TikTok Ads Costs Guide: What to Consider for Better Results

Advertising on TikTok, one of the most popular social media platforms right now, is a great way for many businesses to reach younger customer demographics, build solid relationships with them, build brand awareness, and improve their brand image. It’s safe to say that running TikTok ads has a lot of benefits, but as an advertiser, you have to consider how much it costs to run TikTok ads if you want to get great results without spending above your means.

 

In this article, we explore everything that affects TikTok ads costs and how you can optimize your budget spending while maintaining optimal ad performance. Without further ado, let’s start with one of the most important questions for every TikTok advertiser.

 

How much do TikTok ads cost?

When you’re just starting advertising on TikTok, you might be wondering: are TikTok ads expensive? Can you afford them?

 

While TikTok ads are often thought of as expensive, the price you’re going to pay can vary a lot depending on the ad format you choose. For instance, Brand takeover ads typically cost $50,000 and more, while a Branded hashtag challenge will require you to pay $150,000 for a week of running. Both of these ad formats are incredibly useful for raising brand visibility and awareness, but obviously, this is an option most suitable for big advertisers like large businesses and famous brands.

 

However, other types of TikTok ads cost a lot lower. For instance, most sources show that the average CPM for In-Feed ads is around $10. There’s also research that places TikTok ads CPM a lot lower: according to Lebesgue’s research, the average TikTok ads CPM is $3.21, while Gupta Media’s data provides even a lower number – $2.89. The average CPC for In-Feed TikTok ads is around $0.10-$0.30 per click, which also seems promising.

 

As you can see, there can be a considerable discrepancy in the average TikTok ads costs in different sources. What this means is that just like on other advertising platforms, the costs of TikTok ads can vary based on multiple factors and fluctuate throughout the year.

 

Here are the key factors that can influence the costs of TikTok ads:

1. Ad format: the type of ad you choose has a big effect on the costs. As we’ve explained, ads that show up in people's feeds are usually cheaper than more advanced ad formats like Branded Effects or Brand Takeovers.
2. Ad placement: where your ad appears on TikTok can also change how much you’ll have to pay for it. Ads on the For You Page (FYP) usually cost more because they get seen by more people.
3. Target audience: the age, interests, and what people that you're targeting do online can change how much an ad costs. If you want to target specific groups of people, it might cost more.
4. Timing: ad schedule can also influence the costs of your TikTok ads. For example, running ads during busy and high-competition times (like holidays) will cost more than running ads during the regular hours and days. 
5. Ad quality: TikTok cares about how good and relevant your ads are, and ads that people like more will often cost less.
6. Competition: how many other businesses are advertising similar products or services can also affect TikTok advertising costs. If lots of businesses are competing with you, the ads' prices might go up.
7. Bidding method and strategy: how you bid, what you bid for, and how you use your budget is crucial for determining how much your TikTok ads will cost.

Despite the potentially high advertising expenses, many businesses find TikTok ads worth it because of high engagement rates and multiple opportunities to promote their products. For example, the average engagement rate on TikTok spans from 5% to 16%, while the ROAS for TikTok ads can be 3:1 and higher. This makes TikTok advertising worthy of investments for a lot of brands no matter big or small.

 

Next, let's explore how TikTok decides how much you have to pay for your TikTok ads.

 

TikTok ads pricing system

Most advertising platforms function based on an ad auction system, and TikTok is not an exception. On TikTok, ads are ranked based on how relevant they are to users and how much advertisers bid for them.

 

TikTok offers several bidding options and strategies to determine how everything will play out. Let’s dive deeper into how bidding works on TikTok.

 

TikTok ads bidding options

Before exploring the bid strategies, we need to mention the different bidding options TikTok provides for advertisers to specify what they want to bid for. Essentially, these options determine what actions you’ll be paying for based on your advertising goals.

 

There are four bidding options available for TikTok ads:

1. CPM (Cost per Mille)

You set the bid to pay for every one thousand times your ad is shown to TikTok users (no matter whether they click on it or not). CPM is calculated as the total cost of your campaign divided by the number of impressions and multiplied by 1000.

 

With CPM bidding, TikTok will aim to show your ad to as many people as possible within your budget. You can use it for a Reach campaign if you’re aiming at top-of-the-funnel audience segments and want to increase awareness for your brand and products.

