Increasing Demand Sends Instagram Ad Prices Up

Chris CrumAdvertising

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Instagram marketing partner Brand Networks released a new report looking at pricing and the effectiveness of the image and video sharing service's advertising and how these have changed since it opened its Ads API up last year.

Do you think Instagram ads are worth paying for? Have you seen success with them? Discuss.

The report shares the findings of a six-month study of over 1.6 billion Instagram ad impressions served in 2015. It found that advertisers (especially in CPG, fashion, and retail) are flocking to the platform. Advertisers have been heavily experimenting with video ad formats and took advantage of significant dates throughout the holiday shopping season.

Brand Networks CEO Jamie Tedford said, "We anticipated that pent up demand for programmatic, native advertising solutions on Instagram would drive rapid adoption and eventually scale. However, the pace and scale of investment from our clients in key verticals exceeded our expectations dramatically. This year, we expect to brands from a wider variety of industries will invest heavily on the platform, and experiment with a variety of ad formats—especially video—to stand out in the Instagram feed and reach valuable audiences. In addition to brand-building objectives, we’re also enabling more testing with direct-response ads, as social media users become more accustomed to CTA buttons and more apt to engage in social commerce.”

The study found that increasing demand caused a surge in pricing.

"Cross-industry benchmarks for cost-per 1,000 impressions (CPM) on Instagram have climbed, as advertiser competition has increased since the platform first opened its API to advertisers in August 2015," Brand Networks says. "As part of the mounting groundswell of Instagram advertiser interest, Brand Networks witnessed a fluctuation across industries in cost-per-thousand views (CPM), as global average costs grew from $5.21 in September to a peak of $7.20 in November, before cooling off at $5.94 in December."

Total impressions served on Instagram through the firm's platform increased to 50,000,000 in August (during the beta), then doubled to 100,000,000 in September, and again to 200,000,000 in October. The company expects to deliver over a billion Instagram ad impressions per month by the end of the quarter.

You can find the full report here.

A recent report from Locowise analyzed fan growth and engagement on Instagram in 2015, finding that both have been on the decline. The main takeaway from that is that much like parent Facebook, Instagram appears to be headed in the "pay to play" direction.

According to that report, follower growth was down 88.21% in 2015 while engagement was down 61.43%.

“In the nine months of studies the follower growth on Instagram has declined 88.21%. From the high of 1.95% in April to the low of 0.23% in December,” wrote Locowise’s Marko Saric. “Engagement rate has decreased as well. From the 2.8% engagement high in April to the 1.08% engagement low in December. This is a 61.43% decrease.”

“Instagram has gone from one of the most ‘viral’ social networks to a pay-to-play platform during the year,” he added. “If you want to achieve a great growth on Instagram you do need to consider alternative tactics. Organic growth will not get you far.”

Marketers are of course familiar with similar issues presented by Instagram's parent company.

On Facebook's earnings call this week, COO Sheryl Sandberg said they're pleased with the growth in advertise adoption of Instagram and the "positive results" advertisers are seeing from it.

Later in the call, she said, "On the Instagram question, certainly in the short-run, some of the spend is incremental and some of it isn’t. Some of our clients approached us where they have a social budget or Facebook budget and some of that moves to Instagram and some people, it’s incremental spend. In the medium to long-run however, we believe that we’re really well-positioned to take share from other platforms out there. We believe both Facebook and Instagram have this combination of an ability to do great creative with the best targeting in a most sophisticated measurement which shows businesses how we help them move products off shelves."

"And we want and we tell our clients we want to be the best dollar, the best euro, the best pound and the best minute you spend. And we really encourage them to measure their ROI and compare us to other platforms. We think that comparison bodes very well for our growth. We also think that continued consumer shift to mobile devices bodes well for our growth as well. That said, we have to continue to execute. We know this won’t be easy. We have to continue to build the right products. We have to continue to measure all the way through from seeing an ad impression to sell. And so it’s up to us to stay focused in the coming year and years."

Do you think Instagram ads are worth paying for? Let us know in the comments.

Image via Instagram (Facebook)

Chris Crum
Chris Crum has been a part of the WebProNews team and the iEntry Network of B2B Publications since 2003. Follow Chris on Twitter, on StumbleUpon, on Pinterest and/or on Google: +Chris Crum.