What Are Instagram Ads, and How Do They Work?

Though Instagram is by no means the new kid on the block, its ability to command a position in the top 5 social media sites in 2024 shouldn't be ignored—and neither should its viability as a revenue-generating ad platform.

In this guide, we're going to give you the low-down on everything Instagram ads—including how they work, how you can create your own, tips for success, and even some examples of inspiring ads for your campaigns.

Whether you're a newcomer to Instagram ads or coming back for a refresher, you're sure to find some tips to be successful with Instagram ads in this piece.

What are Instagram ads?

Instagram ads are paid posts (or Stories, Reels, etc.) that target the users of said platform. Instagram ads are not only static images but can come in several different formats (which we'll get to in just a moment).

More importantly, Instagram ads are one of the best platforms for advertisers. While TikTok has become the latest widely adopted social platform, Instagram still beats out TikTok's number of social media users every month.

It is important to note that Instagram's user base skews more toward younger audiences, with the largest portion of the user base coming in around 18-35 years old.

The pure reach, combined with the versatility of the Instagram ad formats available and tools provided by Meta, make it a fantastic place for advertisers to generate incredible ROI.

How much do Instagram ads cost?

The one question every advertiser asks is, "How much will this cost me?". To that end, let's dive into how Instagram stands up to its competitors in terms of costs and benchmarks. Today, we'll be looking at two of the most important metrics: Cost per Click and Cost per Impression.

According to studies, The average Instagram CPM is around $9, while the average CPC is $1.33.

When we compare this to Facebook's ad costs, we see that Facebook's CPM is a tad higher at $10, but the CPC is lower at only $0.73.

If we're looking to compare these to other platforms like TikTok, there's a bit more of a stark contrast. The Average TikTok CPM is around $10 with a $1 CPC. However, the platform requires a minimum investment of $500 and a minimum daily budget of $50 at the campaign level.

Types of Instagram ads

Image ads

When you think of ads, you might think of a single image with text, a CTA, and a link. That would be your standard image ad.

The simplicity of image ads makes them highly versatile: they can be used in every industry and for every campaign goal.

Carousel ads

If an image is worth 1,000 words, why not use 10 images? Or, in the Instagram ads world, a carousel ad.

An Instagram carousel ad lets you feature multiple images (or videos) within a single ad. Each carousel ad can contain up to 10 pieces of content, each with a separate link, allowing viewers to swipe through a variety of products or services.

Video ads

Next up are video ads.

Instagram video ads can be up to 60 seconds long and help you convey a more complex message than simple image ads. On the other hand, creating a great video ad can be tough if you don't have the right in-house resources (more on that in a bit).

Story ads

Launched in 2016 to contend with Snapchat, Instagram Stories posts disappear after 24 hours.

Story ads, on the other hand, are ads that appear between Instagram Stories. In this case, ads are displayed during their scheduled time frame, so they won't disappear after 24 hours.

Reels ads

Much like Stories, Reels were also created to contend with another competitor—this time it's TikTok.

Instagram Reels are short-form video content (15-to 90-second clips) set to audio. Reel ads (which can be images or video) appear between the organic Reels as users scroll through their Reel feed.

Explore ads

Instagram released the Explore feature in 2012 to help its audience find other content that appeals to their interests, and since then, it has only grown more popular. Here, you'll find recommended posts based on your previous interactions with other content on Instagram.

Explore ads fall between these recommended posts and are marked with a sponsored tag.

Instagram Collection ads

In a time when you can get absolutely anything delivered to your home with a few taps on your phone, Instagram has made sure to create its version of a virtual marketplace with collection ads.

Here, users can tap on your ad and swipe through your virtual storefront with ease.

How to design your Instagram ads

I could sit here and write you a sci-fi novella in a single weekend or create an endless string of funny Facebook haikus, but if you asked me to open up Adobe Illustrator or Photoshop and create a work of art, I'd be entirely lost.

And as advertisers and marketers, we don't have to be great at everything. But that isn't an excuse for having low-quality ads.

If you're not confident that you can create engaging and eye-catching Instagram ads yourself, you can always use tools like Sparkle to give you a helping hand.

