Have you ever wondered where the money is in social media?
In a recent Business Insider piece, leading social media analytics platform SocialBakers CEO Jan Rezab shared that his company took in $25 million in revenue from 1500 clients. With clients the size of Nestle, McDonalds, HP and eBay, and 180 employees in three locations, average revenue of $17K per customer for an analytics / advertising firm is really modest. In the same article SalesForce admits that BuddyMedia is a loss leader for the company. In her recent piece, “A day in the life of a social media marketer,” Michelle Bucher used an infographic estimating social media marketing salaries to be between $34K and $65K, though a Vocus / Duct Tape Marketing study of SMBs reports that nearly 75% of businesses delegate social media to existing employees within their marketing department.
Here’s when I realized there was an elephant in the room: In response to Michelle’s piece, a person on Twitter wrote that the low salaries for SMMs were commensurate with a poor skill set. Human resources experts can correct me, but as a general rule businesses don’t often hire people that they deem incompetent. Having done quite a bit of hiring myself, competence or potential competence was always pretty high up on the list of reasons for hiring people and I assume that’s a pretty universal consideration. So, while it may be more convenient to believe that low pay is indicative of a meritocracy – the real reason that SMMs are in the lower echelons of the pay-scale is that businesses pay commensurate to perceived value.
Despite the fact that it challenges the popular orthodoxy, social media isn’t especially valuable to most businesses.
Money talks, uncastrated bovine ordure walks
Last touch attribution is the curse of social media ideologues everywhere. It’s a pretty commonly used methodology to gauge the effectiveness of advertising tactics, where credit for any sale is attributed to the last tactic prior to purchase. The reason that social media advocates don’t like last-touch attribution is that social media is so rarely the last touch prior to a sale. In each of Forrester’s “Purchase Path” studies, PwC’s digital IQ study, and many others, social media wasn’t the last-touch very often. Critics point out that social media is a “top of the funnel” tactic, yet it doesn’t fare especially well with acquisition either compared to paid and organic search.
Social networks are in an unenviable position to have to prove their worth to advertisers. Facebook recently released results of a small study with research company DataLogix that determined Facebook advertising resulted in a 22% increase in ROI, tying the purchase back to FB ads. The problem is that it takes deep data to determine this, and probably isn’t accurate (if Facebook advertising actual had a return of 22% advertisers would know this already). Facebook is also rolling out deeper segmentation tools to advertisers and is now allowing retargeting advertisements (purportedly one of the most effective of FB’s advertising complement) in news feeds. Yelp just rolled out a tool to calculate advertising ROI through the site (though without product information it’s difficult to understand how that works). Twitter is constantly releasing bombastic “studies” about the effectiveness of their platform for advertising. Foursquare reportedly can’t raise anymore capital for their (now fledgling) network.
Here’s the point: advertisers aren’t seeing the clear value in social media yet. If social media marketers were able to perform that job function and show clear causation between social media and revenue, social media marketers would make more money, social media agencies would make more money and social networks would generate more advertising revenue. The fact that three-quarters of businesses don’t even hire someone to manage their social networks is indicative that the perceived value of social media to most businesses is low.
Is it possible that social media isn’t what we think it is?
When Mark Cuban compared Facebook consumption to television consumption late last year, he was lambasted. He just doesn’t get it (never mind that he controls social properties with a scale that most people will never see). Here’s what he said:
“FB doesn’t seem to want to accept that it’s best purpose in life is as a huge time suck platform that we use to keep up with friends, interests and stuff. I think that they are over thinking what their network is all about.”
Let me repeat a point from the last section: Facebook is now allowing retargeting advertisements in its user’s news feeds, without any social connection whatsoever. What is the difference between that and a television ad? To Cuban’s point: Facebook may now be realizing what their network is all about.
When WPP CEO Martin Sorrell described his opinion of Facebook and Twitter in a recent Harvard Business Review interview he was also criticized. Here’s what he said:
“Facebook to my mind is not an advertising medium. It is a branding medium…. it’s a long-term mechanism. Compare that with Google. Say you’re searching for a car: We know that up to 90% of car purchases in the U.S. are search-influenced. Depending on where you are in the purchase cycle, that number one ranking on Google seems more important than a Facebook ‘like.’”
(on Twitter) “I think it’s a PR medium. Again, it’s very effective word of mouth. If you look at the Olympics in London, the big winner was Twitter. It wasn’t Facebook. It wasn’t even Google. We did analyses of the Twitter feeds every day, and it’s very, very potent….because it’s limited in terms of number of characters, it reduces communication to superficialities and lacks depth.”
The criticism of Sorrell’s statements was pretty consistent – each critic citing singular exceptions or claiming that PR, marketing and social media melded into some sort of gelatinous ooze. One of marketing’s big picture thinkers gives a reasoned, big-picture analysis of these platforms and all of a sudden he doesn’t get it? Of course, when he prognosticates the disruptive nature of digital he is a genius; that observation is compatible with most people’s point of view.
Sorrell may be wrong, but he isn’t wrong now. Google acquires customers and generates sales far more effectively than Facebook. Twitter is a limited platform (thought they are working to correct that) and most of their tactical decisions in the past year seem to indicate that they are not sufficiently monetized to go public. The most damning evidence that Sorrell is on to something may be the lack of revenue for major social analytics platforms, or lack of funding for established social platforms, or lack of resource to social media marketers.
There’s no shame in loving social media platforms and leveraging them for businesses. I’m not one of the zealots that thinks that everyone aspiring to become a social media marketer or community manager is inherently flawed. What I’m saying is that businesses (in aggregate) aren’t seeing the tangible value of social media that most people think it should theoretically have (wait for it)….. yet.
What do you think? Are businesses adequately valuing social media and the people who are managing it? What are they missing? Is Mark Cuban right? Is Martin Sorrell right? Is there a right or wrong?