By Ana Gotter on 30-Jan-2019 09:38:48
Ever since the roll out for advertisers everywhere, Instagram Ads have been a major topic for social media marketers and PPC experts alike. Instagram, after all, had always been an incredibly high engaging platform, and the ad system allowed people to add valuable, clickable links to content showing up in users’ feeds for the first time. They could also reach new users who hadn’t yet followed them for the first time, and all while using Facebook’s incredible ad targeting system.
There was one thing that gave some advertisers pause: the cost.
Word got around quickly that Instagram Ads were costing more than their Facebook counterpart. We’ll give you a quick spoiler here: this was particularly true when Instagram Ads first rolled out. Instagram Ads do cost more than Facebook, but only sometimes (with a closing gap), and they’re easily worth it for the high engagement rates.
In this post, we’re going to take a look at everything you need to know about Instagram advertising costs, including what factors affect CPC, and how to keep your ad spend down.
Why Do Instagram Advertising Costs Fluctuate?
Instagram advertising costs are not stable. In fact, they’re anything but. You might see that you’re paying a whopping $0.40 more per click on a single campaign that’s almost a duplicate of one you ran the previous month… and unfortunately, that’s nothing out of the ordinary.
This is largely because Instagram Ads, like many PPC platforms, run on an auction-based system. There are only a finite number of ad placements in user feeds, and an even smaller number of those placements in user feeds that are relevant to select advertisers, so the platform can’t just doll out a flat fee and let people pay whatever they want. Instead, they allow people to bid for placements, with higher bids giving competitors an advantage for space in the feeds or Stories of their target audience.
Here’s how it works. Advertisers create a campaign, going through everything from targeting and placements, and then arrive at the “budget” section of the ads manager, where you can choose to either let Facebook/Instagram set automated bids for you, or you can set a bid cap. Your “bid” tells the system how much you’re willing to pay for a single action that you’ve optimised for, like a click or 1,000 impressions.
With all else being equal (which it never fully is for reasons we’ll discuss in a minute), the higher bid will get the placement. If you’re letting the ad manager do the bidding automation for you, they’ll use competitive bids, and you’ll only have to pay $0.01 higher than the closest competitor, so you won’t be bleeding your accounts dry for nothing. Because the auction is a “live” marketplace with advertisers constantly creating new campaigns and shifting the demand, prices are fluctuating, too.
What Factors Affect Ad Cost?
We mentioned above that different factors are going to affect the cost of your Instagram Ads. This is another important part of the puzzle: it’s not just what other people are doing that can affect what you pay, what you’re doing matters, too.
Let’s look at each of these factors up close, and remember that ad campaigns are live and dynamic, and that fluctuation with all factors can change ad performance (and cost) at the drop of a hat.
Several PPC platforms have quality-oriented metrics to look for the relevance of an ad campaign to a target audience and then prioritise strong, well-targeted campaigns against those that fall a little short. Google Ads has their Quality Score, and Facebook and Instagram’s equivalent is their relevance.
Your relevance score is going to be important for a few reasons. The first is that it tells you how relevant the system believes your ad is for users, and is partially based on engagement that includes click-through rates (CTR). You want your ad to be relevant to your audience, and in my experience, the metric has been a pretty great gauge of that historically. It’s also straightforward; you’ll be given a number between 1 and 10.
Relevance score will also directly affect your costs. In attempt to reward and prioritise ads that are high quality and directly relevant to users, Instagram will actually lower the CPC (or other cost per action) of an ad that has a higher relevance score.
The moral of the story here is to create audience-oriented ad campaigns with smart targeting so that your ads are relevant. Strong relevance scores are 7 and higher, and always try to shoot for an 8 and up.
The Actions You’re Targeting
When you’re creating your ad, you’ll notice that some objectives and advanced bidding options allow you to optimise for different things. This essentially means that you’re paying for different actions, too.
If you’re choosing to optimise for link clicks, for example, the ad system will show your ad to people they believe are most likely to click on your link. They’ll then likely charge you per click, which means you pay the fee every time someone clicks on your ad, not just when they see it. Meanwhile, optimising for daily unique reach will charge you for every 1,000 impressions (or views) your ad receives.
Different actions can result in varying costs, and it’s difficult to predict exactly which will benefit your specific campaigns most. While I typically recommend optimising for the actions you most want to take, you can experiment with what you’re paying for and see what works best for you.
The Placements You’re Using
Different placements can result in different ad costs. Instagram newsfeed ads cost more than their Facebook counterpart, and Stories historically have a lower cost than feed ads (though this isn’t always the case).
