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Instagram’s Stock Rises as CPMs Drop, Ad Performance Increases

A new study by Brand Networks revealed that advertising on Instagram is working, with decreasing costs and increased performance across industries.


A recent study by Brand Networks revealed that advertising on Instagram is working, with decreasing costs and increasing performance across industries. We spoke to Pedro Labarta, Brand Networks’s Managing Director for Mexico and Latin America, about what the study’s findings indicate about the best way to make use of this platform in advertising campaigns.

Advertisers are still figuring out the best way to make use of the different engagement tools that social media platforms provide. And the platforms themselves are constantly tweaking those tools according to new insight revealed in studies like that conducted by software and social network services provider Brand Networks, whose clients include Interpublic Group, WPP, American Express, AT&T, InBev, Discover, Yahoo! and Unilever.

Brand-Networks-LogoThe three-month study looked at two billion Instagram ad impressions and tracked metrics related to spending and performance in the first quarter of 2016. The highlights, with additional insight from Pedro Labarta, Brand Networks’ Managing Director for Mexico and Latin America, below.

For Best Ad Performance on Instagram, Turn to Video

One of the most interesting revelations from the study was that video ads made up an average of 58% of ad impressions over the first quarter. Breaking the numbers down month-to-month, the study found that video ad impressions rose steadily from 43% in January, 59% in February and 65% in March. These numbers are even more impressive if one considers that December 2015 video ads represented just over 30 percent of the total.

What accounts for this change? Instagram did extend the maximum length of videos from 30 to 60 seconds in the middle of Q1. While the Brand Networks team analyzed both long and short videos, there wasn’t a notable difference in performance based on ad length: “We’ve also witnessed advertisers on our platform deliver video ads that were much shorter that performed very well,” Labarta said.

Lower Costs, Increased Performance for Instagram Ads

Continuing to give good news, the study showed that average cost-per 1,000 impressions (CPM) dropped to $4.58 in January, an all-time low at the time. But the numbers kept falling, and in February the CPM reached $3.88. March brought it back up, but just slightly, to $4.19. Impressive, nonetheless, as average CPM was $7.04 in just Q2 of 2015.

The test revealed that the CPM dropped across industries, in some more notably than others. The technology sector’s CPM went down by 32%, education by 50%, automotive by 49%, and e-commerce by 29%. Only telecommunications and travel industries saw decreased cost efficiency, as the CPM went up by 6% in each.

Labarta revealed that Brand Networks has “seen a few industries adopt Instagram advertising more rapidly than others,” and that “retail, consumer packaged goods and high fashion industries have been among the most motivated verticals to test and learn on Instagram.” The fashion industry has been experimenting with new approaches to getting target audiences involved in Spring Fashion Week Events, and all signs point to video as its secret weapon. 90% of fashion impressions came from video, which explains why 71% of ad spending on Instagram in the industry go to video ads.

Despite the decreased cost efficiency its ads have experienced, telecommunications brands “flocked” to Instagram in Q1 to support their sports-related ad campaigns during football and basketball seasons and new contract promotions, which explains the increased competition and CPMs.

Beautiful, Real-World Imagery Carries Platform’s Success

It’s very hard to compare strategies, advantages and disadvantages of the wide array of platforms available to advertisers. In fact, “comparing the different social channels today is a bit like comparing two different planets,” says Labarta. “The ecosystem on each is incredibly different. They are as different from one another as they are from television or radio.”

But in the end, Instagram arguably provides the best platform for visual communication, and is “very interesting because of its focus on beautiful and real-world imagery as a form of communication and expression,” says Labarta. An image or video’s ability to transcend language and culture makes it an undeniably powerful channel.


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