 

2. oCPM (Optimized Cost per Mille)

This is the default bidding method for goals like getting people turn into leads, buy something, install an app, etc. It is calculated just as the standard CPM.

 

However, with oCPM bidding, you’re paying to get your ads shown a thousand times to users most likely to take the desired action at the optimal cost per conversion. It’s the most suitable bidding option for campaigns aimed at shop purchases, product sales, conversions, app installs, lead generation, and community interaction (i.e. follows).

 

3. CPV (Cost per View)

With this bidding option, you pay when someone watches your ad for at least 6 seconds or interacts with it within the first 6 seconds. CPV is calculated as total cost of your campaign divided by the number of focused views. You can choose this option if you’re running a campaign aimed at generating video views.

 

4. CPC (Cost per Click) 

Just like on all other major advertising platforms, CPC bidding on TikTok means that your bid equals the amount you’re willing to pay for each click on your ad. TikTok will try to show your ad to users who are likely to click on it at a cost closest to your bid. CPC bidding can be chosen for campaigns aimed at shop purchases, product sales, app installs, conversions, as well as driving traffic and community interaction (like profile visits).

 

TikTok ads bidding strategies

If bidding options determine what you bid for, bid strategies determine how you’re going to bid. Bid strategies tell TikTok’s system how to bid within each campaign while maintaining a specific cost per result or utilizing the budget efficiently.

 

Here are two main bid strategies you can choose on TikTok:

1. Cost Cap

Cost Cap bidding is a spend-based bid strategy that helps you maximize the results from your TikTok ads while maintaining a specific average CPA within the campaign. If you choose the Cost Cap strategy, TikTok's systems will optimize ad delivery to ensure that the average cost per action of this campaign is the same as your target CPA or at least is close to it.

 

This bid strategy is useful when you’re running TikTok ads with a limited budget and want a predictable CPA that stays the same even during the times of increased competition (like holidays).

 

Here are the key benefits of Cost Cap bidding:

• You can reach your target CPA while utilizing your budget efficiently;
• You can run your TikTok ads for users who are most likely to take the desired action;
• You can maintain a stable average CPA that is as close to your target CPA as possible even during the more competitive times.

 

2. Maximum Delivery

Maximum Delivery is also a spend-based bid strategy, but in comparison with the Cost Cap strategy, it helps you get as many conversions as possible on your budget. You don’t have to set a target CPA for this bid strategy, which means that the priority lies in generating a high conversion volume, not maintaining a specific cost per result.

 

Here are the key benefits of Maximum Delivery bidding:

• You can maximize your conversions while staying within the budget limits;
• You can prioritize all customers within your target audience to get the most out of your budget;
• You can get as many conversions as possible on your budget even if the CPA fluctuates.

As you can see, each bid strategy has its own perks. But how to choose the right strategy for your purposes?

 

Cost Cap or Maximum Delivery?

When selecting the bidding strategy for your TikTok ad campaigns, you should always consider the stage of the conversion or sales funnel that you’re targeting.

 

If you want to focus your campaigns on top-of-the-funnel audience segments, you can choose objectives such as reach, video views, or community interaction and select the Cost Cap bid strategy to get the most out of your budget while maintaining a predictable CPA.

 

On another hand, if you want more users to install your app or buy your products and the conversion volume is more important for you than stable CPA outcomes, choose the Maximum Delivery bid strategy to get as many conversions as possible on your budget.

 

You can also choose Hybrid Bidding to switch between the two strategies while your ad group is actively spending. This flexibility allows you to adjust your bidding strategy based on current priorities without having to create new ad groups.

 

You can switch from Cost Cap to Maximum Delivery bidding when you want to get more conversions, and switch back when you need to have a stable CPA. Keep in mind that this type of bidding is available for the following objectives: web conversions, product sales (excluding TikTok Shop), app promotion, lead generation, and traffic on TikTok and Pangle.

 

Basically, your bidding strategy tells TikTok how to spend your money based on your advertising priorities. That’s why it’s crucial to choose the right bidding strategy to tailor your TikTok ad campaigns to fit specific goals and objectives and get the most out of your budget.

 

Speaking of budget, let’s check the types of ad budgets available on TikTok.

 

Types of TikTok ad budgets

Ad budget is the total amount of money you're willing to spend to run your TikTok ads, and choosing the appropriate type of budget is essential for not spending too much on your ad campaigns.

