Table of Contents
- What Makes Instagram A Great Place To Advertise A
- Facebook Advertising Vs Instagram Advertising:
A Cost Comparison
- Factors That Influence The Cost Of Instagram Ads
- How To Get The Most Out Of Your Instagram Ads Budget
- Employ A Full-Funnel Strategy
- Dollar-cost averaging of campaign objectives
- Brings down the cost per acquisition over time
- May contribute to eliminating dependence on ads
- Opt For Automatic Placements
- Choose Automatic Bidding
- Precise Targeting Over Broad Targeting
- Optimize Your Landing Page
- Test Ads And Landing Pages
- Use The Ad Manager
The cost of advertising on Instagram depends on a lot of factors. However, the choice of bidding model by the advertisers is one of the most significant influencers over the actual cost that advertisers pay on Instagram.
On average, businesses advertising on Instagram can expect to pay $1.54 for an ad click and $11.19 for a thousand impressions on their ads. These numbers are true as of November 2021, so this is the most updated data you will find on the subject.
While the total addressable audience on Instagram is smaller than Facebook, the Facebook-owned platform still commands an impressive audience size of 1 billion active users.
For many businesses, and especially those that are offering products and services targeted at a younger audience, Instagram offers a superb advertising platform. With that said, new advertisers are often very concerned with the costs involved in advertising on any platform.
While the average cost of advertising on Instagram has already been mentioned above, it doesn’t truly reveal the cost specific advertisers may have to pay. Averages often provide a skewed vision of reality.
To truly understand the actual cost of Instagram advertising for your business, you must understand what factors influence it, and that is what this guide is about.
In the upcoming sections, we will learn all about the factors that influence the cost of advertising on Instagram. However, before we get to the meat of this article, let’s look at what makes Instagram such an amazing place to advertise businesses, services, and products.
What Makes Instagram A Great Place To Advertise A Business?
Back in 2012, Facebook paid a whopping $1 billion to acquire Instagram. This fact is relevant here because this deal gives us a peek into the potential of Instagram as an advertising platform. The main source of revenue for Instagram is ads and Mark Zuckerberg valued that income at $1 billion.
So what made Zuckerberg place so much value in this social media platform? Why is it an even better advertising platform than what it was almost a decade ago? Why is Instagram worth your time and your advertising dollars in 2021? Here are just a few of the many, many reasons:
Instagram Audience Is Enormous
When Instagram was acquired, it only had a fraction of the number of users that Facebook had. However, today, it is a different story. Today, with 1 billion active users, Instagram is the second biggest social media platform on the web.
Meaning, for businesses operating in most industries, Instagram is a relevant platform for advertising. This is especially true for B2C businesses. Regardless of what you are selling, if your business follows a B2C model, there is a good chance that you will find a significant percentage of your target audience on Instagram.
Availability Of Advanced Targeting Options
If you have read our guide to Facebook advertising pricing, you already know that the most lucrative feature offered by these online advertising platforms is their ability to target very specific audiences.
Instagram is no exception. With Instagram, advertisers can target hyper-specific audiences, improving their chances for success. For instance, if you are selling dairy products, you don’t have to target everyone that’s interested in dairy on Instagram. You can narrow down your audience to those users who have searched for or shown interest in dairy products, and live in your local area. Similarly, using interest targeting and a little bit of creativity, you can even eliminate, say, people that are lactose intolerant from your targeting list.
Instagram Ads Command A High Click-Through Rate (CTR)
For several years, the CTR of Instagram was much higher than most other social media platforms, including Facebook. Some studies placed the average CTR on Instagram ads 2.5 times higher than every other social media platform.
In the interest of full disclosure, the average click-through rate of Instagram ads has fallen significantly in the second quarter of 2022, at 0.33%. However, this number is expected to regain its former glory in the coming months, as the world recovers from the impact of the recent pandemic.
