Instagram Advertising Costs: How to Spend Less and Get Higher ROI

A lot of businesses, both small and large, are betting on Instagram ads these days. Instagram advertising has many benefits, and with billions of people using it, it's a great place to connect with customers and raise brand awareness.

 

But, how much does it cost to run Instagram ads? Knowing this is super important for planning your budget and making sure you get the most out of your ad spend.

 

In this guide, we'll talk about what affects the cost of Instagram ads and how you can optimize your ad spend for better results and higher ROI.

 

How much do ads on Instagram cost?

As all advertisers know, ad prices can vary widely based on different factors, so it is impossible to give specific numbers that will be true for everyone running ads on Instagram.

 

But it can be helpful to check the average figures and get the ballpark estimate – this will help you adjust your expectations and prepare for the most possible outcomes.

 

According to WebFX, a third of Instagram advertisers feel good about their results, and more than half of advertisers pay from just a few USD up to $500.00 each month. Meanwhile, 11% of marketers spend over $5000 monthly on Instagram ads.

 

Here are the key insights from this data: 

• Average Instagram ads CPC: WebFX reports that more than half of Instagram advertisers pay up to $0.75 per click, and the average CPC usually doesn’t go above $0.25, while StrikeSocial’s data shows that CPC for Instagram ads can be as high as $2.94;
• Average CPM: almost half of Instagram advertisers have a CPM that ranges from less than $1 to $4;
• Average cost per engagement is between $0.03 and $0.08 for more than half of advertisers, but it can be higher as well.

Source: WebFX

 

However, you should always remember that how much you pay can and probably will depend on factors like your competition, bid amount, and ad relevancy. Now that we've covered how much Instagram ads cost on average, let's look at the factors that can affect ad costs.

 

Factors that affect Instagram ads costs

Let’s go through all possible things that can determine how much you’ll have to spend on your Instagram ads:

 

1. Campaign objective

As different campaign objectives help you reach people from various stages in the conversion funnel, your Instagram advertising costs will vary.

 

For example, brand awareness campaigns can cost less than conversion campaigns since it’s easier to get people to view your ads than to make them take actions that require more commitment.

 

2. Target audience

for such campaigns will also be broader, and thus your ads will be cheaper than if you ran them for warm audiences (e.g., created from your customer lists). Target audience When it comes to Instagram ad costs, your target audience plays a huge role. Simply put, who you want to reach with your ads can greatly affect how much you end up paying. If many advertisers are trying to reach the same group of people, advertising costs go up. It’s like an auction; the more bidders there are, the higher the price.

 

Here’s the breakdown of how your target audience can affect how much you’re paying for Instagram ads:

• Age and gender: some age groups are more expensive to target. For example, if you want to run your ads for young people, you might find that you need to pay more because many brands want to reach this group as well. Also, it can be more expensive to advertise to women since they engage with ads more actively;
• Location: Instagram ads targeting users in big cities or affluent areas usually cost more because people in these areas have more purchasing power. They’re an attractive target for other businesses, so you’ll have to compete with them and likely pay more;
• Interests and behaviors: if you’re targeting people with specific interests that are popular in certain niches, the cost might be higher. This is especially true for niches with higher AOV and acquisition costs (e.g., niches that sell luxury items);
• Custom audiences: if you’re using custom audiences, like retargeting people who have visited your website, costs can also be higher since it’s a warm and more narrow audience than the one you’d use for brand awareness campaigns.

2. Ad placements

Instagram has different places where ads can appear, and each one can affect your advertising costs in specific ways. Here's a breakdown:

• In-Feed: ads here look like regular posts but can be pricier because they reach a lot of people;
• Instagram Stories: these full-screen ads that appear between users' stories are very engaging but can cost more because they take up the whole screen;
• Instagram Explore: ads in this placement can be effective but might cost more because they target users who are actively looking for new stuff;
• Instagram Reels: ads here can be more expensive because they're popular and grab users' attention;
• Instagram Shop: Shopping ads here are good for driving sales but might cost more because they target users who are ready to buy.

