Instagram isn't just a platform for pretty pictures anymore. With over 2 billion active users scrolling through their feeds daily, the app has become a serious business tool for brands of all sizes.
However, the challenge is that organic reach has declined significantly, meaning even your most engaged followers might not see your posts unless you pay to promote them.
Paid advertising guarantees your message reaches the right people at the right time. Whether you're a local boutique trying to drive traffic or an online retailer looking to boost sales, Instagram's advertising platform gives you precise control over who sees your content and how much you spend.
To run a successful Instagram ad, you need to do more than simply boost a post. You need to understand how the auction system works, which ad formats drive results, and how to track performance beyond likes and comments.
Keep reading to learn how to build an Instagram advertising strategy that actually delivers ROI.
Why Instagram advertising is essential for multi-channel marketing
Posting consistently and using the right hashtags used to be enough to grow your Instagram following.
Unfortunately, those days are gone. Instagram's algorithm now prioritizes content from friends and family over business accounts, meaning organic reach for brands has dropped dramatically. If you want your content to reach your audience, you'll need to run Instagram ads.
Instagram's online advertising platform has become incredibly sophisticated. You can segment your audience by behaviors, interests, demographics, and past interactions with your website or email list.
Instagram advertising connects directly to the broader Meta Business Suite ecosystem, giving you data from your Facebook page and Messenger. So, when you create an Instagram ad campaign, you tap into Meta's data about user behavior across multiple platforms.
Understanding the modern Instagram ad auction and algorithm
Like most online advertising platforms, Instagram uses an auction system to determine which ads will appear and how much you'll pay. However, the highest bidder doesn't always win. Instagram considers multiple factors to balance advertiser goals with user experience.
Meta has upgraded its advertising platform with AI-powered tools that automate campaign optimization. Advantage+ campaigns use machine learning to automatically test audience segments, placements, and creative variations.
These AI systems analyze thousands of signals in real-time, including user behavior patterns, time of day, and device type.
Three main factors determine whether your ad wins the auction:
- Your bid
- The estimated action rate
- Your ad quality score
Instagram multiplies these factors to create a total value score. This means you can outcompete advertisers with bigger ad budgets if your ads are more relevant and engaging to your target audience.
Instagram ad formats and when to use them
Instagram offers several ad formats designed for different marketing goals, and choosing the right one can dramatically improve your campaign performance.
Instagram Reels
Reels ads appear between organic Reels content and offer the highest reach potential on Instagram. These full-screen, vertical video ads can be up to 90 seconds long, though shorter videos (15-30 seconds) perform better.
The Instagram app algorithm heavily prioritizes this format, making it ideal for reaching new audiences and building brand awareness quickly.
Instagram Shop and Collection ads
Shopping ads let users browse and purchase products directly within Instagram. Collection ads display a cover image or video followed by product images in a grid format.
These formats work best for e-commerce businesses with established product catalogs looking to drive direct sales. You'll need to connect your catalog to Meta Commerce Manager to use these ad types.
Instagram Story ads
Stories ads appear between organic Stories content. These full-screen, vertical video or photo ads excel at driving immediate actions like website visits or limited-time promotions.
The swipe-up functionality lets users easily move from your ad to your landing page, making them perfect for time-sensitive offers.
Carousel ads
Carousel ads let users swipe through multiple images or videos. You can include up to 10 cards, each with its own image, headline, and link.
Use carousels to explain multi-step processes, compare product features, or highlight items from a collection. Each card can link to a landing page, making them versatile for both product education and deep dives into complex topics.
How to build a high-converting Instagram ad strategy
Running random ads without a clear plan is the fastest way to waste your budget. The advertisers who see consistent results approach Instagram advertising strategically, starting with well-defined objectives and building their campaigns around specific business goals.
Here's how to build a successful Instagram ad strategy:
Set full funnel objectives
Most businesses need campaigns running at different stages of the customer journey simultaneously. Meta offers six campaign objectives in Ads Manager:
- Awareness
- Traffic
- Engagement
- Leads
- App Promotion
- Sales
Each objective optimizes for different user behaviors and sits at different points in your funnel. For example:
- Awareness campaigns get your brand in front of new people who've never heard of you.
- Traffic and Engagement campaigns warm up audiences by driving website visits or social interactions.
