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Your Guide To Understanding The Cost of Advertising On Instagram

Your Guide To Understanding The Cost of Advertising On Instagram

Your Guide To Understanding The Cost of Advertising On Instagram

Thinking about running ads on Instagram but worried about the cost of advertising? Don’t worry! We’ll walk you through what you need to know about Instagram ad pricing, how it all works, and some handy tips to keep your expenses in check.

 

 

How much does it cost to advertise on Instagram?

The cost of your Instagram ad campaign depends on the metric you select:

  • Cost-per-click (CPC)
  • Cost-per-impression (CPM)
  • Cost-per-engagement (CPE)

Let’s look at these one-by-one:

Cost-per-click (CPC)

Cost-per-click (CPC)

Cost-per-click (CPC)

On average, CPC ads cost between $0.40 – $0.70.

This is calculated by: total ad spend ÷ number of clicks received.

Cost-per-click usually refers to the cost of link clicks. But on Instagram, it also includes clicks for viewing the post, likes, comments and shares. This can make the number of clicks higher than it actually is.

To see if your CPC is good, compare it with the CPCs from your previous campaigns. 

Keep in mind that CPCs tend to be higher for ads targeting people closer to making a purchase, compared to those just learning about your brand.

Cost-per-impression (CPM)

Cost-per-impression (CPM)

Cost-per-impression (CPM)

The average CPM is around $2.50 – $3.50 per 1000 impressions.

This is calculated by: (Total ad spend ÷ Number of impressions) × 1000.

Make sure you don’t confuse “reach” with “impressions” since they mean two different things. 

  • Reach is the total number of unique accounts that viewed your content. If 1 user saw your content, that would count as 1 reach. 
  • Impressions are the total number of times your content has been viewed. This includes multiple views by the same user. If 1 user saw your post 3 times, that would count as 3 reaches. 

Cost-per-engagement (CPE)

Cost-per-engagement (CPE)

Cost-per-engagement (CPE)

Average CPE for Instagram is $0.01 – $0.05. 

This is calculated by: (Total ad spend ÷ total engagements).

In this case, engagement includes links, comments, shares, saves, clicks to profiles, and link clicks. Ads with high engagement ads can be used as a display of social proof, demonstrating the quality and credibility of your brand. 

Advertisers tend to look at this metric to gauge how well the audience is responding to the ad – not to measure performance. But remember, these are very loose numbers, and are only meant to offer general direction. 

What Factors Influence The Cost Of Advertising On Instagram? 

What Factors Influence The Cost Of Advertising On Instagram? 

What Factors Influence The Cost Of Advertising On Instagram? 

When it comes to Instagram Ads, there is no one-price-fits-all. How much you should spend on Instagram Ads will depend on a few factors, including: 

  1. Bid amount 
  2. Ad relevance score
  3. Estimated action rates 
  4. Your audience

#1. Bid amount

#1. Bid amount

#1. Bid amount

Like Facebook Ads, Instagram ads work as auctions. This means that to get placement for your ads, you’ll compete with others where the highest bidder wins. 

To run an Instagram ad, you’ll need to set your bid amount. This is the price you’re willing to pay for each click or impression. 

Your bid amount will affect your overall budget and how your ad performs. 

For example:

  • If your bid is $4 per click and your budget is $800, you’ll get 200 clicks. 
  • If your bid is $4 but increase your budget to $1200, you’ll get 300 clicks. 
  • Now, if you increase the bid to $8 but keep your budget at $800, you’ll get 100 clicks. 

Basically: 

  1. Your bid amount will impact your budget. 
  2. Your budget will impact how much you can bid and whether you win. 
  3. These factors together will determine how much it’ll cost you to advertise on Instagram.

#2. Ad relevance score

#2. Ad relevance score

#2. Ad relevance score

Instagram wants to show ads that people actually like and engage with. 

If your ad gets lots of clicks, likes and shares, Instagram will give it a high relevance score which indicates how relevant your content is to an audience. This means that your ad will be shown more often and cost less to run, even if you aren’t spending as much as other less-engaging ads. 

On the other hand, if people ignore or hide your ad, you’ll get a low relevance score – meaning your ad won’t be shown as much and will cost you more. 

In short, a higher relevance score means your ad will be seen more and cost you less, helping you get more clicks and leads for your budget.

#3. Estimated action rates

#3. Estimated action rates

#3. Estimated action rates

Instagram prioritizes ads that convert, so make sure your funnel is as simple as possible. 

To make your ads more effective, link directly to the product instead of your homepage. This makes it easier for users to complete their purchase and improves your ad performance.

For example if you are advertising a product, be sure to show an ad that links to the actual product as opposed to linking to the homepage of your site.

Instagram also looks at how likely people are to interact with your ad, which they call the “estimated action rate”. If your ad is expected to get lots of clicks and conversions, Instagram will prioritize it and often charge you less. This means you’ll get more exposure and leads for your budget. 

In short. creating a clearer path for your users will increase conversion rates and improve your Instagram ads overall.

#4. Your audience and competition

#4. Your audience and competition

#4. Your audience and competition

The cost of advertising on Instagram largely depends on who you’re targeting and how much competition you’re up against. 