Each placement has its pros and cons, so it's crucial to choose wisely based on your budget and goals and decide what is more important for you: the potential results you can get from your ads or how much you’ll spend on them.

 

3. Ad formats

The type of Instagram ads you choose can change the advertising price for you. Some ad formats may cost more because they provide a richer experience or higher engagement.

 

Here’s how advertising costs can vary for different ad formats:

• Photo Ads are typically the most straightforward and can be less expensive than other formats. They are great for simple, clear messages but may not be as engaging as videos or carousels;
• Video Ads can capture attention more effectively and tell a more dynamic story. However, creating high-quality video content can be more costly, and running video ads often comes at a higher price;
• Carousel Ads tend to be more engaging, but they can also be more expensive because of their interactive nature;
• Stories Ads can be very immersive and engaging. They often perform well but can be pricier due to their prominent placement and high engagement rates;
• Reels Ads are popular for their high engagement rates and short, dynamic format. Ads in Reels can be more expensive because they attract a lot of attention and are designed for quick, engaging content;
• Shopping Ads are effective for driving direct sales as they allow users to shop directly from the ad. They can be more expensive due to their direct impact on sales and the purchasing intent of the audience.

4. Ad budget

Your ad budget plays a big role in how much you spend on Instagram ads. You can set both daily budgets and lifetime budgets on Instagram. Each of them can impact your Instagram advertising costs in a specific way.

 

Daily budgets

With a daily budget, you set a maximum amount you're willing to spend on your ads per day. This can help you control your spending on a daily basis and ensure you don't exceed your budget.

 

If your daily budget is too low, you may struggle to reach your target audience, especially if there is high competition for ad space. This could result in your ads being shown less frequently, leading to lower engagement and potentially higher costs per click or impression.

 

On the other hand, if your daily budget is too high, you may end up overspending on days when there is less competition for ad space.

 

Lifetime budgets

A lifetime budget allows you to set a total amount you're willing to spend over the entire duration of your ad campaign. Instagram then spreads this budget out evenly over the campaign's duration. This way, you can avoid overspending or running out of budget too quickly.

 

This can be useful for planning and managing your overall ad spend. However, it may limit your flexibility to adjust spending based on daily fluctuations in ad costs. Also, if your lifetime budget is too low, you may not allocate enough budget to reach your advertising goals effectively.

 

If your lifetime budget is too high, on the other hand, you may end up spending more than necessary to achieve your objectives.

 

Also, here are some other things to consider when it comes to your Instagram ad budget:

• Higher budget, more reach: if you have a bigger budget, you can reach more people with your ads. This means your ads will be shown to a larger audience, increasing your chances of getting clicks and engagement;
• Competition and costs: the more advertisers there are bidding for ad space, the higher the costs. If you're in a competitive industry or targeting a popular audience, you might need to spend more to outbid other advertisers and get your ads seen;
• Testing and optimization: with a larger budget, you have more room to test different ad strategies and optimize your campaigns. This can help you find the most cost-effective ways to reach your audience and get better results over time.

Overall, your ad budget affects how many people you can reach, how much you'll pay for ad space, and your ability to test and optimize your campaigns. Adjusting your budget based on your goals and competition can help you get the best results from your Instagram ads.

 

5. Bidding strategy and bid amount

Bidding strategy is another important factor that affects how much you’ll pay for Instagram ads. In simple terms, your bidding strategy is how you decide to pay for your ads. The way you bid can impact both the cost and the success of your ad campaigns.

 

When you’re running ads on Instagram, you’ll be charged according to the pricing model that fits your advertising objectives. The strategy you select should align with your campaign goals, whether it's driving traffic, generating leads, or increasing sales.

