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How Do YouTube Ads Work? A 13-Step Guide to Advertising on YouTube

In this video, Jess from the WebFX Marketing team explains how to advertise on YouTube. 


How do YouTube ads work? Keep watching this video for the answer.

Why invest in YouTube ads?

For starters, YouTube has a massive Internet presence. In the U.S. alone, over 80% of adults say they use YouTube. People around the world watch more than one billion hours of video each day. But YouTube offers more than just reach.

You can earn more customers when you advertise with YouTube, too. In fact, on its Ads & Commerce Blog, Google reports that 70% of people say they shopped from a business because they saw it on YouTube.

In the same vein, a Pew Research survey of U.S. adults found that more than half of respondents said YouTube is either somewhat or very important for helping them decide what to buy.

Not only can you reach the right people with YouTube, but you can also turn those people into customers — with the right campaign, of course.

Let’s continue with this lesson on YouTube ads for beginners. We’ll discuss the types of YouTube ads you can use.

6 types of YouTube ads

Which ads can you choose from when you’re ready to advertise on YouTube? Well, mostly video ads. But you probably expected that since YouTube is a video sharing platform.

In-feed ads

An in-feed ad, formerly known as a video discovery ad, appears  as if it’s a regular search result, just with a little more information so you know it’s an ad. The ultimate goal is to get someone to click on your ad and watch your video. And then maybe subscribe to your channel or take any other desired action.

In-feed ads don’t play while you’re watching a video, but instead appear when you search for a topic, in your video suggestions, or on your mobile homepage. So, instead of your ad interrupting someone’s viewing experience, it gives them the choice of watching.

Bumper ads

Unlike in-feed ads, Bumper ads focus less on action and more on awareness. These short, six-seconds-or-less ads can’t be skipped by video viewers.

It’s a great creative challenge for you to figure out how to communicate your brand and your message in such a short period of time, although you can pair the short ad with a longer one to really draw people in.

Bumper ads play within a video, either at the beginning, somewhere in the middle, or at the end.

Non-skippable in-stream ads

Think of non-skippable in-stream ads as the older sibling of a bumper ad. As it says in the name, you can’t skip them. The focus of these ads is also generating awareness of your brand.

These are almost like an extended bumper ad. They can be up to 15 seconds long and viewers see them at the beginning, during, or at the end of a video.

Skippable in-stream ads

Skippable in-stream ads are like…the more flexible cousin of non-skippable in-stream ads. I know — I’m creating a family tree here.

Take a guess at whether skippable in-stream ads can be skipped or not. It’s a tough one.

You’re not as limited with the length of the ad as you are with the other in-stream option. The caveat is that viewers can skip the ad after five seconds. If you don’t grab their attention in the first few seconds, you’ll have an ad that flops. Hard.

These ads show up before, during, and at the end of videos.

I should also mention that bumper ads, skippable in-stream, and non-skippable in-stream ads can also appear on Google video partner sites or apps if you choose that option.

Masthead ads

If you open up the YouTube app on your phone, TV, or desktop, you may notice a big video ad that’s featured on the homepage. This is a masthead ad.

This type of YouTube ad focuses on brand awareness, since it’s pretty hard to miss when you log into YouTube.

You have to reserve this ad through a Google representative, so plan accordingly if this is what you want to do.

Outstream ads

Outstream ads are not fully YouTube ads, but I figured I’d mention them here. These ads do need to be hosted videos on YouTube, but they won’t appear on YouTube. They’re meant for mobile devices and show up on Google video partner locations, like websites and apps.

Still not confident you can answer the original question, “How do YouTube ads work?”

Now that you’ve learned about the different ways you can promote a video on YouTube, let’s discuss setting up your ad.

How to advertise on YouTube: Setting up your ads

1. Create your accounts

If you don’t have a YouTube channel or a Google Ads account, pause. Step back. Turn around. Go set those up. You’ll need both to advertise on YouTube.

P.S. You can learn more about creating a YouTube channel on our website.

2. Connect your YouTube channel to Google Ads

If you have both accounts set up, you’ll want to connect them. You can do this by going to your channel settings in YouTube, selecting the “Link Account” option, and filling out the required information. Whoever owns your Google Ads account, which is hopefully you, will have to approve your request.

You can also connect your accounts by going to the “Linked accounts” option in your Google Ads settings, inputting your YouTube channel details, and then verifying with your YouTube account.

Your connected accounts can share data with each other, which opens you up to more advertising possibilities. Something really cool is that you can create audience segments in Google Ads based on your YouTube audience, like people who watched a specific video or subscribed to your channel.

You do have to hit audience size requirements for your ads to run. If you aren’t hitting those numbers, you’ll have to work on growing your channel before you can take advantage of the custom audience segments feature.

3. Create your campaign in Google Ads

All YouTube campaigns start in Google Ads, so that’s where you’ll want to go next.

Once you’ve settled into Google Ads, select the option to create a new campaign.

4. Choose your campaign goal

In Google Ads, you’ll be asked to select an objective, or proceed without a goal. You have to know the types of YouTube ads you’ll run at this stage, as each objective limits you to certain ad formats.

Also, know what you want to achieve before filling out everything and spending money. That way you can align your ad copy, video content, thumbnail, and anything else you do with that goal.

You can use the sales, leads, website traffic, product and brand consideration, and brand awareness and reach objectives for skippable in-stream ads.

Non-skippable in-stream ads and bumper ads use the brand awareness and reach objective.

In-feed video ads rely on the product and brand consideration objective.

