Guide to Instagram advertising costs, a handy breakdown

Instagram remains one of the best platforms for social media advertising. It’s connected with Facebook so for many, it’s easier to target an audience based on Facebook’s data. Most Instagram ads are also non-intrusive so it’s highly unlikely to disturb one’s audience.

When considering the suitability of Instagram ads for your business, you need to understand the cost and how to budget. Knowing this helps you make the right decisions.

How much do Instagram ads cost?

The cost of running Instagram ads depends on several factors like your budget, ad type, and the industry. Below is a breakdown of the average costs and how they influence your overall ad budget for Instagram:

Average CPC Instagram

On Instagram, CPC represents the cost per click. When advertisers talk about this metric, they typically refer to link clicks. But for Instagram, it signifies clicks on ads, which may include clicking to react to a post or view an image.

To know if you have a good CPC, compare the value with your previous ones. However, if you’re new to running Instagram ads, the average CPC should range from $0.40 – $0.70 after considering all important metrics.

For ads with a destination URL, the Instagram CPC ranges from $0.50 – $0.95.

Why do I have a high Instagram CPC?

In most cases, your CPC on Instagram depends on your cost per thousand impressions (CPM) and click-through rate (CTR):

  1. Before reviewing your CPC to find out why it is high, first review your Instagram CPM (cost per thousand impressions) to see whether it is also high or if it’s low. A high CPM leads to a high CPC.
  2. After reviewing your CPM, check the value of your CTR (click-through rate).
  3. High CTRs reduce CPC, while low ones may increase your CPC, even with a low CPM.

If this all sounds too complicated, don’t worry! We’ll get into the details and explain everything in the coming sections. 

Apart from the CTR and CPM problems, other possible causes of a high CPC are:

  • Irrelevant messaging
  • Uncatcy ad texts, including headlines
  • Unconvincing images or video in ads — demonstrating low creativity
  • Unconvincing offers in ads

Cost per impression Instagram

Cost per impression, otherwise called cost per thousand impressions (CPM) is a metric that considers your ad spend and impressions altogether. Instagram calculates CPM by dividing your spending by impression and multiplying the result by 1,000.

For example, if your spend was $3 and you derived 4,000 impressions for that cost, your CPM is $0.75. (($3/4,000) * 1000) = $0.75

What’s a good CPM on Instagram?

A good CPM is relative and typically depends on the audience you’re targeting and how you’re targetting them. Most advertisers and marketers determine a good CPM by comparing the ad with their previous set of ads or ad sets. However, if you’re new to Instagram ads, a good CPM ranges from $2.50 – $3.50.

According to WordStream, Facebook tends to have higher CPMs — 2x more compared to Instagram. However, Facebook CPCs tend to be lower by half compared to Instagram.

Why is my Instagram CPM high?

There’s a wide variety of reasons causing your high Instagram CPM. Here are some of them:

  1. Technical problems on Facebook & Instagram
  2. Ad fatigue (when your target audience has been bombarded with your ads to the point where they are tired of seeing them, which makes them not pay attention anymore)
  3. Low relevance score
  4. Restrictive placements (automatic placements may be a better option)
  5. Restrictive campaign objectives

Instagram bidding

Instagram bidding is a concept that determines your ad outcomes. A good bid strategy can help the business get measurable results, including increased sales and customer reach. When choosing a bid strategy, you need to consider how you will measure your success and go for a suitable option.

The three types of Instagram bidding strategies:

  • Spend-based bidding
  • Goal-based bidding
  • Manual bidding

Spend-based bidding

This concept focuses on spending your entire budget and getting the best results from it. You can maximize the delivery and conversions possible from your budget. You can also spend your budget and pivot your attention on the highest-value purchases.

Goal-based bidding

Goal-based bidding can either be:

  • Cost per result goal: This strategy requires you to keep the price around the average cost regardless of market conditions.
  • ROAS goal (return on ad spend): Here, the advertiser or business keeps the return on ad spend around an average amount during the campaign.

Manual bidding

As the name implies, manual bidding helps you control how much you can bid across auctions instead of allowing Instagram to dynamically bid based on value goals or cost.

Types of Instagram ads

When running Instagram ads, you can decide to choose from a range of options. Let’s break them down.

What is a “boost post” on Instagram?

When you boost a post on Instagram, it appears on the feed of active users who don’t follow the page. Posts that you promote may also appear in the Instagram Stories and the Explore section.

Similar to any typical ad campaign, an Instagram boost post will help your business reach target audiences based on interest, location, and other factors.

Before boosting your post on Instagram, you need to ensure you’re on a business account. At the moment, Meta doesn’t support boosting on personal accounts, whether for Instagram Stories or typical posts. It’s also essential to choose an achievable goal before boosting and adding a CTA.

Sponsored posts on Instagram, cost and relevance

A sponsored post is another name for a promoted post or boosted post on Instagram. Businesses use sponsored posts to reach a wider audience. On the platform, a sponsored post can either be promoted or paid.

Here’s a breakdown of how a paid sponsorship differs from a promoted one:

  • Promoted: Using this method, Instagram allows you to create a custom target audience based on factors like age, interests, gender, and location.
  • Paid: In this type of sponsorship, the business pays a user (influencer) on Instagram to promote a service or product to their audience.

Types of Instagram ads based on ad formats

Instagram ads can take on different formats, depending on your campaign strategy. Here’s a breakdown of the different formats:

Image ads

Sample photo ad

Image ads are the fundamental ad formats on Instagram. They contain a footer and an optional ad copy. If you’re trying to convey a single strong visual content, an image is one of the best options to opt for.

