The ROI of Social Media Advertising

roiMany companies are dropping traditional marketing channels to pursue social media marketing, but with the overwhelming amount of content online it is difficult to get advertisements noticed. Although this seems like the most effective marketing strategy due to its high reach, is the return on investment worth it? In the “2013 Social Media Marketing Report” by the Social Media Examiner, it indicated that 97% of marketers are relying on new media marketing. With 64% of advertisers expecting to increase their social media spending in 2013, it is important to analyze if it is all worth it.

Smart Insights revealed that in a recent report by Neilson only 29% of advertisers and 27% of agencies feel like social media is effective and demonstrates a return on investment. Although these numbers are relatively low, 33% of advertisers and 43% of agencies think social media marketing “moves the needle when combined with other efforts,” but they do not know how to measure ROI. This reveals the high uncertainty when it comes to social media ROI. So let’s dive into actual cases where ROI was studied on social platforms to see if these marketing tactics actually work.

Facebook

Recently Facebook teamed with Datalogix to develop a system to determine the effectiveness for advertising. After initiating the partnership, Facebook examined 60 campaigns that used advertising on their site. The results of the case showed that 70% of the 60 campaigns had a 3-times better return on investment, and 50% showed 5-times the ROI.

Although this was a company-conducted case, Christopher Null from Techhive.com did a case study of his own. After placing a bid on Facebook for $0.15 a click and receiving no impressions, Christopher placed a higher bid of $0.57. After 24-hours on the site, Facebook suggested that Christopher raise his bid to $1.41, which increased impressions, but not clicks. As time passed, Facebook kept suggesting he raise his bid. After four days, Christopher spent the average of $1.51 CPC and received 25 clicks total.

So what is the verdict? Christopher did receive 253,207 impressions, but a low amount of clicks (about 0.01 percent). So, although you will get vast exposure, you might not get the most effective engagement from target consumers.

Twitter

Christopher Null also conducted a study on Twitter. He submitted a single promotional tweet that linked back to his homepage, with a $25 per day budget and a per-click cost between $0.01 and $1.50. He did note that the rates were not well explained, but the site did state that the ad should generate 62 to 104 clicks per day. After four days the advertisement only received 67 clicks, a low amount compared to the 248 suggested minimum. However, the ad was promoted a total of 7,529 times, which equated to a clickthrough rate of .89 percent. This was much more promising than Facebook’s 0.01 percent.

The Final Verdict

Additionally, Psoshul studied 10 companies and their social media initiatives. Coffee Groundz used Twitter as a direct ordering channel and increased sales and market share by 25%. Jimmy Choo also used Twitter to geo-locate and feature up-scale stores that sell their sneakers, which caused sales to increase 33%. Additionally, the luxury hotel chain Joie de Vivre advertised on Twitter and Facebook about a $79 per night offer, and booked 1,000 rooms that would have been vacant.

These studies prove that if used the right way, social media can significantly help businesses. It is important to test the effectiveness of different platforms by keeping most variables equal. By maintaining the same budget, duration, and advertisement on all platforms, businesses will be able to analyze their personal ROI and decide what sites are the most effective for their organization. There are obvious success stories and failures, it is just important to figure out which method will reach your consumer.

Are your social media initiatives as effective as you think they are?

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Kailee

Kailee Sisson is a writer originally from New York currently residing in Nashville, TN. She is an alumni of Belmont University with two degrees in Marketing and Music Business. During her free time Kailee enjoys writing music, playing with her dog Gatsby, running marathons, eating breakfast sandwiches, and watching Disney movies.

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