Image source: AdEspresso
You should always choose the placements best suited to your campaign, if necessary, and just remember to factor in the different potential costs overtime.
If keeping ad costs lower with placements is particularly important to you, you can create campaigns that utilise a number of different placements in addition to Instagram. While your CPC on Instagram placements themselves won’t be any lower, it will give you the chance to run the same campaigns you’re already executing on other platforms with much lower CPCs, lowering your average CPC overall.
Competition In the Marketplace & Seasonal Events
Competition in the marketplace, as we’ve discussed already, will affect ad costs. This is typically why CPCs will increase during the holiday season, when advertisers everywhere are scrambling to get their share of the Christmas-and-Hanukkah-present pie. When the market is flooded, it doesn’t change the fact that ad space is limited, and costs typically go up as a result.
Sometimes, new ad placements will roll out, and this can temporarily help lower or maintain rising ad costs by offering up additional placement options.
Unfortunately, ad costs will rise and fall during the year, and there isn’t always a ton of rhyme or reason to it. You should, however, be prepared for ad costs to increase during key marketing times, like the Super Bowl, Soccer Cup, and the holiday season.
Ad fatigue isn’t typically considered a factor that affects cost, but even though it isn’t something that Facebook and Instagram use to determine what you pay, I think it’s a little naive to believe that it doesn’t matter.
Know how you see the same exact ad on a single social media platform for what feels like ten days in a row? You know exactly what the headline says and what that video offers, and you’ve maybe even clicked all the way through to the landing page and then decided “no thanks?” You’re sick of the ad, but you keep seeing it, because the algorithms know you haven’t converted. That’s ad fatigue. And it matters.
Ad fatigue essentially is what happens when people see your ad too often. Even though some initial repeat exposure can lead to an increase in conversions, seeing the ad too many times will drop your CPC rate, can cause people to hide your ad, and then start to affect the ad relevance score. This can start to affect cost in turn.
To keep an eye out for ad fatigue, watch your Frequency metric on each campaign, which tells you how often a single user, on average, is seeing that campaign. If it creeps up past 3, either expand the audience, revamp the campaign, or pause it all together.
So How Much Can I Expect to Pay?
I know, I know. We’ve gotten this far into the post and I haven’t even given you a single number yet for a reasonable bid or what you might expect to pay on Instagram. Let’s change that.
There’s a lot of data online that’s giving a wide range of different costs for Instagram.
One study from ThriveHive found that the average CPM (cost per thousand views) of Instagram Ads was $6.70 in 2017, which was drastically higher than Facebook at the time.
What’s interesting is that while Facebook costs have increased, Instagram’s have sometimes fallen, and a recent post from WordStream notes that the gaps in cost between the two may be closing in. Now, they’ve stated that a highly-targeted campaign (which can cost more than general targeting) costs around $5 on average for a thousand impressions. The same study also noted that single-image ads were typically the most expensive (likely due to lower CTR), while carousel and video ads typically cost less and performed stronger.
Meanwhile, data from AdEspresso has revealed that Stories typically cost less than feed placements (with the exception being the month they first rolled out), costing around $0.40 less on average. This study also found that location played an important role; Viet Nam had the highest CPC of $3.73 and Liechtenstein had the lowest at $1.37.
With all the data at hand, current research points to the fact that you can expect to pay somewhere up to $3 per click (though hopefully less) and around $5 per thousand views for Instagram Ads.
Note that when you’re looking at these numbers that they’re simple guidelines and averages on the data we currently have. I’ve worked with clients who was thrilled with a $8.39 CPC, while one came to me appalled with their current performance and looking to lower their $1.10 CPC. Look at the data, but also look at what’s normal for you so far before you make drastic decisions about ad performance.
Instagram advertising costs are really anything but stable, especially if you’re looking for a specific, to-the-penny number you can expect to pay per click. With drastic changes happening in the marketplace on a regular basis, costs will naturally fluctuate, so all the numbers discussed in this posts are benchmarks-- useful guidelines to keep in mind.
You may find that your CPCs are consistently higher than the numbers we’ve shared above; this happens for some audiences and in some industries. If this is consistent for your brand, your relevance score is high, and you’re coming out with a positive ROI, then you’re still in the clear and you might just have a more expensive audience. Keep a careful eye on your ad performance, and when you know what’s normal for you, you’ll be able to spot anything out of the ordinary-- including campaigns worth pausing-- very quickly.
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