SocialMediaBust

Window On Social Media

Advertising On Social Media Platforms Flat (and for good reason)

Despite all of the hype and hope about how important social media “should be” to businesses, plus the sheer number of people purported to use social media platforms, the amount of money spent by businesses on ads on these platforms is only about 5.5% of total spending on online ads.

What is even more surprising is that this number hasn’t changed much despite the 2008 to 2010 explosion of people trying social media platforms. From 2008 to 2010 this percentage has risen only 0.5% from 5% to the previously mentioned 5.5% (according to eMarketer numbers released in Feb, 2010 and reported on CNet).

There are several reasons for this. First, social media companies are still “getting their chops down” in terms of paid advertising. For example, Facebook’s system for tracking how well ads do is still only in beta as of 2010. Twitter hasn’t even opened up their systems to paid advertising, although this is imminent. Without proper tracking, paid advertising is simply a complete crap shoot.

While social media activists often suggest that companies are slow to adapt to new things, or “don’t get” social media, there’s another very rational reason for the lack of growth in ad spending on social media relative to other online expenditures.

There’s a lack of evidence to support that it works, and provides an adequate return on investment. In fact, there’s considerable anecdotal evidence to suggest that it doesn’t work all that well, since social media platforms don’t tend to attract shoppers.

For example, if you had the opportunity to use paid advertising on Facebook, or on Amazon, all other things being equal, your return on investment should be way higher on Amazon than on Facebook simply because Amazon is primarily a shopping portal. People use its social media components to interact but they go there to look at, buy and talk about products, not to schmooze with friends.

(Postscript: Forrester Research makes the claim that business to business social media advertising spending will increase from 11 million dollars in 2009 to 54 million in 2014. Not only that but you can buy a 17 page report based on these numbers from Emarketer for the paltry sum of $695 U.S. Personally, I do not find Forrester's predictions credible. As an aside 54 million is paltry. It's probably significantly less than the ad budget for any large company that sells to other businesses such as Staples, Office Depot, Microsoft, Google, or even smaller ones. Read the Forrester/Emarketer copy and you'll see they use the word "explode" to characterize this growth. Sorry, hype warning.