Study shows advertisers and agencies will increase social media ad spend… but why?

Photo: Window with a view of ruined buildings Credit: ShadowRave

A new study released by Neilsen and Visu concludes that advertisers and agencies intend to increase social media advertising dollars in 2013.  There are a lot of insights to be gleaned for this report, but it leaves one big question unanswered: why?

Is social advertising becoming more effective, is organic social media becoming less effective, or are advertisers irrationally hedging their bets on social media?

Social advertising has improved.

Facebook in particular has had some great news when third-party data confirmed that their retargeting and mobile ad products were particularly effective.  The Wall Street Journal also recently reported that Facebook’s ad effectiveness has increased with the amount of ads rendered in Facebook feeds.   Among many initiatives, Twitter is partnering with Neilsen to quantify social signals around different media.  The social advertising environment is getting much more friendly for businesses.

Facebook is publicly traded, Twitter soon will be, Google Plus is affiliated with Google, and further down the long tail of social networks investors are keen on monetization.  Advertising products are getting better and will continue to for the foreseeable future.

And Neilsen says that 75% of advertisers are already spending dollars in the social media advertising space, with more intending to enter the space this year.

And organic social media is less effective.

Just as Facebook is a sterling example of innovating their ad product, they are also a sterling example of manipulating their platform to “encourage” ad spend.  EdgeRank has made Facebook fans much less valuable now than they were previously.  And with 1% engagement on posts, they really weren’t that effective to begin with.

Twitter initiative last year to bring users back to the mother-ship from a diaspora of third-party apps was an attempt to increase impressionable users.  And if the money politicians and ads (think Oreo’s opportunistic ad during the Super Bowl blackout), seem to indicate that Twitter’s advertising revenue is in a decent place.

It’s no longer probably (without huge audience) that organic social media will perform nearly as effectively as social media advertising.   Neilsen’s reports that most social media campaigns are integrated with other campaigns (online and offline), so the likelihood that they would compromise their other efforts is lower as well.  It’s probably also telling that Neilsen concludes that the budget for social media advertising is being drawn from other advertising budgets.

In their Wave 6 presentation last year, Universal McCann pointed that social media profile creation may be plateauing although content generation and networks grow.  This means that there is even more organic noise competiting for user attention.

There’s probably some optimism for social media, but it’s not epidemic

To answer the why – I think there is evidence to support an increasing effectiveness of social advertising and a decreasing effectiveness of organic social media for brands.  There may be some extraordinary optimism (I’m speaking to you Foursquare for Business user), but businesses in aggregate don’t allocate budget irrationally.

The Neilsen report states that most advertisers are frustrated with the measurement tools for social media, so they don’t have it entirely figured out yet.  That said, it’s telling that the strategy of big social networks to promote their advertising products has been effective.  And businesses that aren’t committing budget to social media advertising should probably take note of what’s happening.

What do you think?  Is social media advertising more or less effective?  Can organic social media be effective without augmenting it with social advertising?

Jim Dougherty

Jim Dougherty

Writer and chief of miscellany at leaderswest.com
I'm the guy that wrote the article you just read. Sorry for the typos.
  • http://www.bilal.ca/ Bilal Jaffery

    I think it has to do more with lazy brands and lack of a real social strategy. It’s much easier to sell to the traditional markters (with Advertising focused background) on this vs. actual engagement (even if it has to be outside of closed networks like Facebook)

    • jimdougherty

      An interesting point Bilal, thank you. I’m not sure that I believe that any brand or organization would be lax with their budget as “laziness” would suggest, but I’ll concede it as a possibility!

      • http://www.bilal.ca/ Bilal Jaffery

        As a corp social strategy guy from my days at ibm and now at bell, it’s always easier for me to get my advertising related initiatives of the ground vs. Long term community focused social ones. Campaign focused execution is much easier and lazy as it is mostly media buy.