What Is the Necessary Budget for Instagram Ads? Explaining Tips to Increase Cost-Effectiveness

Success in SNS marketing significantly impacts the sales of your company's products. In particular, image-centric SNS like Instagram have high visual appeal to users, so they should be actively utilized as a venue for advertising.

In this article, we will explain the budget required for each type of Instagram ad and how to create ads to increase cost-effectiveness.

What Is Instagram?

Since the main focus on Instagram is posting images and videos, it has higher visual appeal than text-based SNS. The variety of posting formats, such as vertical screen videos up to 90 seconds (Reels) and slideshows that can be displayed for only 24 hours (Stories), is also a major attraction.

While you can add text explanations to images, only images are displayed in search results and the Discovery tab (*) list. To gain significant attention with posts on Instagram, it is required to create images that are as catchy and informative as possible. Instagram is an SNS established in 2010, and as of October 2022, the number of monthly active accounts worldwide is over 2 billion. In Japan, the official announcement states that the number of monthly active accounts, which was about 33 million as of 2019, more than doubled by November 2023. As for user attributes, there are many young people in their 10s and 20s, and the gender ratio is slightly higher for women.

(*) A recommended display function based on user attributes, search history, etc.

Overview of Instagram Ads

Instagram ads are services that post advertisements in image or video format on business accounts for a fee. Meta, which operates Instagram, also operates Facebook, a real-name SNS, and linking both SNS is essential when creating a business account. By opening business tools (Meta Business Suite) through Facebook linking, you will be able to run Instagram ads for the first time.

Since ads are displayed on timelines and discovery tabs in the same format as regular posts, there is no need to worry about being disliked by users, unlike general affiliate ads. Additionally, if you set up detailed audience settings in business tools, you can show ads pinpointed to users who are highly likely to become new customers.

Budget setting is possible from at least 100 yen per day, but once the budget is exhausted, no ads will appear at all until the next day. If you set a budget for the total period instead of per day, the posting will end when it is exhausted. Note that setting a higher amount makes it easier for the ad to rank higher.

Billing Models and Cost Estimates for Instagram Ads

Instagram ads have the following four types of billing models:

• CPM (Cost Per Mille / Impressions)
• CPC (Cost Per Click)
• CPV (Cost Per View)
• CPI (Cost Per Install)

Let's look at the details of each below.

CPM

CPM (Cost Per Mille) is a billing model where a cost of about 500 to 1,000 yen is incurred for every 1,000 times an ad is displayed. Since the unit price per result is overwhelmingly cheap, if you can connect many users to purchasing behavior through the ad, you can recover ad costs relatively early. On the other hand, be careful that ads displayed to users outside the target will result in almost entirely wasted expenditure.

For reference, the click-through rate for Instagram ads averages around 1%, and 1,000 ad impressions can be interpreted as a result equivalent to 10 clicks.

CPC

CPC (Cost Per Click) is a billing model where a cost of about 40 to 100 yen is incurred every time a link within an ad is clicked. Since 10 clicks cost about 400 to 1,000 yen, it is almost the same as CPM based on average values alone. However, since no cost is incurred at the viewing stage regardless of which user the ad is displayed to, it demonstrates very high cost-performance when the goal is to improve awareness.

CPV

CPV (Cost Per View) is a billing model where a cost of about 5 to 10 yen is incurred when a video ad is played for 10 seconds or more. If the video duration is less than 10 seconds, it will be subject to billing when played to the end. Like CPC, no cost is incurred just for the video being displayed. Yet, like CPM, the number of clicks does not affect the cost, so from the perspective of billing conditions alone, it can be said to be the best of both world from CPM and CPC.

However, since the cost itself is about 500 to 1,000 yen for 100 results, to get cost-performance equivalent to or better than CPM, you must maintain a click-through rate of 10% or more relative to the results.

CPI

CPI (Cost Per Install) is a billing model where a cost of about 100 to 150 yen is incurred when an app is installed via an ad. While the cost per result is the most expensive among the four types, for paid apps, the ad cost can be recovered immediately, so as long as the price setting is correct, it will not become a deficit.

On the other hand, for basic free apps, profits will not be generated until users start paying, so it is necessary to manage ads with a long-term perspective.

Budget Required for Instagram Ads

The cost of managing Instagram ads is about 30,000 to 100,000 yen per month for in-house operation. When hiring an ad agency, a prescribed fee is charged, and when hiring an influencer, the budget varies greatly depending on the number of followers.

Operating In-House

When managing Instagram ads in-house, it is generally said that you should start from about 1,000 yen or more per day, which is about 30,000 to 100,000 yen per month. Even though you can list an ad from a minimum of 100 yen, considering the ranking, a three-digit amount will hardly catch the eye of users. Also, avoid recklessly investing large sums of money until the name of the company or brand is sufficiently recognized.

For example, with a monthly budget of 100,000 yen, you can expect about 50,000 to 100,000 impressions with CPM ads and about 1,000 to 2,500 clicks with CPC ads, both of which are sufficient sample sizes to evaluate marketing effectiveness.