 

Here are the main actions you can be charged for on Instagram:

Cost Per Click (CPC)

With this bidding model, you’ll pay each time someone clicks on your ad. This strategy is good if your goal is to drive traffic to your website or app. However, keep in mind that CPC can be higher in competitive industries or for highly targeted audiences.

Cost Per Mille (CPM)

With this model, you’ll pay for every 1,000 impressions, i.e., the times your ad is shown. This can be more predictable in terms of budget but might not directly lead to actions like clicks or sales.

CPL (Cost Per Lead)

With this model, you’ll pay for each lead you get from your Instagram ads, which can be a sign-up, form submission, or something else.

CPI (Cost Per Install)

This model is primarily used for campaigns aimed at app installs, and you’ll pay for each time someone installs your app after clicking on your ad.

CPA (Cost Per Action)

The CPA bidding model is great if you want people to take a specific action after watching your ads, like making a purchase. You’ll pay only when the desired action happens, which can be more cost-effective but might have a higher upfront cost.

Remember that your bid amount will also influence how much your Instagram ads will cost you. The higher your bids are, the more actions you can get from your ads, but it’s important to keep ad performance in check to avoid bidding too high when it’s unjustified.

 

5. Ad Quality and relevance

Creating effective Instagram ads involves two main factors: ad quality and relevance. These aspects can directly affect how much you'll spend on your ads and how well they perform.

 

Ad quality is basically how appealing and well-made your ads are. This includes everything from design to messaging. High-quality ads catch people's attention way more, so you can potentially have to spend less on your ads.

 

Ad relevance is more about showing your ads to the right people – those who are most likely to be interested in your products or services. When your ads are relevant, they feel more personal and resonate with your target audience, which can also lower your Instagram ad costs.

 

Here are some other things to consider:

• Engagement drives down costs: engaging ads tend to cost less because Instagram rewards them with better placement and lower prices;
• Better placement, lower costs: ads with high quality and relevance are given priority in Instagram's ad auction. This means they're more likely to be seen by your target audience, resulting in lower costs per interaction;
• Ad score matters: Instagram assigns a quality score to each ad based on its performance, and ads with higher scores are favored by the platform and can result in lower costs and better results.

Also, keep in mind that the timing of your ads can also impact costs. Running ads during peak times (holidays or weekends) often leads to increased competition and higher costs, so you should take that into consideration when setting up schedules for your ad campaigns.

 

Tips for reducing Instagram ads costs

If you want to optimize your Instagram ads CPC, CPM, or other types of costs, you should be aware of different strategies that can help you with that. So, let’s consider each of them in more detail.

 

1. Choose the right campaign objective

Choosing the right campaign objective is crucial for saving money on your ads no matter which platform you use. Here's how you can make sure you're picking the right one to get the best results:

• Get clear on your advertising goals: understand what you want to achieve with your ads. Are you looking to increase brand awareness, drive website traffic, or boost conversions? Each of these objectives will have its own pricing strategy (e.g., CPC, CPL, CPM, etc.), so you’ll know what to expect in terms of how you’ll be charged;
• Consider the sales funnel stage: identify where your target audience is in the sales funnel. Are they just learning about your brand (awareness), considering your products (consideration), or ready to make a purchase (conversion)? Ideally, you want to run ad campaigns targeting each of these stages to maximize your results;
• Evaluate audience behavior: take a look at how your audience behaves online. Are they more likely to click on links, watch videos, or make purchases directly from ads? Depending on your findings, you’ll be able to pick the objectives that fit both your goals and your audience’s preferences.

Here are some other tips for maximizing your budget by choosing the right objective:

• Start with funnel-appropriate objectives: for broader and cold audiences, start with awareness, engagement, or website traffic campaigns. These are less expensive and help introduce your brand to new users;
• Use retargeting: direct users to your website, where they can be tracked by the Pixel. If users visit your site but don’t convert, use retargeting campaigns to bring them back to get more conversions;
• Capitalize on impulse buys: if you offer low-cost products, Instagram can be effective for driving impulse buys from first interactions. So, make sure your offers are as attractive as possible to get more purchases for this type of campaign.

