Monthly Cost of an Instagram Ad Campaign Can Approach $1M

There Is No Rate Card for Ads on the Photo- and Video-Sharing Network

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Michael Kors' November Instagram ad as seen on a desktop computer
Michael Kors' November Instagram ad as seen on a desktop computer

Much like Pinterest, Instagram is out pitching advertisers on a premium ad offering.

Following the conclusion of a test late last year with 10 advertisers, the Facebook-owned mobile photo and video-sharing network is out pitching Instagram ads at CPMs that would put a month-long buy deep into six figures and verging on seven depending on the reach and frequency sought.

One executive briefed on the ad product said a month-long buy could end up costing $500,000, while another quoted pricing just south of $1 million for that period of time. A third put the lower end of monthly pricing at around $350,000 to $450,000 with the higher end south of $1 million, while noting that no range has been set in stone. Instagram doesn't have a rate card, and CPMs are based on factors like targeting (gender and age are the only parameters now available), reach and frequency.

Instagram's ad business is evidently already chugging along. Ad Age reported last month that it had struck a year-long, upfront-style deal with Omnicom worth up to $100 million.

Instagram declined to comment on the pricing of its ads.

It's currently unclear whether any of the advertisers in the test group -- Adidas, Ben & Jerry's, Burberry, General Electric, Levi's, Lexus, Macy's, Michael Kors, PayPal and Starwood -- are re-upping on Instagram ads.

As for new advertisers, Taco Bell announced last week that it would use Instagram ads as part of the roll-out of its breakfast menu. Chobani also announced last month that it was launching an Instagram ad campaign that would last three or four weeks.

Instagram has also recently donated ad space to the non-profit Charity Water.

What makes Instagram's native-style ads valuable -- the fact that they flow through a stream where users see photos one at a time as they scroll through -- is also what makes disrupting user experience a significant risk. That helps explain why Instagram has been methodical about the roll-out of advertising, wanting to test and learn.

It's also continuing to set the bar high for ad creative, urging prospective advertisers to produce beautiful, print-worthy images that fit the aesthetic of the app, according to sources. Instagram's launch advertisers notably were brands that were already proficient content publishers on the network.

"It's really about quality over quantity," one executive said.

Instagram announced last week that it now has 200 million monthly users, up from the 150 million it reported six months ago. According to an eMarketer report, 69% of Instagram's U.S. users were between 18 and 44 years old last year; that percentage is on target to drop to 67.5% this year.

The majority of Instagram users are female, but the split of female and male users is expected to approach parity at 55% and 45% respectively by 2016, according to the report.

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