How to optimize and maximize the costs of your client’s Instagram ads

Marketing | August 21, 2023 | 11 min read

Digital marketers know that Instagram ads are a powerful tool for clients in just about every industry. With nearly 2 billion users scrolling their feeds every month (Statista), Instagram presents an unparalleled platform for businesses to engage with consumers. That said, Instafame doesn’t come free—for most businesses it has a cost, and that’s the cost of Instagram ads.

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Navigating the cost of Instagram advertising can be overwhelming, and it often feels like an ever-changing labyrinth, especially when you’re working with a client’s budget instead of your own. Thankfully, this guide is here to help. Use it as you work toward a greater understanding of Instagram advertising costs and to help you price and optimize your clients’ ad spend.

Table of Contents

What’s the average cost of Instagram ads in 2023?

The average CPC for Instagram ads ranges from $0.50 to $0.75, but as with any pay-per-click marketing, the cost of your Instagram ads varies depending on the products or services your client is selling. It’s important to remember that this number is an average so your actual CPC might be higher or lower than the number mentioned (Wordstream).

Think of Instagram’s advertising price as a complex formula that’s influenced by several factors. On top of what you’re trying to sell, these factors also include audience targeting, ad placement, ad format, bidding strategy, industry, and even the season you’re advertising in. Each of these factors can have a substantial impact on your final ad spend—when it comes to Instagram, it’s never as simple as a flat rate per click.

While all of this probably sounds a bit daunting, there’s actually no need for concern. The variables that are at play aren’t insurmountable obstacles. In fact, understanding each of them gives you an opportunity to better strategize and optimize your client’s advertising budget.

How do Instagram ads work?

As a marketing agency, understanding the mechanics of Instagram advertising is paramount to formulating an efficient ad strategy. Instagram ads operate within the Facebook Ads ecosystem, taking advantage of its powerful targeting and analytics tools.

An Instagram ad campaign begins with identifying a clear objective. That might be something like building awareness, fostering consideration, or converting viewers into paying customers. Whether you’re aiming to increase visibility for your client’s brand, drive traffic to their website, or boost product sales, defining this goal will be paramount to your campaign’s success.

Once you’ve set your objective, you’ll need to define your target audience.This is where the power of Instagram’s user data comes into play. You can target users based on demographics, behaviors, interests, or even the connections they have with other users. Custom and lookalike audiences can give you the opportunity to further refine your targeting, helping you ensure that your Instagram ads reach the users that are most likely to engage.

Lastly, you’ll need to determine your budget and your schedule. At this point, you can enter the bidding process. This step is where understanding factors that influence the cost of Instagram ads becomes crucial to optimizing your client’s ad spend. Understanding how these elements interplay will enable you to run effective, cost-efficient campaigns.

What factors contribute to the cost of Instagram ads?

Instagram advertising operates in a dynamic and fluid environment where several elements interact to determine the finder cost. Getting to know each of these elements will provide you with a better understanding of how Instagram ads work overall and how each of them contribute to your overall Instagram ad spend.

Audience targeting

Targeting is a crucial element in determining your Instagram ad cost. Opting for a highly specific, narrow targeting can lead to cost escalation due to the limited audience pool and amplified competition for that particular segment. However, a broader targeting approach, while potentially lowering costs, could dilute the relevance of your ads and ultimately result in lower engagement and conversion rates.

Audience targeting is about finding the right balance to ensure your ads are cost-efficient and effective in meeting your campaign objectives. Achieving this balance requires a deep understanding of your client’s target market and a carefully crafted targeting strategy.

Choosing your ad placement

The selection of ad placement plays a surprisingly significant role in your ad pricing. Each placement option, whether it’s feed ads, stories ads, or explore ads, carries a different cost structure.

The level of competition and popularity associated with certain placements can lead to higher costs and as such, understanding how each placement operates and where your audience is most engaged can help you create a more strategic, budget-friendly placement strategy.