 

2. Target the right audience

As we’ve said before, different types of audiences can have different costs:

• Broad audiences are typically cheaper due to less competition;
• Narrow audiences can be more expensive due to higher competition;
• Custom audiences for retargeting are often higher in cost due to a smaller audience size, but can be more effective.

Here are some targeting strategies you can try to lower your Instagram ad costs:

• Target a specific audience: aim for a smaller, more specific audience interested in your product to get more conversions. However, avoid making your audience too narrow to ensure you don’t miss potential customers;
• Start broad and narrow down: you can begin with a broad audience to let Instagram’s algorithms find users likely to convert, and then narrow your targeting based on the data you collect;
• Exclude irrelevant audience segments: focus only on users who find your offers relevant and engage with your ads by excluding segments that aren't a good fit for your products or services;
• Run retargeting campaigns: they can be more expensive but often deliver higher conversions, so your ROI can also be higher in the end.

For example, if you own a local business, targeting everyone in your city can be costly due to broad competition. Instead, you can target people who have interests related to what your business is about and live within a 10-mile radius. This can help you lower advertising costs and make your ads more effective.

 

So, by trying different targeting approaches, you can optimize your Instagram ad spend and achieve better results within your existing budget without paying more.

 

3. Experiment with placements and formats

To spend less on your Facebook ads, think about where you place them and what formats you use. Some placements will cost less and have less competition, which can lower your advertising costs but also deliver less significant results. The same goes for ad formats: you have to find the balance between performance and costs to run successful ad campaigns.

 

Look at your audience, the type of ad, and your goals to pick the best spots. Then, test different ones to see what works best for you.

 

Consider these tips for choosing the best Instagram ad placements and formats:

• Know your audience: figure out where your audience hangs out on Instagram. If they like Stories, it might be worth paying a bit more for ads there;
• Test different options: try out different placements and formats for your ads and see which ones get the best results. Keep an eye on how they perform, and change your strategy based on what works. You can also automate A/B testing with automated rules;
• Consider your goals: match your ad placements with what you want to achieve. If you want people to know about your brand, try placements like Instagram Feed and Explore. If you want to sell directly, go for Instagram Shop;
• Think about your ad content: use ad formats that you're best at and that your audience likes the most. For example, you can use photos or videos to build awareness and shopping ads to boost sales, but always check how your audience reacts to different formats and creatives.

Also, consider using automatic placements for your ads. This lets Instagram decide where to put them, giving you more options and potentially lowering your ad costs.

 

4. Pick the right bids and budgets

To make the most of your Instagram ad budget, try these tips for choosing a bidding strategy and budget:

• Set the right goals: match your bidding strategy with what you want to achieve. If you want more website visits, go for CPC. For brand awareness, CPM might be better;
• Start with a lower bid: you can begin with a lower bid to test the waters. You can gradually increase it based on ad performance;
• Try automatic bidding: if you're unsure about setting the right bid, use automatic bidding. It allows Instagram to choose the optimal bid for your ad goals;
• Bid strategically for peak times: it’s also a good practice to increase your bids during peak times when your audience is most active. This can improve ad visibility and engagement, delivering more clicks and conversions to you;
• Pick the right budget: think about whether a daily or a lifetime budget will suit your goals more based on the pros and cons of each of them, and choose what fits you the most.

Also, keep in mind that, with a small budget, it might take longer for your Instagram ads to get out of the learning phase and start delivering. Ad costs may be higher at first until the system understands your campaign and audience better, but as your ads get more engagement, costs can decrease over time.

 

Don’t forget to watch your ad performance and adjust based on the KPIs: if you're not seeing good results, adjust your bid amounts or try a different strategy.

