Instagram Ads Cost: How to Optimize Instagram Campaigns for Cost Efficiency

Author's avatar Social Media UPDATED May 11, 2022 PUBLISHED Apr 2, 2021 10 minutes read

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    Peter Caputa

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    Is the thought of Instagram ads cost holding you back from reaching out to an audience of 83 million youngsters? That’s right, the visual-first platform currently has 83 million users that are 13 to 17 years old. What’s even more interesting is that Instagram is in third place, right behind Facebook and Snapchat.

    Either way, the point is that Instagram has been growling fast, so fast that it’s now just as big of an advertising platform as its parent company, Facebook. As such, you should take advantage of that.

    But what about the cost of Instagram ads? Just as any other advertising platform, when done right, you can effectively advertise and within your budget. And, in this post, we aim to help you do just that – advertise on a budget as we look at:

    Let’s get on with it.

    How Much Does the Average Instagram Ad Cost?

    The average Instagram ad costs depend on the bidding model. For a cost per click or CPC model, Instagram advertising cost can be anywhere from $0.50 to $3 for competitive industries such as the fashion industry.

    The same cost for a cost per impression or CPM model is $6.70 per 1000 impressions.

    Give the average cost, how much do other businesses invest in Instagram ads?

    According to our survey of 45 respondents, most companies spend under $5K on Instagram per month (52.63%), not depending on the industry they belong to.

    average Instagram ads cost per month survey results

    That said, respondents that spend more than $50k on Instagram per month are all agencies or tech companies (10.53%) – they probably have combined budgets from different clients.

    Instagram ads cost survey control question

    8 Ways to Reduce Instagram Ads Cost

    Now to help you maximize your Instagram ad’s reach within your budget. Start with these tips:

    1. Work out your spending goal beforehand
    2. Choose your bidding model carefully
    3. Test different ad formats
    4. Implement automated rules
    5. Split test your ads
    6. Group performance by objective
    7. Leverage user-generated content
    8. Segment ads by placement

    1. Work out your spending goal beforehand

    Goals give you direction, making them a good starting point for all objectives you set including reducing your Instagram ad spend.

    It’s why Assured Marketing’s Connor Hewson recommends setting your spending goal. “My number one tip for maintaining cost-efficiency when running Instagram Paid Ads is to always identify your suitable cost per acquisition from the beginning.”

    Having an ad spending bracket helps you plan your ads accordingly. As Hewson puts it, “Working out exactly what you/your client are willing to pay in order to acquire a customer is the best way to ensure a positive Return On Investment (ROI).”

    “If you sell a monthly service at £75pm, then a single campaign budget of £75 would perhaps be suitable. This way if the campaign converts within the first month you have made back your ad spend, and as long as the customer is retained long-term their value to you/your client from month 2 is pure profit,” explains Hewson.

    “If a campaign is not converting then it is essential to cut this audience before the campaign begins to lose you/your client money.”

    In short, “having this pre-determined expense is a great way to anticipate the next steps should the campaign be unsuccessful. Identifying the right cost-per-acquisition can be tricky but properly analyzing margins, needed reach for conversion, and the lifetime value of a customer are important factors to consider.”

    Editor’s note: To determine whether to invest in Instagram ads at all, use this Inbound Social Media Performance dashboard that shows how social media affects your verall inbound marketing pipeline, and which networks are driving the most leads.

    Inbound Social Media Performance dashboard template

    2. Choose your bidding model carefully

    There are several ways to manage and make Instagram ads more cost-effective. You can start with an automatic bid, optimize your Instagram ad campaign for conversions and set a frequency cap.

    Speaking of frequency cap, Planet Content’s Obaid Khan points out, “Set a frequency cap on your ads to minimize ad fatigue, which can lead to better usage of your ads and greater reach.”

    Circling back to Instagram’s bidding models, keep in mind that “Instagram advertising costs depend on your bidding model such as cost-per-click (CPC) or cost-per-impression (CPI),” highlights Chan.

    “On average, companies pay $0.20 to $2 per click and $6.70 per 1000 impressions for Instagram ads. With my small ecommerce business, I plan a monthly Instagram ads budget of between 5k to 10k. If your goal is to maximize profits, choose the maximum bid. However, if you want to pay a little extra per conversion but get a lot more of them, select the average bid,” Chan continues.

    Of the multiple bidding models though, Clancy Clarke from DesignCrowd vouches for the return on ad spend bidding model. “Always leverage FB bidding algorithm and use a return on ad spend bidding model to ensure you have complete control over your ROI,” Clarke outlines.

    “If possible use offline conversion tracking to avoid the pitfalls of cookie-based tracking (particularly with the release of iOS 14).”

    Related: Social Conversions: How to Generate Leads from Social Media

    3. Test different ad formats

    Another suggestion for chopping your Instagram ads cost is to test different ad formats and measure their performance with a social media dashboard software – a suggestion that a handful of our expert respondents made.

    The team at Brandhopper Digital, for instance, does a lot of ad format testing. Their team’s Dan Cassidy comments, “We test lots of creative for our e-commerce clients at the start of every ad campaign so that we can scale as cost-efficiently as possible.”

    Based on their experience, Cassidy goes on to add, “We recommend testing different formats – images and video – along with different types of content – product shots, customer images, or lifestyle images – until you dial in on what’s working best and then scaling from there.”

    Editor’s note: Keep an eye on how well your Instagram account is doing by tracking essential metrics such as reach, impressions, and new followers on one screen using this free Instagram Business (account overview) dashboard.