With Sparkle, you can get unlimited designs—Facebook and Instagram ads, videos, flyers, and even email templates—for one flat monthly fee.

Just submit a request, and within 48 hours, you'll have your first proof delivered to your inbox. If you need some changes, you can request as many revisions as needed until you're 100% happy with it.

The best part? You can get started with Sparkle for free during your 7-day trial.

How to create Instagram ads

Now that we know what Instagram ads can offer, let's get down to the important part—creating an Instagram ad from scratch! 

Note: You will need to have your Facebook and Instagram accounts linked before you continue.

Since Instagram is under the Meta wing of products, we want to navigate to our Facebook Ads Manager to create our ads.

1. Start by clicking on the Create campaign button and selecting your campaign objective.

2. In the next step, you'll want to select any special ad categories, A/B tests, spending limits, or if you want to use the Advantage campaign budget. In this example, we're not going to use any of these features. Instead, we'll click the blue “Next” button on the bottom-right-hand side of the screen.

3. In the next step, we can select our audience target options, ad set schedule, and, most importantly, placements. The placements are what will help us create an Instagram ad. Under the Placements section, you'll see Facebook's Advantage+ placements are the default (and recommended) placement type. Since we want to focus only on Instagram, we're going to select the manual placements option instead. Then, can choose to remove Facebook, Audience Network, and Messenger to create an ad that will only be seen on Instagram. After you're finished, go ahead and click the “Next” button.

4. On the next page, we get to the fun part: building out our ads! Here, you'll need to select your Instagram page, as well as what ad type you'd like to use, and add in your images or videos, links, and copy. (Tip: Make sure your accounts are connected properly to avoid any issues during the creation process)

Once you've added in all your creative bits, you can hit the “Publish” button and pour yourself a celebratory glass of wine!

Pro tips for creating killer Instagram ads

As with everything, you need a combination of technical knowledge and strategy to be successful. To help you with just that, here are a few of our top Instagram ad tips you need to follow in 2024.

1. Use high-quality visuals

Let me ask this: If you were looking to get a new credit card, would you trust the ad with spelling mistakes, pixelated graphics, and a comic sans font?

Most of us probably wouldn't choose to willingly give our private information to a company using such an atrocious design, even if it was legitimate. But unfortunately, learning how to convey a clear message with a quality design is something that most advertisers struggle with.

Make sure to do things like:

• Use high-resolution product images
• Follow your brand's identity (use the same colors, logo, and fonts as your website)
• Use HD video wherever possible
• Follow the recommended ad specs and sizes

2. Leverage user-generated content

If you don't have an in-house design team (or the budget for one), creating content can seem daunting. So why not let your happy customers do it for you?

User-generated content (UGC for short) is content that your customers create about your product. This could be things like tutorials, reviews, or even general endorsements. You can then use the content they create for both your organic and paid social media efforts.

Sephora is a great example of a company that continually uses UGC for content across its marketing channels.

3. Think mobile-first

In 2023, there was a near 60/40 split for the amount of time users spend on their mobile devices vs. a computer. This means that for 2024, considering how a user will engage with your ad on their mobile device is incredibly important.

When creating your campaign, consider the following:

• Is the text easy to read on a small screen?
• Is the audio necessary to understand the ad? (If so, you'll need to add captions)
• Is my landing page/website optimized for mobile traffic?
• Is my ad thumb-stopping? (Eye-catching and engaging)

If you answer no to any of the previous questions, you'll need to head back to the drawing board.

4. Define your target audience

Here's an unpopular opinion: I loathe golf.

There's absolutely no way you'd ever get me to willingly step onto the green and spend hours hitting a tiny ball into a random hole that's 200 yards away. No matter how much money you throw into an ad for your new set of clubs that can do it all, I'd never click on it or spend a dime on your products.

And while there's no problem with not liking golf, there is a problem with an advertiser spending thousands of dollars to display an ad to an audience that couldn't care less about what they're trying to sell.

