Direct Line Blog

Social Media Makes Cents

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Source: Tax Credits via Flickr Creative Commons
Source: Tax Credits via Flickr Creative Commons

When Facebook went public last year analysts wondered if ads on the social network giant would actually generate revenue substantial enough for the company to stay in the black. Indeed, Facebook's potency as an advertising and marketing platform—in providing return on paid and owned media—is experiencing hockey stick growth, according to Adobe's first-ever 2013 Social Intelligence Report, released today. Facebook isn't the sole beneficiary of this trend either, says Joe Martin, analyst for Adobe Digital Index, as marketers on Twitter and Pinterest also are seeing substantial growth in key advertising metrics.

These predictions are supported by data from 130-plus billion Facebook ad impressions, one billion-plus Facebook posts, 2.3 billion-plus Facebook engagements (which includes comments, shares, and likes), and 400 million-plus unique visitors to social sites.

For Facebook, the social network seems to be vindicated in an area that had many analysts skeptical: its ads. (Of course, all questions will be answered on October 30, when Facebook releases its Q3 report.) Adobe's report notes that click-through rates (CTRs) have exploded by 275% year over year (YoY), whereas cost-per-clicks (CPCs) are down 40%—which Adobe claims makes this an optimal time to purchase Facebook ads.

Martin suggests that the CPC decrease is due to more brands buying on a cost-per-thousand (CPM) basis for Facebook advertising, which has a YoY increase of 120%. 

“Marketers are better optimizing for social,” Martin says as the reason for the increase in CPM and the decrease in CPC. “If you're really good at [CPM], you can pay less than what you bid on.”

Facebook, of course, isn't just about paid ads—it also serves as a medium that refers potential customers to online retail outlets. Currently, 67% of all social media referrals come from Facebook—though it's notable that this is a decrease of 20% from this time last year as Pinterest (an increase of 84% YoY), YouTube (increase of 130% YoY), and especially Twitter (increase of 258% YoY) become increasingly influential as referrers.

And those referrals are significant because they tie directly into increasing revenue growth for all social media sites. For instance, retail revenue per visitor (RPV) from Facebook is now worth $.93, up 39% YoY. Pinterest RPV is $.55, up 150% YoY, and Twitter RPV is $.44, up 300% YoY.

But despite Twitter's significant growth in referrals and referral revenue, Martin is especially bullish about Pinterest's prospects. “Pinterest is referring more traffic to retail sites than Reddit, YouTube, and Twitter combined,” he says. “By next holiday season I think Pinterest could be equal to or even higher than Facebook in terms of [overall] referring revenue.”

The reason for Martin's enthusiasm over PInterest: images. According to Adobe's research, images produce the highest engagement (defined as a comment, like, or share) rates at 4.3%, compared to text links, which have a .7% engagement rate. That's a 600% difference.

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