    Instagram Business (account overview) dashboard

    4. Implement automated rules

    You can also save money on running your Instagram ad campaigns by putting a lid on the ad spend. “For example, if an ad has spent X but the CPA is over Y then pause the ad. This prevents ads from running longer than they should and CPA costs increasing,” explains Darren Graham from 408 Media.

    In fact, Felix Yim from GrowthBoost calls this tactic “the best way to ensure your Instagram ad spend doesn’t blow out of control.” In simple: “put campaign spend limits in place before you run the campaign.”

    Yim shares their experience, writing, “I usually set the limit to a cap of 3 days of ad spend, so you are forced to review the performance after a few days and decide whether you want to continue running the campaign or not.”

    On a similar note, Guru99’s Krishna Rungta suggests using automatic bidding for managing your Instagram ads cost. “This technique is also useful for new Instagram advertisers and an easy way to get a bid that is the best for the campaign.”

    “Using Automatic bidding, we can set the bid amount which is right for our campaign,” Rungta continues. “It’s a great way which helps to manage Instagram ad costs so that they remain cost-efficient.”

    5. Split test your ads

    A/B testing your Instagram ad campaign helps you understand what’s working and what’s not. The better (and faster) you can identify this, the more you can save on your Instagram advertising cost.

    To this end, Martina Cooper of BHMR advises, “I recommend split testing 5-10 different ad creatives & different ad copies. After the initial testing period of 7 days, look at the analytics and turn off the ads that aren’t effective.”

    Related: 13 Instagram Analytics Tools to Try Out Right Now

    Don’t expect to get the magic formula for the most cost-effective ads here though as “Effectiveness of an ad is a pretty subjective term that different from one ad campaign to another,” notes Cooper.

    “But you’ll generally see some ads that have way higher ad spend per click or conversion than others and you’ll see that some of them perform infinitely better than the rest. This way you’ll be investing more in the initial phase of your Instagram ads but your Instagram ad costs will drop down significantly in the long run – hence, better long-term ROI.”

    Related: Instagram Ads For Beginners: 8 Tips for Creating High-Performing Instagram Ads

    6. Group performance by objective

    An important aspect of managing the cost of your Instagram ads is understanding what’s an efficient or worthwhile spend on the ad campaign.

    This is why Megan Thielen from Twelve Three Media suggests you “group performance by objective so you don’t compare your cost per engagement (CPE) to your cost per click (CPC).”

    “This is a pretty important component because you need to know what an efficient spend is in the first place and you need to have a relatively apples-to-apples comparison (i.e., comparing CPE to CPE is a little more apples to apples than CPE to CPC, which would be more apples to oranges),” elaborates Thielen.

    In short, remember that “if your cost per result is pretty high above your average, something is going on and you’re not spending as efficiently as possible. Vice versa, if you’re experiencing a cost per result that is much lower than normal, there’s something happening that you will want to know about.”

    7. Leverage user generated content

    User generated content or content that your users create is an awesome way to add social proof to your ads. The social proof, in turn, makes ads relevant and attractive to your intended audience. Needless to say, the more effective the ad, the better you can manage its cost since you know what to do.

    Here’s an example from Animalso’s IG ad campaign that Alexandra Seagal shares, “One way I found to get the most return on ad spend is by using user-generated content. The main video that I used in all 7 stores was user-generated content for that specific product.

    It even ruled out professionally made videos. Which I may have paid videographers to make and edit. My main store that I’m running has done over $300,000 solely on the base of user-generated content made by influencers and normal people.”

    Here’s why Seagal thinks UGC for managing ad costs works so well: “From my theory, the reason why user-generated content is the best marketing trend for small businesses and any business honestly, is because people want to relate to products.

    They want to feel like they can trust the business they are buying from. So when customers see actual people reviewing the brand, unboxing their product, and giving their opinions, it makes the customer feel a lot more safe buying the product.

    Since they see another actual human has also bought it and loves it. Whereas If they saw a professionally-made ad, they can’t really relate to it because they know a company actually spent loads of money on the ad, and the customer doesn’t really have anything to make a connection to, in the ad.”

    So it’s a smart move to add planning an audience-engaging UGC campaign to your to-do list here.

    Related: 18 Proven B2B Instagram Marketing Strategies

    8. Segment ads by placement

    Last on managing your Instagram advertising cost: segment ads efficiently. In particular, Creatopy’s Bernadett Kovacs-Dioszegi recommends “segmenting your ads by placements.”

    “For example, Instagram Stories are more cost-effective due to the fact that the competition is lower there, so you can achieve a favorable CPM. I recommend creating separate ad sets for Facebook platform, Instagram Feed and Instagram Stories. This will help you optimize your campaign in a more efficient way.”

    Additionally, it’s essential you optimize ad size according to the target platform. “In the case of Facebook you should use at least 1080px by 1080px resolution banners, for Instagram stories it’s best to use 1080px by 1920px dimensions, which is an aspect ratio of 9:16,” Kovacs-Dioszegi outlines.

    To bring this to a close, remember that to manage your Instagram ads cost, you need to start with setting a budget goal and understanding how much you’re willing to acquire each customer. Select your bidding model wisely. From there on, optimize your ad spend by optimizing your ad content and use a social media dashboard to measure the effectiveness of your strategy.

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    Masooma Memon

    Masooma is a freelance writer for SaaS and a lover to-do lists. When she's not writing, she usually has her head buried in a business book or fantasy novel.

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