How to Set an Instagram Ad Budget

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Instagram isn’t just for posting social media content organically. It’s also a tool used by businesses to increase engagement, grow followers and drive revenue. Instagram is used by about 800 million people across the globe, and is currently the fastest growing social network.

Since Instagram is owned by Facebook, advertisers have access to Facebook’s advanced tools. These make it possible to build Instagram ad campaigns that target exactly the right audience for their product or service.

Furthermore, Instagram is known for having better engagement than other platforms with regard to ads. A survey of social media influencers found that nearly 60% thought Instagram provided better engagement than other networks.

Here is how social media managers can create an Instagram campaign that is aligned with their business goals.

1. Calculate what your overall budget should be.

Setting an ad budget is a critical component of any successful campaign. Your ad budget and the period during which you want to display the content will influence how the Instagram ad network chooses to display content (see image below). Selecting an ad budget that is too small might mean that your ad will not reach all members of a target audience; however, one that is too large might strain your resources.

When calculating your ad budget, you should take into consideration what the goal of the campaign is, and how the return will be calculated. For example, if you are interested in using Instagram ads to drive revenue directly, then the metric to consider is new revenue. At a minimum, your ad budget should allow you to turn a profit.

Instagram_Audiences

A quick way to estimate if your Instagram ad budget is capable of generating a return on investment is by keeping your entire marketing funnel in mind. Here are some calculations that can help you determine whether your budget is sound:

  • Pay per Click (PPC) * Number of Clicks = Ad Spend
  • Number of Clicks * Website Conversion Rate (CR) = Number of Customers
  • Number of Customers * Average Customer Value (ACV) = Revenue
  • Revenue / Ad Spend = ROI

Using these calculations, you’ll be able to determine what your Instagram advertising budget should be in order to turn a profit.

 2. Create a target audience.

Once you know what your advertising investment should be, it’s time to set a target audience. Creating an accurate target audience will help you improve the efficiency of your marketing funnel, which in turn will mean your advertising dollars are working more efficiently.

Since Facebook and Instagram collect a great deal of information about their users, advertisers have the ability to target Instagram users in a number of different ways. As mentioned above, the size and specificity of your custom Instagram audience will have an impact on the reach of your ad, and on the amount of money you will need to spend to reach the entire audience.

Instagram_targeting

Take a look at the example above to understand some of the targeting options available to Instagram advertisers. Marketers can use parameters related to location, age and gender, in addition to self-declared interests, to create highly targeted advertisements.

Additional targeting parameters include connections (meaning an ad could be shown to users who are connected with people who already like your Instagram page) and behaviors. Behavior-based targeting allows advertisers to display an ad to Instagram users who have already taken a specific action. A common behavior-based ad type is retargeting ads, which are displayed only to Instagram users who visited specific pages on your company website.

Running a behavior-based ad can be a great way to improve the conversion rate of your marketing funnel, thereby making it easier to justify an investment in Instagram advertising.

3. Monitor performance and adjust the campaign as needed.

Once your Instagram campaign is live, it is critical that you use an Instagram analytics platform – such as Owlmetrics – in order to understand how your ad is performing.

Consider taking a two-pronged approach when monitoring performance. First, log in to your Facebook Ads Manager account. From there you will be able to see metrics related to audience reach, ad spend so far, ad engagement rates and ad click-through rates. Using this information, you can determine if the daily budget, PPC bid and total budget are optimized to ensure your ad has the funds to reach your target audience frequently enough. Again, to calculate the size of the audience you’ll need in order to reap a return, refer to calculations in section one.

Second, a powerful Instagram analytics tool like Owlmetrics can help you track metrics related to follower engagement and follower growth (among others). This additional information will help you to know if your Instagram ad campaign has ancillary benefits in addition to contributing to the bottom line of your business. For example, it may be the case that people who view the ad directly do not engage with it, but because the ad is generating brand awareness, your overall Instagram following is growing.

Based on the data from both analytics platforms, you will be able to make informed decisions on how your Instagram ad spend should or should not change over time. The challenge will come if your ad does not produce immediate ROI, but does grow other metrics like followers. In this case, you’ll need to estimate how follower growth will impact your business in the long run.

Conclusion

Advertising on Instagram can be one of the most effective ways to quickly improve brand awareness, grow followers and drive revenue. To get started, you should have some understanding of how your marketing funnel converts on average. With this information, you will be able to calculate what your spend should be in order to reach positive ROI.

Remember that, while the Facebook Ads Manager does provide you with some great metrics, it is also a good idea to use a third-party analytics platform in conjunction with the Ads Manager to understand how your Instagram account is impacted by your ads and by changes to your ad budget.

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David Epstein

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