Reality Check: Social Media ROI Is Still MIA

Lulu Phongmany

One of the reasons I love my job is there is always something new going on. Given the volume of new business ideas and trends that I have to evaluate on a day-to-day basis, it’s absolutely necessary to be rigorous. For every Google (NSDQ: GOOG), there are a hundred Pets.coms.

For the past two years there are very few conversations that I’ve had or media that I’ve consumed that did not involve the words “Twitter” or “Facebook”. Don’t get me wrong – I do believe that social media is a game-changer. It’s as important as search and mobile when it comes to how it’s impacted the way that people use the internet.

My issue with the current social media frenzy is that as a result of this buzz, businesses are feeling the pressure to just jump right in and ask questions later. And most of them are. But what is the actual return on investment?

Here’s what I know about social media:

Social media is not a new phenomenon

Despite what you may have heard or read, social media did not begin with Facebook and Twitter.

Online communities have been in existence for decades and they are still thriving. Message boards and price comparison sites, which I consider to be as social as Twitter and Facebook, are still very relevant to online audiences.

According to Forrester (October 2010), 60 percent of online adults in the UK post on a message board weekly – versus 38 percent who update their Facebook status weekly. From the same study, 72 percent said they trusted price comparison sites – compared to just 34 percent that trusted brand profiles on social networking sites.

Social media doesn’t drive as much traffic as search

Let’s not kid ourselves. When it comes to driving users and traffic, there is nothing that comes close to search.

As paidContent:UK pointed out last June, UK newspaper sites are seeing about 50 percent of their traffic coming from Google alone (47 percent of our referrals at come from Google sites). In contrast, Facebook accounted for 0.1 percent of referrals to newspapers, and 0.2 percent to

This figure should not surprise publishers. Remember the days when we thought distributing our content on a portal was going to bring us all kinds of new users and lots of traffic? Distribution deals drive some traffic and provide some new users, but mainly what it does is gets you better results in terms of organic search, which is what is actually driving your traffic. Social media is really just an evolution of the online portal in this aspect.

Social media will change online brand spend

Publishers know that there are two advertising budgets – brand and performance.

Before social media marketing, ad networks and search marketing provided cheap, performance-based alternatives to advertising on premium sites. It got the job done, but it hardly did anything for your brand.

Social marketing is different. It offers you an opportunity to run a branding campaign at direct-response prices. Given the exposure and brand perception you can gain for a Facebook campaign, versus running a search campaign or on an ad network, you can put your branding dollars toward social marketing and theoretically achieve the same branding result.

According to eMarketer, social marketing spend is expected to reach £185 million, a 42 percent increase from 2010. While it remains to be seen if this spend will come from budgets that went to traditional media (TV and print), premium online publishers will definitely need to work hard for their share of those branding budgets.

There are ROI questions that remain unanswered

At this point, examples of how social media drives ROI are merely the the low-hanging fruit.

The fact that retailers like Dell and gaming companies Zynga are thriving with the growth of social media makes absolute sense, since social media really just extend existing offline behaviour around retail and gaming. You tell your friends about things you buy and deals you’ve scored. You play games with your friends.

However, we’re not yet seeing consistent evidence of significant ROI outside of retail and gaming. Now that there is significant spend coming from brands and an
increased investment in social media efforts from publishers, the expectation to produce ROI will be more important than ever. It’s make or break time for social media.

The one really positive thing I can say about the social media frenzy is that, for the first time in a very long time, it’s been the catalyst for getting offline business excited enough to dip their toes in a more meaningful way.

When insurance corporations are setting up Facebook profile pages you know you’re in for some interesting times. It’s also got brands actually spending their marketing budgets in a more experimental way, which is important for online innovation.

However, let’s all keep a little perspective. If I’ve learned anything – the more frenzied the hype, the more disappointing the product. Star Wars prequel, anyone?


» Lulu Phongmany is head of business development and marketing for NBC (NYSE: GE) Universal’s

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