Instagram Ads Drive More Conversions
In terms of conversions, Instagram is one of the best online advertising platforms. At 1.08% average conversions across industries, Instagram commands a conversion rate that is higher than its competitors like Twitter (0.9%) and Pinterest (0.54%).
The conversion for Instagrams can be driven higher, in some cases, to two-digit percentage points, with smart targeting and relevant, provocative ad messaging.
Instagram Ads Result In Higher Value Orders
Instagram commands the second-highest average order value among all the social media platforms, behind only Pinterest. With an average order value of $103, Instagram is placed higher than Facebook and Snapchat.
Now that we have some data-backed reasons for advertising on Instagram, it is time to look at how the cost of advertising on Instagram compares against advertising on Facebook. This will also help us understand the differences in the audiences active on both platforms.
Facebook Advertising Vs Instagram Advertising: A Cost Comparison
There are actually a few reasons behind Instagram’s comparison with Facebook:
- Facebook and Instagram are the two biggest social media platforms, and thus, the two most lucrative advertising platforms on the web.
- While there may be an overlap in the audiences present on Facebook and Instagram, both also have their specialties. This comparison will help us understand the differences in their audiences.
- Advertising on both social media platforms is powered by the same ad management tool.
- It is a common recommendation for advertisers to spread their ad budget across different relevant platforms. However, if, for whatever reason, you have to choose one, this comparison will help you make an informed decision.
Now, let’s talk about the actual comparison. As mentioned at the beginning of this guide, the average cost per click paid by advertisers on Instagram is $1.54. In comparison, advertisers have to pay a lower cost per click on Facebook, an average of $1.15.
Things look a little different when we look at the cost of advertising on both platforms from the lens of cost per thousand impressions. The cost per thousand impressions on Instagram is $11.19 and on Facebook, it is $16.39.
With that said, these costs will vary dramatically in different industries. The interesting thing to note here is that despite the similarities between the two platforms, the most competitive industry is not the same on Facebook and Instagram.
On Facebook, the most competitive industries are Finance and Insurance. The cost per click for businesses operating in these industries routinely crosses the $3 mark. On the other hand, retail and apparel are the most competitive industries on Instagram. Once again, for businesses operating in these industries, the cost per click can easily surpass $3.
Let’s understand the relationship between industries, audience groups, and ad costs on Instagram in a little more detail.
How Audience Targeting Influences Instagram Advertising Costs
While it may be obvious to most readers that advertising to a more specific audience set will result in a higher cost per click. However, there are a couple of other, less obvious trends that influence the cost per click on Instagram. These are:
The Age Factor
As mentioned earlier, Instagram, in comparison to Facebook, caters to a younger audience. It is considered one of the most effective ad platforms for brands targeting the 25-29 age group, and Facebook (or Meta, these days) realizes this. Some stats say that over 70% of internet users between the ages of 18 and 29 are active on Instagram. That’s perhaps why targeting this age group on Instagram almost always drives up the cost per click by a significant margin.
The Gender Factor
Another interesting thing that can be noticed when studying the cost-per-click trends of Instagram is that brands and ad campaigns that primarily target women tend to pay a higher cost per click. This is perhaps because there are more women using Instagram than men. While this gap has reduced significantly over the last few years, women still account for more than 500 million users of Instagram.
Thankfully, these are not the only two factors that dictate the cost per click paid by a brand advertising on Instagram. If you were getting disheartened because targeting your intended audience on Instagram will be more expensive, learning about the other factors that influence the cost you pay per click can help you control that cost.
Let’s look at what these factors are:
Factors That Influence The Cost Of Instagram Ads
The Instagram Auction System
Just like on Facebook, ad spaces are auctioned off on Instagram. Let’s understand this with a simple example of just one user. If you are selling apparel targeted at this user, you are not just competing for ad space with other brands that sell similar apparel to the same user. You are also competing with all the other brands that are using Instagram to sell anything they think is relevant to the user. Because of limited places to show ads, Instagram auctions off the ad space to the highest bidder.