Quality and relevance

The quality and relevance of your ads have a direct implication on the cost and success of your campaign. Instagram’s algorithm factors in the ad relevance score, engagement rate, and user feedback to determine an ad’s performance. Ads that strike a chord with the audience and deliver high-quality content are often rewarded with better performance and potentially lower costs. Invest your time in crafting high-quality, relevant ads to give your campaigns the best chance at success.

While formats like video ads and carousel ads typically necessitate more creative resources, thereby adding to costs, still image advertisements are typically more affordable. However, video and carousel ads are typically more engaging and visually appealing, helping advertisers to pull in higher conversion rates and more engagement from viewers.

Bidding strategy

The bidding strategy you choose is one of the most significant factors shaping the cost of Instagram ads. Instagram provides multiple bidding options, such as CPC, CPM, and cost per action (CPA).

Each of these strategies comes with its own set of unique cost dynamics, and choosing the option that best aligns with your campaign objectives can affect your Instagram ad spend significantly. Mastering the art of bidding strategy selection requires careful evaluation of campaign goals and budget constraints.

Competition and demand

The level of competition and demand for Instagram advertising space will vary depending on your clients’ industries and targeted audiences. More sought-after audience segments or competitive industries often come with much higher costs due to increased demand for ad placements. Understanding the competitive landscape and audience demand can help you allocate your clients’ budget appropriately and formulate a successful advertising strategy.

Seasonality and timing

Seasonal fluctuations and timing significantly affect your Instagram advertising costs. During peak shopping seasons or holiday periods, competition for ad placements escalates, resulting in higher costs. Forward-thinking advertisers typically foresee these cost surges and adapt their budgets and strategies accordingly. Hence, keeping an eye on the calendar and understanding industry standards is key.

Campaign duration

Lastly, the duration of your Instagram ad campaign might seem like an obvious factor when considering the cost of Instagram ads, but it’s one that’s often overlooked. Extended campaigns, particularly those that run during periods of intense audience competition, can attract much higher costs.

Take time to think about the timeline of your campaign when developing an advertising strategy. Ensure that your timeline aligns with the objectives of your campaign and budget limitations.

How to optimize and maximize your Instagram ad spend

Just like consumers, businesses want to make the most of their spending. That’s where you come in. As a digital marketer, it’s your job to provide your clients with the best possible value for their investment by optimizing their strategy and ensuring they get results.

Use these strategies to optimize and maximize your client’s Instagram ad spend.

Scrutinize competitor strategies

Pay attention to your client’s competitors. Watching their Instagram ad campaigns can be an enlightening exercise. Take time to assess their strategies, ad creatives, targeting options, and messaging to gain valuable insights.

Identify opportunities to differentiate your client’s brand and fine-tune their campaigns based on what you’ve learned in your competitor analysis. Tweaking campaigns based on those insights may give you a significant edge in managing the cost and success of your Instagram ads.

Overall, this approach allows you to learn from others’ success (and failures) and avoid potential pitfalls.

Understand user behavior

A deep dive into user behavior and engagement patterns can help you to determine the most effective times to run your ads. By aligning your campaigns with peak activity periods, you can significantly enhance your client’s exposure and engagement, thereby optimizing your advertising budget.

In addition, consistently monitoring ad frequency helps you to avoid ad fatigue—an element often overlooked, leading to diminished returns.

With these tactics in play, you can optimally allocate your budget to make every penny count.

Embrace native lead generation forms

Implementing Instagram’s native lead generation forms is a strategic move towards user-friendly conversions. With these forms, users can effortlessly share their information without leaving Instagram, thereby eliminating potential conversion drop-off points.

This process not only streamlines the conversion process, but it can also significantly lower the cost of Instagram ads by boosting conversion rates. It’s a simple yet impactful approach to getting the most out of your ad spend.

Leverage user-generated content

Promoting user-generated content affords you the unique opportunity to build authenticity for your client’s brand and foster engagement at the same time. It allows you to showcase real-world use cases for your client’s product or service, adding a layer of credibility that can’t be achieved with brand-created content.

