The 2021 Guide to Instagram Ad Costs

Do you remember 2012 when Mark Zuckerberg bought Instagram for $ 1 billion? It was a gamble. At the time of the acquisition, the platform was valued at half the purchase price, had 30 million users and was not generating any sales. Six years after the acquisition, Bloomberg valued Instagram 100 times.

Today the platform has over 1 billion active users worldwide with different demographics, behaviors, interests and habits. This makes it the main area for targeted advertising.

Instagram advertising is a fascinating process that involves competition, computation, capital, and strategy. Let’s discuss how these factors affect costs so that you can decide how to implement Instagram advertising in your overall budget for this year.

Advertising on Instagram can be an accurate and effective way of reaching the right prospects at different stages of the buyer’s journey. When done right, your company can leverage the platform to generate interest in your product or service and turn users into customers.

But how should you go about running ads on the platform? What should your budget look like? And who should you address?

You need to answer these questions before starting your campaign. Before you even get close to any of them, however, you need to understand how the platform calculates advertising costs.

How is the cost of Instagram ads determined?

Instagram ads are bought through an auction bid system that ultimately determines their prices. An advertiser first sets their campaign budget and places a bid.

Budgets are exactly what they sound like – the total amount a company is willing to spend on an entire campaign. A budget is structured either daily or according to the total costs of a campaign lifecycle.

Bids are the maximum amount of money a business is willing to spend on each user that meets the ad goal. This goal can include anything from viewing a video to clicking a website link to downloading a mobile application.

Ultimately, goals are always about building brand awareness, giving thought, or converting potential leads.

In an auction, Instagram determines which advertising creates the most value for users and selects a winner based on this. This value is determined by three main factors:

• The advertiser’s bid amount
• How likely it is that a user will take the specific action for which the ad is optimized, also known as estimated action rates
• How likely is it that a user is interested in the ad itself? Ad quality and relevance

As a winner, you can place your ad in the spot that your competitors have applied for. You will be charged on a cost-per-click (CPC) basis and your ads will stay active until your budget is used up. During your campaign, you can track the performance of your campaign using an analytics tool such as HubSpot’s ad software tool.

The amount of money needed to win this auction depends on the target audience, time constraints, and strategic placement in the app. More on this in the following section.

What can make the cost of Instagram ads vary?

Age range

It’s no secret that Generation Z’er, Millennials, and Boomers are likely to interact with your ads in very different ways. A clothing brand that sells pleated khakis and golf shirts is likely to perform better with mature prospects watching PGA Tour videos than 13-year-olds scrolling through SpongeBob memes.

Additionally, users in different age groups have different online behaviors, with some spending much more time on social media than others. This means that certain age groups are more lucrative and more competitive for Instagram ad placements.

Timeframe

Instagram ad prices vary depending on the time of day, day of the week, and time of year.

When publishing on the timeline or in stories, brands consider the days and times as this affects the performance of the content. Unsurprisingly, advertising prices also take user activity into account and prices based on that fluctuate.

The cost per click can change over the course of the year.

Different spending habits come with each season, along with the rise and fall of the popularity of certain brands. For example, air conditioning companies are likely to generate more interest in the summer months than in the dead of winter.

For the same reason, advertising in the weeks leading up to Christmas and Black Friday can cost more than other weeks of the year.

Consumers’ interests and habits change with the seasons – and the cost of Instagram ads tends to follow suit.

gender

As of 2021, 50.8% of Instagram users identify as female, while 49.2% identify as male. While this difference may seem nondescript, it can have some significant implications for the cost of Instagram ads. Remember: Over a billion people use the application, so a variation of 1.6% is not trivial.

This difference can, among other things, lead to slight differences in the cost of Instagram ads for women and ads for men. While the cost per click gap can be just a few cents for men and women, it can quickly add up to dollars.

Ad placement

The placement and type of ad within the platform will affect the cost per click of your ad. Ads in Instagram stories are usually cheaper than feed placements.

However, some experts – including Jillian Hope, Senior Marketing Manager at HubSpot – suggest creating unique ads for both stories and Feed placements to get the most efficient results for your budget.

Ultimately, paying fair prices to reach your target users requires some finesse. There is no definitive answer to how much Instagram ads cost because of the multiple elements involved.

While you never know exactly how much your Instagram ads will cost, you should understand the factors that can affect the way you advertise and base your advertising strategy on them.