Hiring an Ad Agency

When hiring an ad agency to manage Instagram ads, you need to pay a fee of about 100,000 to 300,000 yen to the agency in addition to the ad costs paid to Instagram. It is common to see plans around 100,000 to 200,000 yen for managing accounts alone, and plans of 300,000 yen or more for managing everything from the ad creation stage.

While you are not used to SNS marketing, it is better to borrow the power of an ad agency even for just a few months to steadily improve your company's awareness. If you absorb marketing know-how during that time, you will be able to utilize Instagram ads without any trouble even after switching to in-house management.

Hiring an Influencer

Instagram ads can also be posted on influencer accounts in the form of PR posts. To implement promotional posts, as a preliminary procedure, the influencer must apply for a brand partner application, and that person must be approved as a content creator.

The current market rate for requested expenses is about 2 to 4 yen per follower, and for influencers with hundreds of thousands of followers, it is not uncommon to exceed 1 million yen. Still, since you can borrow the influence of a celebrity to improve awareness all at once, it is a solid option when you want to make a strong start with a new product deployment.

Tips for Increasing Cost-Effectiveness of Instagram Ads

Maximizing the cost-effectiveness of Instagram ads requires an appropriate targeting strategy and improving the quality of the ads themselves. Let's look at this in detail below.

Change the Targeting Policy According to the Billing Model

In the case of CPM or CPV, where the goal is to drive traffic to your company's website, narrow down the target audience more strictly and show ads pinpointed to users who are highly likely to become your company's customers. By doing so, you can significantly reduce unnecessary expenditures caused by impressions from outside the target.

In the case of CPC, which aims to improve awareness, there is no need to narrow down the target audience, but rather the expansion is required. The lookalike audience feature is useful here. This feature allows you to deliver ads to users similar to existing audience settings based on a pre-set similarity rate of 1 to 10%.

Test Multiple Ads to Optimize the Budget

Since Instagram ads can be posted on a daily basis, it is possible to try various ads in a short span and repeat analysis and improvement. Instagram also has a feature that automatically increases the budget allocation for ads with better performance after running multiple ads simultaneously (Campaign Budget Optimization).

First, polish the content of the ads themselves, and when the improvement in performance reaches a plateau, find the optimal ad style using the budget allocation feature mentioned above.

Focus on the Beginning for Video Ads

From a user's perspective, video ads take effort to absorb information compared to still images. To have users watch such video ads to the end and lead to link clicks, it is essential to create videos that strongly attract users at the beginning.

Specific ways to create the beginning of a video include impactful footage with catchy words or case studies of problems that invite user empathy. Since there is a risk that "only billing occurs without links being clicked," whatever beginning you create, its content must be directly related to the promotion of your company's product.

Procedures for Running Ads on Instagram

Finally, we will explain the flow up to running advertisements on Instagram in two steps: account creation and campaign setting.

Creating a Business Account

First, create accounts as usual on Instagram and Facebook, and then link both SNS through one of the following operations.

• Linking from Facebook

<Manage Page> → <Page Settings> → <Instagram>

• Linking from Instagram (mobile only)

<Settings> → <Account> → <Linked Accounts> → <Facebook>

Next, from the Instagram profile, switch to a business account following these steps:

1. Go to <Settings and Privacy> → <Account Type and Tools> → <Switch to Professional Account>
2. Select account type <Business> and the category corresponding to your industry
3. Register public information such as address and contact details

By creating a business account, you can set up to 5 external links and also place action buttons such as store reservations and inquiries on your profile.

Campaign Settings

Ad campaigns can be created from the Business Manager. After proceeding to new creation, selecting an arbitrary item from delivery goals such as awareness or conversion will automatically determine the billing model. Once the billing model is decided, set the budget per day or as the total amount within the posting period. If the budget is not set, billing will continue forever as long as payment is possible.

Next, proceed to audience settings and ad placement settings. Narrow down the audience to the extent that the meter in the upper right does not point towards red, and for the placement, it is better to leave it to the Facebook algorithm with <Automatic Placement>.

Finally, select the ad format and upload images or videos created separately according to the size regulations for each format. Confirm that all input contents are correct and click <Confirm and Publish>, and after waiting for a review, the ad posting will begin.

Tomira Is Recommended for Instagram Ad Management Services!

Tomira is a company that provides services such as video production and SNS management agency. In Instagram ad management agency, ad management professionals create optimal campaigns based on trend analysis. Another attraction is the ability to conduct account management that increases customer satisfaction through a proprietary CRM tool.

The fee is 20% of the monthly ad cost, and there are no small additional costs or contract period restrictions at all. If you are interested, please request materials from the link below and check the service details.

Tomira Instagram Ad Operation & Consulting

Summary

We have explained the billing models and budget estimates for Instagram ads, as well as points to increase cost-effectiveness.

We hope the content of this article will be of even a little help for SNS marketing in your company.