Meaning, you have to place a bid on how much you are willing to pay for a click. While it is not the only way for Instagram to determine whether or not your ad is relevant to the user, a higher bid means that you are willing to bet more money than your ad is relevant to a specific user or audience. As a result, if you have placed a high bid, you are more likely to secure a placement for your ads.
Now, you may find yourself conflicted between saving your precious money and paying more to secure an ad placement. The easy way out of this dilemma is to place higher bids when you are just launching your campaigns. This will actually help you bring down your advertising cost in the long term.
How to bid?
By placing a higher bid, you are securing more placements for your ads. This gives the Instagram algorithm more room to understand your ad’s relevance to its users. The same result can be achieved with a lower bid as well, but that will mean fewer placements and Instagram will need more time to learn about your audience. As a result, you may end up paying the lower bid amount for a longer period of time, driving up your spending on advertising.
With a higher bid, you can help the algorithm quickly learn about your audience and collect some valuable insights yourself in the process. When your knowledge is applied in combination with the insights collected by the algorithm, you can expect to achieve a positive ROI sooner, effectively lowering your investment into the campaign.
The daily budget influences a campaign’s budget in a similar way to the bid. Even if your bid is competitive, if you have a low daily budget, the Instagram algorithm will need more time to learn how different audiences are reacting to your ad, and optimize your campaign accordingly. This will mean that by spending less money every day, you will spend more time in this ‘learning’ phase where results may be less than impressive.
As a result, the ROI of your campaign may suffer and you may even end up spending more than truly necessary to secure a positive ROI on your advertising investment.
While showing ads is the main source of revenue for Instagram, it is also important for the platform to ensure that the ads complement the user’s experience of using Instagram. To that end, Instagram wants to ensure that the users are being exposed only to ads that they are likely to find relevant to them.
In order to ensure that, Instagram has devised the relevancy score that helps determine how relevant your ad is to the users you are targeting. This score is primarily based on how Instagram users react to your ad. A lower relevancy score will translate into higher advertising costs.
Typically, brands that target a broader audience have to pay a lower cost per click than brands that are targeting highly specific audiences.
When you target a specific niche with specific interests and qualities, you essentially reduce the total addressable audience size for your campaign. As a result, the cost per click is driven up. On the other hand, with broad targeting, Instagram has the freedom to display your ad to a variety of different people. As a result, targeting a broad audience will allow you to pay a lower cost per click.
With that said, for brands that truly understand their audience, targeting a broad audience may be a bad idea. This may seem counterintuitive but targeting a broad audience may result in lower conversion rates, as compared to a situation where you target audiences with specific attributes that are more likely to be interesting in your offering.
In other words, in some cases, sacrificing conversion rates for a lower cost per click may negatively influence the ROI of the campaign. Brands must strive to find a balance between maintaining a low cost per click while still targeting their desired audience.
Estimated Action Rate
The estimated action rate can be considered as a metric that is similar to the Relevancy Score. The name is quite self-explanatory. Only when your ads are relevant to your targeted audience, will you be able to get them to interact with your ad. The higher their likelihood of interacting with your ads, the lower your ad costs will be.
Click-through rate or CTR is the percentage of people that click on your ad. Ads that drive a higher CTR benefit both the advertiser and the advertising platform.
For the advertiser, a higher CTR means more individuals within their target audience are visiting their landing pages or product pages. When more people view your offer, more people are likely to purchase from you. It’s that simple.
In the case of Instagram, the platform benefits from a higher CTR because it means that the users are seeing ads that are truly relevant to them. Even from the user’s point of view, an experience of finding a product worth buying on Instagram may open them up to receiving more product recommendations from the platform and thus, give them another reason to return to the app. For this reason, advertisers that publish ads that drive a higher CTR are able to pay a lower cost per click.
In fact, the CTR-CPC relationship is partly the reason why campaign costs are higher near the launch of the campaign and are often brought down as the campaign progresses.
