Understanding Instagram Advertising Costs

Do you remember in 2012 when Mark Zuckerberg bought Instagram for $1 billion? It was a gamble. At the time of the acquisition, the platform was valued at half the purchase price, had 30 million users, and wasn’t generating revenue.

Today, the platform has over 1 billion active users worldwide with diverse demographics, behaviors, interests, and habits — making it prime territory for targeted advertising.

But how much do Instagram Ads cost?

Instagram Ads cost depends on your bidding model, such as cost-per-click (CPC) or cost-per-impression (CPM).

The cost for Instagram ads hovers between $0.70 to $1 per click on average. That being said, costs tend to vary based on a variety of factors, such as industry, location, and ad placement. More competitive industries and demographics generally have higher advertising costs. In some cases, Instagram ads can exceed $5 per click.

Advertising on Instagram can be an accurate and effective way of reaching the right prospects at various stages in their buyer’s journeys. If done right, your business can leverage the platform to generate interest in your products or services and turn users into customers.

How are Instagram ad costs determined?

While determining ad costs, Instagram follows the same guidelines as its parent company, Facebook. There are four main factors that decide how much you will pay:

1.Bid Amount

Your bid amount determines how much you spend on an Instagram ad campaign. You have to decide how much you are willing to pay to get leads. The value of your bid also affects how much you pay.

Instagram has higher bid rates; you will want to be ready to pay more for clicks and impressions.

2.Relevance Score

Your ad relevancy score will also affect the cost of your Instagram ads. Your relevancy score is how relevant your ad is to Instagram users who will see your ad.

Instagram strives to give users relevant content in their feed. They’ll base your score on how users respond to your ad.

3.Estimated Action Rates

The estimated action rates will also affect your Instagram ad cost. According to Instagram, the rate is dependent on the probability of users acting on your ad. Basically, they want to gather how likely your audience will interact with your ad.

These interactions include actions such as clicking and converting. Instagram wants to promote ads they think users will engage with and connect with.

If Instagram believes it’s likely that more people will interact with your ad it will be put first. This means you will get a lower bid amount, which will help you gain more leads and conversions.

4.Competition

When you try to reach a specific demographic of people, there will always be competitors trying to reach that same group. Your competition could cause the cost of your Instagram ads campaign to change.

What makes Instagram ads worth the price?

Advertising on social media brings many benefits, and there are some particular benefits of paying for ad impressions on Instagram rather than simply running campaigns and promotions directly from your business’s account.

1. Advanced targeting

With over 1 billion monthly users, Instagram ranks second after Facebook. These platforms have an incredibly robust arsenal of targeting data and since Facebook owns Instagram, Instagram advertising uses the same comprehensive demographic and geographic data. This advanced targeting is what makes Facebook Ads work so well, as you can be incredibly prescriptive when targeting various audiences.

2. Higher engagement rates

Instagram is known for its high engagement rates—organically and through paid ads.

As a visual platform, images and videos are powerful in driving more engagement than on other more text-based social platforms.

3. External links

With Instagram advertising, you can include outside links, which enables you to designate a destination URL to your website or another external URL. To be able to better track website traffic from your Instagram Ads, it’s recommended to use your own domain as you should have your Pixel implemented there, whereas you may not have it on other website URLs that you don’t control.

4. Longer videos

Instagram Feed and Explore video can be up to 60 seconds in duration and while Stories are typically up to 15 seconds in duration, if you run ads in these three ad placements, you can have up to 2 minutes of video content. This gives you more opportunity to convey both your brand and the features and benefits of your offer through your products and/or services.

How To Lower Instagram Ads Cost?

When it comes to social media advertising, you want to do whatever you can to reduce advertising costs. The best practices that can help you reduce the cost of your Instagram ads and maximize your return.

1. Use Automatic Bidding

If you haven’t used Instagram ads before, using automatic bidding for your campaign is beneficial. For you, it’s a simple way to get a bid that’s right for your campaign.

Automatic bidding is the best way to go if you don’t have any historical data informing you of a good CPC to set for your campaign. This will help you determine the bid amount that matches your campaign.

2. Use Precise Targeting

When setting up your Instagram ads the goal is to target people who would be interested in your products or services. Use precise targeting to reach your desired audience

Instagram lets you target people by: Location, Demographics, Interests and Habits.

By using precise targeting, you will reach more people who are interested in your products and services. This means that your ad copy will become even more relevant to them, helping you get a higher ad rank and a lower CPC. This would also result in a rise in sales which will help cover the costs of running the campaign.

3. Set Goals

Setting goals will help maintain focus on what you want to accomplish with your advertisement.

There are three main goals you should focus on attaining with your Instagram Ads:

• Awareness: You should concentrate on growing awareness about your company, brand, product, app, or service through an awareness campaign.
• Consideration: If your goal is consideration, then you will focus more on educating your audience. You’ll want to give more persuasive information to your audience, which will get them to convert.
• Conversion: Many businesses aim to get their customers to buy their goods, install their apps, or use their services. If you focus on conversions for your campaign goal, you want to have a persuasive copy that will get your audience to buy your products or use your services right away.

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4. Make Relevant Landing Pages

Most businesses make the mistake of directing leads to their home webpage after clicking on their Instagram ad. This does not promote engagement, since, people are not led to an ad-relevant landing page. If a user is taken directly to the product they see in the ad, they are more likely to convert.

When a customer is taken to the product directly, they are more likely to convert. This will help recoup the costs of running your campaign.

5. Test Your Ad

You must test your ad to make sure you put out the best version possible. Testing your ad lets you make a more relevant copy of the ad. Relevant ad copy means you will have a higher ad spot, leading to a lower CPC.

Give Instagram Ads a test and it may end up being an important part of your funnel by driving more brand awareness and engagement or it may end up bringing a primary source of revenue.