Ads on Instagram for about a month now, after the Facebook company opened its ads API to third parties. I’ve hypothesized in the past that Instagram ads could be worth more than Facebook ads, and the early results indicate that’s indeed the case.
Salesforce was one of the launch partners for Instagram’s ads API, and it published aggregate results for the first two weeks of publishing ads to Instagram. It found the average price per ad impression was 90% higher than on Facebook, coming in at $6.29 per thousand impressions.
Let’s take a look at the main factors leading to these higher ad prices, and whether investors can expect Instagram to maintain its premium pricing.
These ads get clicks
Perhaps the biggest factor driving up the average ad price on Instagram is the fact that users are clicking on these new ads. Overall, Salesforce saw a 1.5% click-through rate on the average Instagram ad its customers bought through Social.com. Comparatively, it recorded an average click-through rate of just 0.84% during the first quarter for Facebook ads.
Naturally, higher conversions lead to higher ad prices on a per-impression basis. If you look at the cost-per-click on Instagram and Facebook, they’re much closer. The cost-per-click for an Instagram ad is about $0.42, just $0.02 higher than Facebook ads.
With Instagram’s new ad units focusing on direct-response campaigns like app-installs and website visits, advertisers ought to be inclined to continue paying as long as conversions stay high. Brand advertisers may look elsewhere, however, as direct advertisers bid up ad prices.
Factors behind higher clicks
It’s important to understand why users are clicking on these ads at a higher rate than Facebook ads in order to determine whether the rate is sustainable.
One important factor behind the higher click-through rate is that Instagram only has one ad unit — a big image with a call-to-action button. Facebook, comparatively, has News Feed ads that offer similar capabilities as well as right-hand column ads on desktop. The company readily admits that right-hand column ads are lower priced — indicating they don’t convert as well. Even Facebook’s News Feed ads don’t occupy as much screen real estate as Instagram’s ads, which likely factors into the conversion difference even more.
Another potential reason for the higher click-through rates is the novelty of the feature. Users are apt to see what these new direct-response ads are all about by clicking on them. This clearly is an unsustainable advantage, and it’s impossible to measure.
It’s important to note, however, that ads on Instagram aren’t completely new. They’ve been around nearly two years, so users are used to seeing sponsored posts to a certain degree.