- Sales and Leads campaigns focus on conversions from people ready to buy or sign up.
Trying to skip straight to sales campaigns with completely cold audiences usually results in high costs and poor performance because you're asking for too much too soon.
Use advanced audience targeting
Instagram offers three powerful targeting methods beyond basic demographics.
- Lookalike audiences find new users who share characteristics with your best customers.
- Retargeting reaches people who've already interacted with your brand through your website, app, or Instagram profile.
- Interest-based targeting finds users based on their behaviors and interests across Meta's platforms.
Each method serves different campaign objectives and stages of the customer journey.
Consider broad targeting when it makes sense
Privacy changes like iOS 14.5's App Tracking Transparency have limited how much data advertisers can collect about user behavior.
Meta now encourages advertisers to use broader targeting parameters and let AI systems find the right audiences automatically. This approach, called Advantage+ audience, often outperforms manual targeting in the current environment because Meta's algorithm can identify patterns and opportunities that human marketers might miss.
Managing your Instagram advertising budget and ROI
Budget management separates profitable Instagram campaigns from money pits. You need to understand what drives your costs, how to test efficiently without burning through cash, and how to scale winning campaigns without hurting their performance.
Factors that influence your cost per click and CPM
Some cost factors are beyond your control. Competition in your industry drives up prices when multiple advertisers bid for the same audience.
Holidays and shopping seasons create bidding wars as more brands fight for attention. Your niche matters, too. Even your ad placement choices affect costs, with feed placements generally costing more than Stories.
But when you create ads, you can control several variables that directly impact what you pay: targeting breadth, ad creative quality, and bidding strategy. Narrower audiences cost more because you're competing for a smaller pool of users.
At the same time, better creative reduces costs by improving your relevance score, which gives you an advantage in the auction.
Best practices for A/B testing your creative
Test one variable at a time, whether that's the image, headline, or targeting. Let tests run long enough to gather meaningful data. Generally, you want at least 50-100 conversions per variation before declaring a winner.
How to set a realistic budget for small business growth
Start with a daily budget you can afford for at least 30 days while your campaigns gather data and optimize. For most small businesses, this means $10-25 per day per campaign.
Once you identify winning campaigns, scale your budget gradually rather than doubling overnight, which can disrupt the algorithm's learning phase. Instead, increase budgets by 20-30% every few days when you see consistent positive results.
Why manage your Instagram ads through Mailchimp?
Running Instagram ads through Mailchimp offers advantages for businesses already using Mailchimp for email marketing.
The integration lets you use your email subscriber data to build Instagram ad audiences. You can find new customers similar to your best customers by creating lookalike audiences based on your contact lists. You can also target your existing subscribers directly or retarget people who have visited your website.
When you connect your ecommerce store and Instagram account to Mailchimp, the platform tracks how your Instagram ads drive sales and bring in new customers. This connected view helps you see which campaigns actually contribute to revenue, not just engagement metrics. You can create, buy, and track your Instagram ads all within Mailchimp instead of switching between multiple platforms.
Analyzing performance: Metrics that actually matter
Surface-level engagement metrics like likes and comments won't tell you whether your campaigns are profitable. Instead, study the metrics that directly connect to your business goals.
Return on ad spend (ROAS) tells you how much you earn back for every dollar you spend on advertising. A 3:1 ROAS means you earn $3 for every $1 spent. This metric directly measures profitability.
At the same time, conversion rate shows what percentage of people who click your ad complete your desired action, whether that's making a purchase, signing up for your email or SMS list, or downloading a resource. Track both metrics at the campaign and ad set level to identify what's working.
To get the full picture, you need to look at data from multiple sources. Meta Ads Manager shows ad-specific metrics like impressions and clicks, giving you insight into campaign performance at the top of the funnel. Mailchimp reports track what happens after someone enters your ecosystem through email sign-ups and purchases.
Use Ads Manager to optimize your creative and targeting based on immediate responses. Then, use Mailchimp to see which campaigns attract subscribers who become long-term customers.
Turning ad traffic into long-term customers
Instagram ads work best as part of an integrated marketing strategy that moves people from first impression to loyal customer.
Mailchimp's automation tools let you build email workflows that nurture new subscribers from your Instagram ads with personalized content based on what they clicked. Your CRM data helps you segment audiences and send relevant follow-ups that feel personal, not automated.