 

5. Improve Ad Quality and relevance

To make your Instagram ads better and more relevant to your audience, try the following:

• Understand your audience: learn who your audience is and what they care about. What are their interests? What problems do they need to solve? Make your ads speak directly to their needs and wants, and try segmenting your audience into distinct groups to run more relevant ads for each of them;
• Work on ad creatives: use clear, high-quality images and videos that grab attention. Make your ad text short and to-the-point, quickly telling people what you're offering and why it matters to them;
• Test different versions: try different images, videos, and copies to see what works best. Start with small tests to find the best performers before putting more money into a bigger campaign;
• Keep an eye and adjust: track how your ads are doing by using Instagram’s analytics tools to see which ads get the most engagement or conversions. If an ad isn’t doing well, tweak it to improve its quality and relevance, or pause it to stop spending money on it.

When your ad is both high-quality and relevant, it’s more likely to engage users, get a higher score, and cost you less per click or impression. Let’s also consider specific tips for reducing Instagram ad costs for different types of businesses.

 

Optimizing Instagram ads costs for different types of businesses

Here's a closer look at how small, medium, and large businesses can approach Instagram ad costs.

 

Small businesses

• Budget-friendly options: if you’re advertising a small business with a limited budget, you don't need to spend a lot to see results. Even with a modest budget, you can still reach your target audience effectively;
• Focus on local targeting: small businesses often benefit from targeting local customers. By narrowing down your audience to a specific geographic area, you can make sure your ads are seen by people who are most likely to visit your store or use your services;
• Use simple ad formats: stick to simpler ad formats like single image or carousel ads. These are less costly to produce and can still be very effective;
• Take advantage of organic content: pair your paid ads with organic posts to build a following without spending money. Engaging with your audience through comments and direct messages can also help grow your brand.

Medium businesses

• Balanced budget: medium-sized businesses usually have more flexibility in their budgets. You can afford to experiment with different ad formats and strategies to see what works best for your brand;
• Broader targeting: expand your targeting beyond just local customers. Consider targeting specific demographics, interests, and behaviors that align with your products or services. This can help you reach a larger audience while still staying relevant;
• Invest in high-quality content: if your budget allows, invest in creating high-quality content. Professional photos and videos can make a big difference in how your ads are perceived and lead to higher engagement and better ad performance;
• Test and optimize: take advantage of A/B testing to find out which ads perform best. Regularly review your ad performance and make adjustments as needed.

Large businesses

• Larger budgets: having higher advertising budgets allows you to run more extensive campaigns that can reach a wide audience. You can run multiple ads simultaneously and use a variety of ad formats;
• Advanced targeting strategies: with a bigger budget, you can use advanced targeting strategies. This includes retargeting people who have already interacted with your brand, targeting lookalike audiences, and using detailed demographic and interest targeting with multiple options applied at the same time;
• Comprehensive campaigns: you can create comprehensive campaigns that include not only Instagram ads but also ads on other platforms like Facebook. This multi-platform approach ensures that your message reaches your audience wherever they are online;
• Collaboration with influencers: consider partnering with influencers to boost your ad campaigns. Influencers can help you reach their followers who are likely to trust their recommendations. This can significantly increase your brand's reach and engagement.

Regardless of the size of your business, Instagram ads can be tailored to fit your budget and goals. If you understand the specific needs and capabilities of your business, you can effectively use Instagram ads to grow your brand and reach your audience.

Conversion rates on Instagram for businesses with different follower counts. Source: The Bazaar Voice

Recap

To wrap things up, getting a handle on what influences Instagram ad costs can really help you make the most of your budget.

 

So far, we've talked about different factors that can impact advertising costs on Instagram and shared some tips on lowering your CPC or CPM that you can try out to see what works best for you. By following these strategies and keeping an eye on how your ads are performing, you can make sure you're spending your ad budget only on getting the results that you're looking for. 

 

If you want to know more about advertising costs on other platforms, check out our other guides:

• Facebook ad costs guide,
• Google ad costs guide,
• TikTok ad costs guide,
• LinkedIn ad costs guide;
• Snapchat ad costs guide.