The 2020 Guide to Instagram Ad Costs

Do you remember in 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 wasn’t generating revenue.

But as it turns out, Zuckerberg absolutely nailed it. Instagram blew up, and six years after the acquisition, Bloomberg estimated it was worth roughly $100 billion.

The application’s 100-fold increase in value was paralleled by an equally meteoric rise in popularity. Today, the platform has over 1 billion active users worldwide. People of almost every background and walk of life are represented on Instagram — making it prime territory for targeted advertising.

If you use Instagram regularly, you’re bound to have scrolled past advertisements. Maybe you’ve clicked on some — or perhaps you always breeze by them. They may seem obnoxious or impersonal, but the truth is a lot of careful consideration, effort, and money likely went into getting that advertisement on your feed in particular.

Ultimately, Instagram advertising is a fascinating process that involves competition, calculation, capital, and strategy.

Here, I’ll discuss how all those factors play into deciding how much you might end up paying for an advertisement on Instagram, so you can decide how to implement Instagram advertising into your overall budget spend in 2020.

As a social-media-savvy marketer, you should at least consider advertising on Instagram. It can be an accurate, effective means of reaching the right prospects at various stages in their buyer’s journeys. You can leverage the platform to raise brand awareness, guide consideration, or convert leads into customers.

If done right, your business stands to gain a lot from advertising on Instagram. But, how should you approach placing ads on the platform? What should your budget look like? And who should you be targeting?

You’ll need to answer those questions before coordinating your Instagram advertising campaign. But before you approach any of them, you have to understand how the platform calculates advertising costs. 

How are Instagram Ad costs determined?

Instagram ads are bought on an auction bidding system that ultimately dictates their prices. An advertiser starts by establishing his or her campaign budget, and submitting a bid. 

Budgets are exactly what they sound like — the total amount of money a company is willing to allocate for an entire campaign. A budget is structured either on a daily basis or by the total cost of a campaign lifecycle. 

Bids are the maximum amount of money a company is willing to spend on each user that completes the ad objective. That objective could include anything from viewing a video to clicking on a website link to downloading a mobile application.

Ultimately, objectives always revolve around improving brand awareness, driving consideration, or converting potential leads.

In an auction, Instagram determines which advertisement will create the most value for its users and selects a winner on that basis. That value is determined by three primary factors:

• The size of the advertiser’s bid
• How likely a user is to complete the specific action the ad is optimized for, otherwise known as estimated action rates
• How likely users are to be interested in the ad itself, otherwise known as ad quality and relevance

The winner gets to place their ad in the space their competitors were vying for. That "space" could be based on factors like age range, gender, or time of day. Advertisers are charged on a cost-per-click (CPC) basis, and their ads remain posted until their budget runs out.

The amount of money it takes to win that auction is going to vary depending on demographics, time constraints, or strategic placement within the app. That variety of factors is another important aspect to consider.

What can make Instagram ad costs vary?

Age Range

Generation Z’ers, millennials, and boomers probably won’t engage with your ads in the exact same way. Different products and services are generally tailored toward different age ranges. A clothing brand selling pleated khakis and golf shirts will register more with mature prospects watching PGA Tour videos than 13-year-olds scrolling through SpongeBob memes.

Different age ranges’ financial situations and levels of disposable income also tend to vary. Additionally, they spend different amounts of time on the platform on average. That means certain age brackets will be more lucrative and, in turn, more competitive for Instagram ad placements.

Timeframe

Instagram ad prices fluctuate based on the time of day, day of the week, and time of year. There are specific times and days that work best for personal Instagram posts, and unsurprisingly, advertising prices follow similar trends. More users on the platform means more prospects to engage with your advertisement.

Cost-per-click also shifts as the year progresses. Different times of year come with different spending habits and industries of interest. Other companies could be less inclined to advertise during the dead of winter than the lead up to the holiday season. Circumstances change with the seasons — and Instagram ad costs typically follow suit.

Gender

In 2018, 51% of Instagram users were female, while 49% were male. In the United States, Though that difference may seem unremarkable, it can have some meaningful implications on how much Instagram ads cost. Remember — over a billion people use the application, so a 2% discrepancy isn’t trivial.

That difference — among other factors – partially accounts for slight cost discrepancies between Instagram ads targeting women and those targeting men. Though the gap in cost-per-click for men and women might be as small as a few cents, that price can add up quickly.

Ad Placement

The placement and type of advertisement within the platform impacts your Instagram ad’s cost-per-click. Ads in Instagram stories tend to be less expensive than feed placements.

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

Ultimately, paying fair prices for ads that land on targeted prospects’ Instagram feeds or stories takes some finesse. There’s no definitive answer to how much Instagram ads cost.

You’re never going to go in completely sure of what you’re going to pay. The best you can do is understand the factors that could potentially shape the way you advertise on the platform and build your advertising strategy around them.