This approach can enhance overall ad effectiveness and reduce costs by bolstering engagement and click-through rates. User-generated content represents a clever utilization of existing resources, adding value without draining the budget.

Regularly analyze key metrics

Key metrics analysis should be an integral part of your Instagram ad management strategy. Regularly scrutinizing metrics like click-through rate (CTR), cost per conversion, and return on ad spend (ROAS) offers you a clear picture of your campaign’s performance.

With this data at your disposal, you can identify underperforming campaigns or ad sets and make informed decisions that drive improvement. This method could also give you the upper hand when it comes to managing your client’s budget against the cost of Instagram ads. It’s like having a compass for your campaign that always points towards optimization.

Retarget high-value audiences to maximize ROI

Retargeting high-value audiences—those who’ve previously engaged with your brand or showing interest in your offerings—is a proven tactic for improving ROI. These users are already familiar with your client’s brand and that makes them more likely to convert when they see advertisements in the future.

This targeted approach leads to higher ad efficiency and lower costs, maximizing the returns from your client’s investment. It’s the equivalent of betting on a winning horse, which gives you a far higher chance for success.

Experiment with ad placements

Explore the various ad placement options that Instagram offers. This strategy should be a part of your regular Instagram ad arsenal as testing different placements can reveal surprising insights about where your clients’ advertisements perform best.

This process of trial and error allows you to uncover the most cost-effective ad placements on Instagram, which can ultimately lead to more controlled spending and a higher ROI.

Prioritize conversion events with tailored campaigns

When you define and prioritize specific conversion events, such as purchases, sign-ups, or downloads, your campaigns become far more targeted and effective. By focusing your ad spend on driving these crucial actions, you can optimize costs and typically garner higher returns.

With this type of goal-oriented approach, you’ll find your budget is spent more on driving specific, valuable user actions and less on experimentation.

Build funnels from organic posts

Creating a sales funnel from your existing organic posts is a cost-effective way to nurture leads towards conversion. This strategy capitalizes on content already created, ensuring a seamless transition for your audience from interest to conversion. It’s about making the  most of what you already have, keeping costs low while maintaining a consistent brand experience.

Test bid strategies

Your bid strategy might just be the most important part of your Instagram advertising services. A successful bid strategy can ensure your clients get the most bang for their buck, but often, finding the right strategy can be a challenge and what’s right for one campaign might not be right for another.

Allocating resources to experimenting with different bid strategies for each client can offer powerful insights. It can help you determine which approach best serves your client overall, and help you better develop your objectives and budget for each campaign.

Diversify your bid strategies such as lowest cost, cost cap, and bid cap to hep you grasp the nuances of your campaign’s cost dynamics. This exploration will empower you to fine-tune your approach and give you more effective control over the cost of Instagram ads.

Frequently asked questions

How does the cost of Instagram ads compare to other advertising platforms?

The cost of Instagram ads varies based on several factors and can fluctuate compared to other advertising platforms. On average, Instagram’s CPC may be slightly higher than Facebook due to its highly engaged user base. However, in terms of CPM, Instagram can be more cost-effective, considering its higher engagement rates. Compared to Google Ads, Instagram ads tend to be less expensive. In terms of LinkedIn, Instagram is significantly more cost-effective, especially for B2C brands.

Are there any seasonal trends or fluctuations in Instagram ad costs?

Yes, Instagram ad costs can fluctuate seasonally, largely due to changes in demand.

It’s also worth noting that some industries might see higher increases in costs at specific times of year while others don’t. On the other hand, there are also periods in the year when competition is lower and as such, costs can decrease. It’s essential to factor these seasonal trends into your advertising strategy and budget to maximize your campaign’s efficiency.

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About the Author

Lawrence Dy is the SEO Strategy Manager at Vendasta. His career spans from starting as a Jr. Copywriter in the automotive industry to becoming a Senior Editorial Content Manager in various digital marketing niches. Outside of work, Lawrence moonlights as a music producer/beatmaker and spends time with friends and family.

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