One minute, you are scrolling through cute dog videos. The next, you’re checking out with a new business, purchasing five new pieces of clothing you probably don’t need.
How did this happen?
This is the power of a well-crafted Instagram ad. Before you know it, you’ve seamlessly moved from your favorite social media site (sorry, X), and you’re scrolling through all the things you didn’t know you needed from a brand you didn’t know existed.
It’s the digital equivalent of sleepwalking.
And it’s why Instagram ads are so popular with brands! But how much are these brands spending on advertising on Instagram?
Here, we will discuss how ad costs are calculated and how much you should be spending to attract new customers to your brand.
Are Instagram Ads Effective?
When done correctly–very!
While some ads are forgettable, as you seamlessly scroll past them in a fit of jealous rage that your friend Jen is on holiday AGAIN, chances are when you think of good Instagram ads, you have a memorable one that springs to mind.
When done well, Instagram ads are a great way to engage with your target audience on their favorite social platform (again, sorry X, no hard feelings), with all the benefits of the detailed targeting opportunities that Meta offers users.
How Much Do Instagram Ads Cost?
Wouldn’t it be lovely if every Instagram ad costs the same, regardless of the audience size, type, and budget?
No, sadly, Instagram ads are a little more complicated than that, operating in an auction style. Essentially, this means that your Instagram ads’ cost depends entirely on supply and demand.
You set a bid amount, which represents the maximum you’re willing to pay for your desired action (such as a click or an impression), and this bid can be either a manual or an automatic bid.
But the cost you pay for the ad placement isn’t necessarily your bid amount. You pay slightly more than the bid of the second-highest bidder.
This is often referred to as the “second-price auction” model. Your actual cost per action will depend on factors like competition, ad quality, relevance, and audience targeting.
When you set up your ads through the Meta Ads Manager, you have a range of tools that allow you to alter your priorities to keep your ads within budget.
To keep things simple, look at your ads through one of two lenses. You either have a budget you want to spend for the entire campaign or a budget to spend per result.
You have the power to control how much you want to spend, but you don’t have the ability to control how much each purchase, download, or click costs due to the auction system.
The built-in tools allow you to control the cost per result a bit, but the outcome may vary.
Don’t Skip: Instagram Ads Playbook
The cost factors explained
That all sounds quite complicated, right?
Well, to keep things as simple as possible, let’s look at it through the eyes of the lizard king himself, Mark Zuckerberg, and his company Meta.
Meta’s aim is to keep their users on the app as long as possible, which makes sense when you think about it. A lack of activity isn’t particularly “social.”
Therefore, they are conscious of serving bad ads, as this will have a negative impact on user experience, leading to more people leaving.
As a result, they operate a system where the less popular your ad is, the more you have to pay to deliver it. Alternatively, if you create an awesome ad that Instagram users love, it will be much cheaper to run, as Meta will see you are not ruining the experience of their users and will be more willing to share it with others.
“How do they determine a good or bad ad?” I hear you asking for your monitor (don’t worry, I’m already on ChatGPT 12). Well, essentially, they tally up engagement, reactions, and comments to see how your audience is reacting to the content.
As an advertiser, all you must do is set your budget, identify relevant target audiences who will like the content, and create brilliant ads, as this will all help reduce your costs.
Within the world of Instagram advertising, the role of creativity cannot be overstated. It’s the quiet yet powerful force that has the ability to transform ordinary ads into captivating stories, resonating deeply with your audience and leaving a lasting impression.
What does CPM mean on Instagram?
When you start looking at your advertising campaigns, you’ll probably notice the term “CPM” appear from time to time, seemingly a key aspect of analyzing the performance of your ads. Sadly, it doesn’t stand for Cute Puppy Memes (but we think it should).
It actually stands for cost per thousand impressions and is calculated by dividing how much you have spent by how many impressions your ad has made.
Frequently Asked Questions About Instagram Ads
How do you calculate Instagram ad costs?
Instagram ad costs are calculated based on factors such as bidding strategy, target audience, ad relevance, competition, and ad format.
How much should I budget for Instagram ads?
The budget for Instagram ads depends on your campaign goals, audience size, and competition, but it's recommended to start with a budget that allows for consistent testing and optimization.
Is paying for Instagram ads worth it?
Yes, paying for Instagram ads can be worth it as they offer targeted reach, engagement, and potential business growth opportunities.
Keep Learning: How to Use Instagram for Business to Smash Your Goals
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