When you’re trying to attract a certain audience, there will always be competitors trying to target the same group of people. The number of competitors you have can affect the cost of your Instagram ads. 

  • Ads for B2C (business-to-consumer) are usually cheaper than those for B2B (business-to-business), since there are businesses on Instagram than consumers.
  • Ads targeting women often cost more than ads for men, since women tend to interact more on Instagram. 

Instagram knows which audiences are more likely to buy and which industries generate the best ROI. 

If multiple bidders are vying for the same audience, a bidding war can start, and you’ll need to outbid your competitors to secure top placement.

Other factors like popular holidays (e.g. Christmas), days when users are more active, competitive sectors (e.g. clothing industry), can also drive up costs. 

Are Instagram Ads Worth the Investment?

Are Instagram Ads Worth the Investment?

Are Instagram Ads Worth the Investment?

Instagram has 2 billion active users – this is equivalent to 35.71% of the world’s mobile users! 

Their extensive reach gives you the opportunity to connect with a global audience or target specific niches that might be difficult to reach otherwise. Instagram ads can help you make the most of this massive audience by offering unique benefits that you can’t get through organic means – especially in a highly competitive advertising landscape. 

Benefit #1: Advanced targeting 

Instagram offers powerful targeting tools thanks to its detailed demographic and geographic data. You can use this to precisely target different people based on their interests, behaviors, income level, demographics, location and more. This ensures your ads reach the right audience who are most likely to take the desired action.

Benefit #2: Higher Engagement 

Instagram really shines when it comes to engagement. Images on Instagram get 23% more interaction than on Facebook. But with only about 4% of your followers seeing organic posts, paid ads can help you reach more people. Video ads are especially effective, getting 38% more engagement.

Benefit #3: Clickable Links 

Unlike regular posts, Instagram ads let you include clickable links. This means you can drive traffic straight to your website or other destinations and track traffic effectively using tools like the Facebook Pixel.

What are the Different Kinds of Instagram Paid Ads?


One of the most important aspects of your Instagram Strategy is determining which IG Ads you are going to invest in.


There are many different types of Instagram Ads that are available. Want to know which ad format? Here are the 4 most popular.


#1 - Video Story Ads.


When Instagram decided to steal stories from Snapchat they changed the digital landscape and inspired an entire movement of apps to do the same.


Now, stories are everywhere, across countless apps and platforms, and they are one of the most powerful ways to advertise your product on Instagram. If you are
planning to invest in Instagram Story Ads, it’s usually best to hire a professional videographer.


#2 - In-Feed Carousel Ads.


Carousel Ads are probably the most under-utilized ad in all of Instagram.


Here’s why…


Carousel Ads inspire engagement. A good carousel ad has a compelling first image that creates a sense of curiosity so the user thinks to themselves ‘I have to see
what comes next’ and swipes.


Carousel Ads require a bit more planning, but with the right amount of creativity they can be extremely effective.


#3 - In-Feed Photo Ads.


Classic image ads in the IG-Ad arsenal, in-feed photos are a great way to showcase your product without having to shoot a video.


#4 - In-Feed Video Ads.


While it might be tempting to couple in-feed videos with story videos - truth be told they are very different experiences and therefore should be treated as a very
different type of ad.


How To Lower The Cost Of Instagram Advertising

How To Lower The Cost Of Instagram Advertising

How To Lower The Cost Of Instagram Advertising

1. Use Automatic Bidding 

If you’re new to Instagram ads, automatic bidding is a great option. It helps you set the best bid amount without overspending. Automatic bidding adjusts your bid to what’s needed for your campaign, saving you from overbidding and reducing your costs until you gather more data.

2. Target Precisely 

Instagram lets you narrow down by location, demographics, interests, behaviors, custom audiences, and lookalike audiences. Precise targeting means your ads reach people who are truly interested, leading to better results and lower costs.

3. Create Relevant Landing Pages 

Make sure your landing page matches your ad. Instead of sending users to your homepage, link directly to a page that relates to the ad’s content. For example, if your ad is about boots, the link should go to a page showcasing those boots. Relevant landing pages boost conversions and help you save on ad costs.

4. Choose the Right Ad Placements 

Pick ad placements that fit your goals. Instagram offers automatic placements, where they choose the best spots, and manual placements, where you select the placements yourself. Start with automatic placements to find what works best, then switch to manual placements to focus on the most effective spots and avoid wasting your budget.

5. Add a Clear CTA 

Your call to action (CTA) drives conversions, so make it stand out. Use Instagram’s built-in CTAs, but also include a text CTA in your ad copy. Make the CTA clear, action-oriented, and eye-catching with special characters or emojis. This will increase the chances of users taking the desired action and help you get more from your ad spend.

Are you ready to grow your brand on IG?

Are you ready to grow your brand on IG?

Are you ready to grow your brand on IG?

Growing your business with Instagram ads doesn’t have to be a hassle. Call us today to speak with a Digital Strategist from an award-winning social media agency about setting up Instagram ads that drive engagement and increase your conversions.

 

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