 

A bidding strategy allows you to control the costs at the ad level, while your budget helps you control how much you’re paying for your campaigns and ad groups in total. You can allocate budgets for both campaigns and ad groups, with one campaign potentially containing multiple ad groups.

 

There are two types of ad budgets on TikTok:

1. Lifetime Budget

A lifetime budget is the highest amount of money you're willing to spend on a campaign or ad group for the entire time your ad is running. When you set a lifetime budget for an ad group, TikTok tries to spread out your spending evenly over the whole period, although it might not be exactly the same each day. If you want to control how much you spend each day, it's better to use a daily budget.

 

2. Daily Budget

A daily budget is the highest amount of money you're ready to spend on a campaign or ad group in a single day. Keep in mind that if you pick a daily budget for your campaign, you’ll also need to select it for the ad group. On another hand, if you choose a lifetime budget for your ad campaign, you can pick either type of budget for the ad groups within it.

 

Also, remember that you can’t change the budget type at the campaign or ad group level once your campaign is published, so try to make the right choice while you’re still in the process of setting up your campaigns.

 

In short, both lifetime and daily budgets act as the highest amount you're willing to spend, and the actual spending might be less than what you set. Your campaign or ad group will never cost more than your chosen budget.

 

Now, let’s turn back to the ad auction for a moment and consider one crucial thing we have to understand about it: the more competitive your bid is, the higher the chances that your ads will reach more people and get more conversions. It works just like in real-life auctions, and you should at least know the minimum amount you need to pay to enter the competition.

 

What is the minimum budget for TikTok ads?

When you want to run ads on TikTok, you have to set a minimum budget to ensure that your ads will be delivered. The minimum daily budget for campaigns is $50, while the minimum daily budget for ad groups is $20.

 

The lifetime budget is calculated as the minimum daily budget multiplied by the days when your ads will be running. This means that, for example, if you want to run your ads for 30 days, your minimum budget for ad groups will be $600.

 

Now that you understand the basics of TikTok ads costs and what determines them, it's time to go through the main strategies that can help you reduce them. 

 

How to reduce TikTok ads costs?

 

1. Target the right audience

Nothing can beat the target audience in terms of importance for advertising success: no matter how engaging your ads are, they won’t generate significant results if you’re running them for the wrong groups of people.

 

When you understand what your audience likes and how they behave, you can make ads that they really connect with. This means your ads are more likely to reach the people who are interested in what you're offering, making your campaigns more successful. So, always start with a proper audience research and try to dive deeper into the trends and discussions  your customers participate in.

 

Here are also several TikTok ads targeting strategies you can try:

• Start with a broad audience: begin by targeting two to three audiences and keep your targeting broad. This approach lets you reach new audiences on TikTok and find potential customers for your brand. It also helps you understand how effective your creatives are. And what’s more important, broad audiences typically deliver a lower CPA.
• Use your data: you can utilize your customer data to create lookalike audiences to expand your targeting and run retargeting campaigns to drive users who already know about your business to take the desired action. This can increase engagement, improve your advertising results, and deliver clicks and conversions at cheaper costs.
• Test different audiences: you can never know for sure which groups of people will react more positively to your ads, and the main strategy here is to experiment with new audience groups when launching campaigns. Test several audience segments to find the most cost-effective options for your TikTok ad campaigns.

 

2. A/B test your ads

A/B testing is one of the best ways to figure out the most effective ad creatives that generate the best results without draining your budget.

 

To reduce your TikTok ads costs, try out different versions of your ads using A/B testing to see which one works best. Experiment with different sounds, effects, hashtags, video lengths, and so on.

 

Once you determine the winner, you can put more of your budget into that ad variation to scale it and get the most out of it. Don’t forget to analyze your ad performance: it will help you see what successful ad variations have in common and use these insights in your future campaigns.

 

Check out our previous articles to learn how to A/B test the right way and automate A/B testing to save time and get better results.

 

3. Make your ads look organic

Since TikTok ads will show up alongside regular videos on users' For You pages, they should fit in with the organic content instead of looking like obvious ads. And most importantly, they should provide clear value to the users who watch them and catch their attention fast before they scroll to the next video.