Campaign objectives may be the last element on this list but they are certainly not the least. In fact, your choice of campaign objective may have the most significant influence over your Instagram ad costs.
The campaign objective choices presented to advertisers using the Facebook ad management tool can be correlated with the buyer’s journey or the conversion funnel. For instance, the brand awareness objective is aimed at creating top-of-the-funnel awareness for brands. Campaigns that target this objective have a lower chance of generating sales in the short term. That’s why, when you select the brand awareness campaign objective, your cost of advertising will be low.
On the other end of the spectrum, you have the option of choosing a more ‘valuable’ objective, like conversions. As the name suggests, when you choose this objective, your ads are optimized to inspire users to purchase your product (or perform the action you have defined as a conversion). This is why, with the conversion objective, you will incur a higher cost.
Time Of The Year
The number of advertisers and the average amount of money they are spending on ads varies throughout the year. During the holiday season, when online eCommerce activity is at its peak, the advertisers on Instagram are the most active. Similarly, the days around Black Friday and Cyber Monday are also high activity days for advertisers on Instagram.
Thanks to this increased competition, advertisers have to pay more for their campaigns during the latter half of the year, and especially during the months of October, November, December, and January. With that said, there may be certain days and weeks outside of these months, in the former part of the year, when advertisers can expect to pay higher prices for every click. Some examples of such days are Easter, Good Friday, and Valentine’s Day.
Advertisers that are engaged in the eCommerce space should design their yearly budgets by accounting for these trends. On the other hand, if you are advertising something that is not influenced by the holiday season and similar trends, you must keep track of upcoming high competition days and optimize your budgets to ensure you are not spending unnecessarily during such days.
As you can see, almost every metric mentioned in this section can be optimized by you to minimize your Instagram advertising spend and maximize the results you get.
By being smart with your bids and your daily budget settings, targeting a moderately specific audience, creating the right ad messaging, choosing the right campaign objectives, and the correct time for publishing your ads, you can control the cost of Instagram advertising for you.
Fortunately, that’s not everything that you can do to get the most out of your Instagram ads.
How To Get The Most Out Of Your Instagram Ads Budget
So far, we have spoken about the factors that influence the cost of advertising on Instagram, and the average cost that advertisers can expect to pay. However, many forget that controlling the cost of advertising is only one part of the equation. The other part, which is just as important, if not more, is getting a positive, profitable ROI from Instagram ads.
Only when you drive more conversions, more sales, will it make sense to spend more on Instagram advertising. Only when you employ a strategy to maximize conversions can you expect a positive ROI.
Here are some tips to help you with the same:
Employ A Full-Funnel Strategy
As mentioned earlier, the campaign objectives presented to advertisers in the Facebook ad management interface can be directly correlated with the standard conversion funnel. This selection influences how the ads will be optimized by the algorithm and of course, the cost you will have to pay for each click.
However, these objectives are also a hint from Facebook, for smart advertisers that want to make the most of their Facebook ads. This hint is that the Facebook advertising experience is designed keeping the standard conversion funnel in mind. Meaning, brands that leverage multiple campaign objectives to use Facebook to implement a holistic advertising strategy have a higher likelihood of producing pleasing results.
Spreading your advertising budgets between awareness and conversion campaigns allows your brand to reach a higher number of people while also starting to generate revenue in a short period of time. Unless you have a specific objective with ads, like testing the market response for a product or service, implementing a full-funnel strategy is the most dependable way of ensuring long-term success with Instagram advertising.
A few other benefits of doing this are:
Dollar-cost averaging of campaign objectives
Dollar-cost averaging is a financial concept that supports the concept of periodical investments.
Simply put, by using dollar-cost averaging and investing in a periodical and disciplined manner, regardless of the condition of the market, investors can reduce and manage the risk of volatility when purchasing assets.