For that reason alone, the very first thing you should do before creating an ad campaign (or any marketing campaign, for that matter) is to define your target audience. You can do that by asking yourself:

• Who are my current customers? (Look for patterns in age, gender, location, spending habits, and any other characteristics that define your loyal customers.)
• What problems does my product or service solve?
• How does my product or service directly affect the pain points of my audience?
• Who engages with my content?
• Where does my audience hang out online?

By answering these questions, you should be able to create a general idea of who your ad is best suited for and thus create content and messaging that appeals to them specifically.

5. Create a full-funnel strategy

If you ask advertisers what they want from their customers, the only thing you'll hear is revenue. But if you ask a consumer what experience they'd like to have with a brand, you'd probably get a much more multifaceted answer.

The reality is that in a world where it's hard to tell real products from spam, consumers are looking for companies that stand out and show real examples of their products, tell authentic stories, and connect with their audience.

Unfortunately, this isn't something one ad alone can do. For that reason, we recommend creating a full-funnel ad strategy.

Instead of going straight to a sale, a full-funnel ad strategy takes your relationship with your audience from a stiff handshake to a whirlwind romance in the Bahamas (metaphorically).

Along each step of the way, we introduce the user to our company—who we are, what we do, and why we're different from the competition. Only after cementing these reasons do we ask for a sale. After all, you'd never ask your blind date to get hitched at the end of the night, right?

In the end, your audience will hopefully become happy customers for years to come (just make sure to invite us to your beach reception).

Inspiring Instagram ad examples

Target

Why we like it: I might have a pumpkin-based bias, but this ad from Target immediately stuck out to me. Here, Target takes advantage of the season by displaying an arrangement of fall treats by Starbucks that they supply in their stores. The image is bold and eye-catching, while the simple text and CTA can be easily scanned and read. Great job, Target!

Dr. Squatch

Why we like it: Dr. Squatch has a history of fun ads, but this one is a fantastic example of TikTok-style content that anyone can create. While the video in and of itself is simple in format, the special attention paid to the transition shots and the highlight of the benefits and description of the soaps make this a fantastic ad.

Athletic Greens

Why we like it: One of the best ways to close a sale is to show your audience just how easy it is to use your product, and that's something Athletic Greens did exceptionally well in this ad. Here, we can see that it only takes a few seconds to get all the vitamins you need each day in one simple drink. Anyone advertising a physical product should seek to introduce tutorial/use case-style videos for their ad campaigns.

How to find your ad inspiration

Luckily for us, we don't have to scroll through countless ads on Facebook to find out what our competitors are doing—Facebook has its free ad library where you can search through ads that are currently running on the platform and get a glimpse at the competition.

What you will notice, however, are the fun little features like the ability to save an ad to a collection or order design services that my previous screenshots had won't be available.

And that's because I'm using one of the most powerful Facebook ad libraries out there, the Madgicx Ad Library ;)

With the Madgicx Ad Library, you not only have access to hundreds of thousands of real Facebook and Instagram ad examples, but you can also:

• Pin ads to different creative boards to save for later
• Filter by language, platform, ad type, aspect ratio, brand, ad text, or tag
• Share your boards with anyone (even if they don't have a Madgicx account)
• Send a brief to our Sparkle design services to have them create something similar for you in 48 hours

And if all that wasn't enough, you can try out the library for free today and find all the inspiration you need.

P.S. You can check out some other great ad examples that I saved using the Madgicx Ad Library on my board!

Conclusion: Are Instagram ads worth it?

In short, a resounding yes.

As we've seen here, Instagram not only provides an incredible array of ad types and tools to create ROI-positive ads, but it also provides an audience size large enough to be able to take full advantage of them.

Though the Meta ads platform might be tough for users to navigate, your friends here at Madgicx have created an entire suite of products to help you create the perfect Instagram ad campaign:

• The Ad Library - A one-stop shop for Instagram ad inspiration with Pinterest-style boards and open collaboration.
• Sparkle - Your on-demand creative team that will design any ad in just 48 hours!
• Creative Insights - AI-powered insights that help you understand which ad gives you the most bang for your buck (and which you can ditch).

With Instagram's reach in your back pocket and Madgicx's tools in your hand, you're well on your way to building a revenue skyscraper.