 

To get people interested, avoid making your videos look too polished or scripted – it won’t work on TikTok. Instead, keep your TikTok ads casual and simple like the videos users create themselves. You can leverage storytelling, trends, and hashtags, boost user-generated content, use influencer marketing, and a lot more – there’s a lot of room for creativity on TikTok. Read our previous article for more tips on how to create successful TikTok ads.

 

4. Choose a bidding strategy based on your goals

Choosing the appropriate bidding strategy can play a huge role in reducing your TikTok ads costs. As we’ve explained earlier, if your primary goal is to achieve specific results while maintaining control over the budget, opting for the Cost Cap bidding strategy can be beneficial for you. This strategy will help you ensure that you don't overspend while still driving the desired actions. What matters here the most is staying within a certain CPA threshold.

 

If maximizing the number of results within your budget limits is your priority, the Maximum Delivery bidding strategy will be more suitable. With this approach, you can spend your budget efficiently to generate as many conversions or interactions as possible. Here, the number of results is more important, but you’ll still stay within the specified budget limits.

 

By selecting the right bidding strategy aligned with your advertising objectives, you can optimize your ad spend, minimize unnecessary expenses, and improve the overall efficiency of your TikTok ad campaigns.

 

5. Track your TikTok ads metrics

No matter the platform you’re running ads on, one thing stays constant: you have to consistently track key performance metrics and optimize your ad campaigns based on them to keep getting good results and spend your budget wisely.

 

TikTok Ads Manager allows you to track various kinds of metrics to measure the performance of your TikTok ads. There are attribution metrics, merics for tracking in-app events, page events, instant page events, and video plays.

 

If you’re not sure what to keep an eye on for monitoring your TikTok ads’ performance, consider tracking these basic metrics:

• Clicks (Destination): this metric measures how many times users clicked on your ads and went to a specific destination such as website, app, or app store.
• Impressions: this measures how many times your ads were shown on the screen.
• Conversions: this tracks the number of times your ad achieved a desired outcome based on your campaign objective and settings.
• Cost per 1,000 Unique User Accounts Reached: this is an estimated metric that shows the average cost to reach 1,000 unique user accounts.
• CPA: this indicates the average amount of money you spent on each conversion, calculated as the campaign cost divided by the number of conversions or installs.
• CPC (Destination): this measures the average amount spent on each click leading to a specific destination.
• CPM: this shows the average amount spent per 1,000 impressions.
• CTR (Destination): this is the percentage of times your ad was seen and clicked on, leading users to specific destinations.
• CVR (Impressions): this measures the percentage of the results achieved out of all impressions on your ads. It is calculated as the number of conversions divided by impressions.
• CVR (Clicks): this shows the percentage of the results achieved out of all clicks on your ads. It is calculated as the number of conversions divided by the number of clicks.
• Frequency: this indicates the average number of times each unique user account saw your ad.
• Paid Likes: this tracks the number of likes your video creative received within 1 day of a user seeing your paid ad.
• Reach: this estimated metric measures the number of unique user accounts who saw your ads at least once.
• Real-time Conversions: this tracks the number of times your ad achieved a desired outcome based on the objective and settings you selected in real-time.
• Real-time CPA: this indicates the average amount spent on each conversion in real-time.
• Real-time CVR (Impressions): this shows the percentage of the desired outcomes achieved out of all impressions on your ads in real-time.
• Real-time CVR (Clicks): this measures the percentage of the desired outcomes achieved out of all clicks on your ads in real-time.
• Total Cost: this estimates the total amount of money spent on your campaign, ad group, or ad during its schedule.
• Clicks (All): this measures the overall engagement on your ad, including paid likes, comments, shares, follows, and clicks. 

You can also pay attention to video ads metrics like total number of views, total video play time, average video watch time, the number of likes, reposts, and saves, and so on to check how engaging and relevant your content turned out to be.

 

Recap

TikTok advertising presents a great opportunity for businesses of all sizes to connect with younger audiences, enhance brand visibility, and get more sales, bookings, or app installs.

 

While the costs of TikTok ads may vary depending on factors like ad format, placement, target audience, timing, ad quality, competition, and bidding strategy, proper planning and the right strategies can help you achieve you objectives within budget constraints.

 

Proper audience targeting, A/B testing, organic ad appearance, selecting the right bidding strategy, and keeping an eye on performance metrics are the key to reducing the costs of your TikTok ads while maximizing the results. Follow the recommendations we've provided in this article to become a pro at TikTok advertising and grow your business to its true potential.