Even though image ads are helpful at any stage in sales, there can be limitations. Many times, videos can convey a story better than an image does. But, an image may also be a faster technique to pass a message, especially if your audience has a short attention span.

On Instagram, image ads or photo ads are published alongside captions and a CTA (call to action). The CTA could be a button to sign up, install an app or extension, and make a call.

Video ads

Sample video ad for content creation course

In many cases, video ads give a more detailed breakdown of products and services. Unlike images, videos typically contain different frames of images and sound. Video ads on Instagram are said to generate three times as much user engagement compared to their image counterpart.

Most users prefer video ads because they find them more engaging and mentally easier to process. However, it’s important that the video content is not intrusive as it would lead to minimal ad outcomes.

Common examples of brands performing well with video are LG, Sparkle in Pink, and Porsche. All of those brands ensure they invoke emotions in viewers, making them some of the best to run ads on Instagram.

Collection and shopping ads

Collection and shopping ads on Instagram are best for call-action and eCommerce campaigns. They preview as photos or videos and allow users to click on them to explore the brand and the product. When users click these ads, Instagram redirects them to catalogs or websites, depending on the setup.

Shopping ads contain all the necessary information about a product to help the users know what they are about to purchase. It’s also important that brands uphold their promises about their products for an effective campaign.

Collection ads are displayed as a carousel of shopping ads. Similar to shopping ads, the link to the brand for the product is typically embedded on the same page.

Explore ads

Explore ads appear under the Explore section of Instagram. Statistics show close to 50% of active Instagram users visit the Explore section. When setting up your campaign, you may need to indicate in your settings whether you would like your ads to display in the Explore section.

Running explore ads can be beneficial as it allows users to discover your page easily. Most users on the Explore page are looking to “explore” and follow new brands or people. So, if you get it right, your ads can have a high conversion rate by using the Explore tab.

Depending on your industry, you should consider testing Reels-style content. Reels is a feature gathering a lot of attention on Instagram, especially on the Explore page. A reel is simply video content with a 9:16 aspect ratio. It’s a similar feature to TikTok videos or YouTube Shorts.

Carousel ads

Carousel ads help businesses to display videos and series of images in a post. Compared to typical images or videos, carousel ads are significantly interactive. They are common among eCommerce companies since they allow users to pick from a variety of options instead of a single image or video of the product.

Another great application of carousel ads is storytelling. They help in crafting compelling narratives and display different aspects of one’s brand and products, which increases the possibility of driving conversions.

Carousel ads can also make a brand’s Instagram profile more visually appealing. With consistent themes across multiple slides, it can be eye-catching to potential customers.

How much is an Instagram ad?

From our review, we have come to the conclusion that the Instagram ads cost depends on your bidding model, which can be CPC or CPM. However, most companies on average spend between $0.50 to $1 per link click. If you’re in an industry with high competition, you may pay as high as $3.00 per click for your Instagram ad.

Instagram ad cost per month?

According to a study by WebFX, Instagram ads cost between $0.00 – $500.00 per month for over 53% of individuals. However, marketers spend over $5,000 a month on Instagram ads. The specific amount you spend on ads will largely depend on your cost type, daily budget, and competition.

How to budget Instagram ads

On average, most brands allocate 0% to 20% of their total ad budget to Instagram ads. What you decide to allocate to ads depends on the company’s unique needs and goals.

Pro tip: When starting out with Instagram ads, ramp up your budgets slowly. After testing your ad with a low budget, ensure that your product gives a significant conversion. If it doesn’t, make adjustments to your ad format or copy, depending on your set target audience. There are definitely certain industry-specific approaches you can take as well as different strategies you can follow to ensure your budget is well spent and you get your money’s worth, but this will take time and practice to properly figure it out. You can always find professional help if your efforts are not showing your desired results.

Instagram ad cost calculator

Instagram ad calculators like that from Convoboss and 4B Marketing can be helpful and they typically decide how much you spend based on the following factors:

  • Bid price: Your bid price determines how much you spend on your Instagram ad campaign. Since Instagram has a high bid amount, you may need to pay more compared to other social media platforms for impressions and clicks.
  • Ad relevance: Instagram wants to show relevant content to its audience. So, the more relevant your ad is, the higher your relevant score, and the higher the leads.
  • Estimated action rate: The estimated action rate is based on the possibility of people acting on the ad. So, if Instagram believes people will likely act on your ad, they will prioritize it. With that, there’s a high chance of obtaining a lower bid amount, thereby increasing your leads and conversions.
  • Competition: When trying to reach a certain demographic, competitors are unavoidable. Your CPC may increase when trying to bid against the competitors.

So, are Instagram ads worth it?

Instagram ads are definitely worth it and can be cost-effective when done right. Optimizing your ad for results will help boost engagement and generate traffic for your website. It’s also easier to build a following for your brand with Instagram ads.

It’s undeniable that Instagram has become a popular space for users to research products and services. This general knowledge proves that Instagram should be one of the go-to platforms for brands looking to push out their identity, including their products or services. So, it’s beyond doubt that running Instagram ads is a great step for your business.

Need an agency to help optimize your Instagram ads?

Creating an Instagram ad campaign can be a challenge, especially when you need to optimize your budget. It may require learning, analysis, and expertise to effectively run ads for yourself.

Every industry differs and requires a unique approach to its ad campaigns. So, you should consider reaching out to Instagram ad experts like us. Here at Nomadic Advertising, we will help you build a working ad strategy on Instagram and optimize your budget for maximum returns. Reach out to us for a FREE 30-minute consultation and learn everything we can do for your business!

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