Additionally, all of the YouTube ads I just mentioned can be created if you choose to move on without a selecting goal.

5. Select your campaign type

From there, you’ll select your campaign type — which is video, of course. Then, you’ll choose the proper campaign subtype and any other options that appear. Just follow the prompts as you go.

After you move to the next screen, you’ll see options to name your campaign. Choose something that you can easily identify when you go back to review its performance. So “Ad Campaign 1…2…3”  wouldn’t be great because that’s hard to remember.

6. Determine how much you want to spend

You need a budget to promote a video on YouTube. In Google Ads, you’ll see the option to choose a bid strategy and enter a budget. Google Ads uses a digital auction to determine when ads appear, hence why you place bids for your ads. A number of factors, including your bid, determine whether or not you appear in front of your audience.

If you aren’t seeing a lot of success with your ads, you may not be bidding enough. That’s not the only reason an ad can fail, but it’s one to take into consideration when evaluating your campaigns.

Your bid strategy may be limited depending on the objective and format you chose in the previous steps. Two common strategies are maximum CPV (maximum cost per view) and target CPM (target cost per 1000 impressions — or 1000 people seeing your ad).

7. Select where your ad will appear

Google Ads will prompt you to choose the network your ads will appear on. The YouTube search results is a common choice for in-feed ads. YouTube videos would be what you select for for an in-stream or bumper ad.

Yes, you can select both the search results and videos. Yes, you can also have your ads appear on Google partner sites. It’s up to you.

Location goes further than ad placement, though. You have to option to target certain countries with your ads. So, if you operate only in the United States, you can limit your ads to only people in the U.S. You can also adjust the languages to match the geographic areas you want to target.

8. Define content exclusions

Google offers a way for you to stick to the most appropriate content for your business with its inventory options.

Want to show up as much as possible and don’t care about how family-friendly the videos you appear alongside are? Choose an expanded inventory. Want to be extra strict with the content your ads appear for? Select a limited inventory.

Don’t have a preference? You can stick with a standard inventory that YouTube labels as ‘appropriate’ for plenty of brands.

You can also choose different types of videos and ratings you would like your ad to appear on.

9. Add related videos to your ad

If you so desire, you can add a minimum of two, maximum of five related videos to your ad. This keeps people focused on your brand since you take up more space with the added videos.

Make sure the videos complement your ad. You don’t want to have a main in-stream ad about your services, followed by a tutorial on how someone can do that specific service on their own.

That defeats the purpose of your ad! A customer testimonial or related service would work best in this situation.

There are a few additional settings you can update before moving on to your ad group, including the devices your ad appears on, how often your ad gets shown to people, when your ad runs throughout the day, and vendors who can see your ad data, but I’ll move on to keep this video from lasting hours.

10. Define your targeting

After you’ve chosen a memorable name for your ad group, you can specify who you want to reach with it.

You have a lot of options to choose from when deciding who you want your ads to reach.

As I mentioned before, you can create custom audience segments using YouTube data, or even first-party data gathered by your business. Again, you have to meet audience size requirements for these ads to run, so you may need to use other targeting methods if you haven’t quite hit that minimum threshold.

You can choose your audience based on demographics, interests, search activity, or even reach people who watch content from certain channels, search using specific keywords, or watch content on different topics.

Keep in mind that your audience should match up with your campaign goals. If you want to generate leads for your service business, but target people searching for jobs in your industry, you’re probably not going to see a positive return on investment (ROI) since the targeting doesn’t match the intent of the people who are going to view your ads.

11. Specify your bid

Earlier, you set an overall campaign budget. Now it’s time to determine how much you should spend for each view or every 1000 impressions if you chose that option.

If you’ve never run a campaign on YouTube before, it may take some time for you to figure out the right bid. You’ll want to check in on your performance regularly and make adjustments as needed. Google Ads may even make suggestions to help you improve your results.

12. Pull together your ad creative

Now we get to my favorite part of this YouTube ads tutorial: Getting your ad creative ready to launch. We’ve established that you need a YouTube video to launch a YouTube ad.

You’ll upload your video within your YouTube account — in YouTube Studio, that is. Select the create button, and follow the prompts in the box that appears to get your video ready for its debut.

If you have an existing video that you’ve made public and want to reuse for the ad, I’d recommend uploading a second, unlisted version of it and using that, instead. YouTube ads tend to have lower engagement than regular, organic videos, so you can seriously hurt the original video’s performance by adding that paid traffic.

And that’s especially important if this video gets the most subscribers and views for your channel. Engagement matters when it comes to organic YouTube SEO.

In the ad creation box, you’ll link to the video you’re using for the ad (again, it has to be a YouTube video, whether public or unlisted). Depending on the format you’ve chosen to advertise on YouTube, you’ll fill out a headline, choose a thumbnail, and write a brief description.

Creating your video doesn’t need to be that difficult! You can partner with a YouTube marketing agency to get the job done (like WebFX), or learn more about how to create videos on our website. Yes, that was a shameless plug. And I’m okay with it.

13. Review your ad and launch

We’re in the home stretch of this video tutorial on YouTube ads for beginners. Once everything is in place, you’re clear to launch.

Make sure to check back on a regular basis to see how your ad is performing. You may need to adjust your bid or targeting if you notice you’re not getting the results you want. It’s all about experimenting and finding what works for you.

And that wraps up this…lengthy…tutorial on how YouTube ads work. If you want to keep learning the ins and outs of YouTube, we have plenty of content on our website.

Don’t forget to sign up for Revenue Weekly, our email newsletter, for the latest digital marketing advice. Happy advertising!

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