So how does this complex financial concept relate to advertising on Instagram? Simply because brands that choose to target multiple campaign objectives at the same time are paying a mix of CPC. They are neither exclusively paying a high CPC nor taking a bigger risk with conversion objectives. Nor are they exclusively spending their advertising dollars on objectives that may not be targeted at directly producing revenue.
By spreading your cost between different campaign objectives, you effectively reduce the cost per click paid by your brand.
Brings down the cost per acquisition over time
This point relates to the reason behind the popularity of the standard conversion funnel. The reason is that it almost perfectly emulates the journey that the modern consumer makes to come to a purchase decision. Modern consumers like to do their research, learn about their needs and the available solutions, and want to purchase only from brands that they trust.
A conversion funnel perfectly addresses these concerns. The top-of-the-funnel and middle-of-the-funnel are both areas that are dedicated to helping brands build trust by helping their consumers. Once this trust is built and the buyer is ready to purchase, the need for conversion-objective advertising becomes much less.
When you employ a full-funnel strategy, you are generating revenue right from the first day (or week). At the same time, you are also allocating some part of your advertising budget to establish trust with your prospects and improve the brand recall value commanded by your business. In the long run, these prospects, that are exposed to your top-of-the-funnel advertising, will become primed and ready to be converted into customers. If this strategy is executed well, you may not even need to retarget these prospects with conversion ads to convert them into customers.
May contribute to eliminating dependence on ads
There is no denying that advertising on Instagram or any other platform can turn out to be a highly profitable undertaking. However, if you got the option of completely stopping all your advertising efforts without negatively influencing your revenue, would you take it? The answer is a “yes” of course.
If this sounds like only a dream, there are real-life examples of companies that have achieved similar results. The most famous and inspiring example comes from the online property rentals giant AirBnB. The company significantly reduced its spending on performance marketing, that too, at a time when global lockdowns had brought the tourism sector to a complete standstill.
The effects? Airbnb’s traffic numbers dropped by a factor of 5% only. That’s right, despite the pandemic, and despite moving away from performance marketing, Airbnb was able to retain 95% of its traffic. These results were possible because of AirBnB’s efforts towards building a strong brand.
A holistic advertising strategy can help you achieve similar results for your brand. While a strategy that focuses on top-of-the-funnel objectives can also do the same, employing a holistic strategy lets you generate revenue during the time you are building trust with your prospects.
Opt For Automatic Placements
Many advertisers fret about the placements of their ads. To an extent, it makes sense, especially if you know for a fact that for your brand, certain ad placements outperform the others. However, if you are a beginner, it is best to let the platform decide the best placement for your ads.
As a beginner, you should be more concerned with targeting the right audience. Regardless of the placement, only the audience you select will be able to view your ads. As long as the audience is relevant, you can expect to drive decent results.
Choosing automatic placements lets you pay less by not exclusively showing your ads in the most competitive spaces. It also enables the Instagram algorithm to test different placement types and learn which one truly works best for your brand.
As you become a seasoned advertiser and get access to more data and insights from the Facebook ad management platform, you can take a data backed decision to choose manual placements.
Choose Automatic Bidding
Figuring out the right bid is perhaps one of the most complex decisions that advertisers have to take while advertising on Instagram. It is also a consequential decision. Unless you make the right bid, you may run the risk of losing visibility or losing your precious advertising dollars.
Bid too high and you may end up paying an unnecessarily high cost per click. Bid too low, and you may not get enough clicks to even collect the insights that will help you optimize your advertising approach.
In order to truly make a good bid, you need access to historical data of bid rates. However, if you are a beginner, you don’t have access to any historical data. For this reason, it is best to choose automatic bidding. Automatic bidding helps you ensure that you are not overpaying for a click, effectively minimizing your spending on Instagram advertising.
Precise Targeting Over Broad Targeting
As discussed earlier, when you target a more precise audience, you should expect to pay more for each click. Similarly, targeting a broader audience will result in a lower cost per click. However, by targeting a lower cost per click, you are actually targeting an audience that is relatively less likely to purchase your product.
Instagram lets you target the following aspects of an audience:
- Location: You can target one location or many. Similarly, you can target specific zip codes or entire states and countries.
- Demographic information: This includes information like age, gender, and race.
- Interests: This setting lets you target audiences based on what they like on the platform.
- Behaviors: Instagram also allows you to target users based on their online behavior. For instance, you can target people that have purchased something online in the past 30 days.
Even if you have a limited understanding of your audience, you already know their location and their demographic information. Beyond that, you can make educated guesses about interests and behaviors. Doing this will allow you to target audiences that are more likely to purchase from you, effectively driving up your ROI from your ads.
Sure, this will also mean that you will be paying a higher cost per click but a positive ROI will mean you are making that money back and then some. In fact, in some cases, you may end up lowering the cost per click that you pay in the long run.
If you are targeting a precise audience that you know is more likely to purchase from you, you will get a great click-through ratio on your ads. With a higher CTR, you will be eventually rewarded with a lower cost per click.
Optimize Your Landing Page
Targeting the right audience and designing a compelling ad will not work unless you are backing up your advertising efforts with a strong, consistent landing page.
This is perhaps one of the most common mistakes made by novice advertisers- they send their prospects to their homepage. Instead, the proper way to advertise is to send your prospects to a landing page dedicated to the same offer/product/service that is being advertised through your ads.
The messaging on the landing page should be highly focused and consistent with the messaging for your ads. Every aspect of your landing page should be focused on inspiring or motivating the visitor to take the action you desire, like making a purchase from your website.
A landing page plays a critical role in ensuring the clicks you are generating from your Instagram advertising campaign translate into real, measurable revenue.
Test Ads And Landing Pages
Without ever launching an ad campaign, ever spending a single dollar on advertising on Instagram, it is impossible to figure out what kind of targeting would work best or what marketing message will create the most impact.
That’s why it is important to conduct A/B testing on your ads and landing pages to ensure you are consistently optimizing your campaigns according to the data you collect.
As the name suggests, A/B testing is the practice of testing one ad against another. Similarly, you can also A/B test two landing pages against each other.
As you may be able to imagine, you can test an almost infinite number of combinations of different copies, different creatives, different audience selection options, and much more.
Ideally, testing and optimization should be an ongoing activity, every time you find a winner between two versions of an ad, create a new iteration, and test again. Remember, no ad campaign is ever perfect. You can always optimize your campaigns to pay a lower cost per click or achieve a higher conversion rate.
Use The Ad Manager
Many beginners simply ‘promote’ their posts on Instagram, never get any results, and think that advertising on Instagram is not for their brand. However, that is not the case. “Promoting” a post may be the easiest way to start advertising on Instagram. It also gives you access to some data about how people are interacting with your ads. However, it is also the most useless way of advertising your business, your products, or your services on the platform.
While using the Facebook ad manager is surely far more complex than promoting a post on Instagram, it gives you the control you need to drive a positive ROI from your ads. There is a bit of a learning curve involved but even while learning, there is a good chance that you will be able to generate some revenue and collect insights that will allow you to become more efficient with the ad platform.
To recap, the average cost per click on Instagram is $1.54 and the average cost for one thousand impressions is $11.54. However, the actual cost that you may have to pay may be much higher or lower.
The final cost that you have to pay for Instagram costs will depend on:
- The industry in which you are operating. For low competition industries, the cost per click will be less.
- Your audience and the targeting options you select.
- The choice of campaign objective.
- The choice of placement.
- The relevance of your ad to your chosen audience.
- The time of the year.
With that said, when you use the Facebook ad manager to advertise on Instagram, you get a lot of control over the way your campaign is created and in turn, the cost you incur.
For beginners, advertising on Instagram may prove expensive. However, if you are just starting out, you can avoid paying a high cost for advertising on Instagram by seeking the help of a digital advertising agency, like Digital Web Solutions. If you want to know how we can help you keep your ad costs low and your conversions high, get in touch today!