Social Media Spending to Double in Five Years
20% of dollars in social media by 2018
Neither B2C nor B2B companies, on average, currently devote more than 10% of their budgets to social media efforts. Yet according to 468 chief marketers polled by Duke University's Fuqua School of Business, both segments will top that mark before the year's out and will continue to spend at a rate that will see them top 20% in five years.
“This is a significant increase in attention being paid to social media,” says Christine Moorman, the marketing professor who directs the school's biannual CMO Survey. “When we first asked the question in 2009, they were spending 3.5% on social media. Now they're saying they will spend 11.5% this year and 21.6% in five years.” Conversely, marketers say they intend to trim spending on traditional advertising by nearly 3% in 2013.
Marketers are making this substantial commitment even while admitting that their social media activities are not closely tied to strategic goals. Asked to rate their social campaigns' level of strategy integration on a 7-point scale, theirmean score was 3.8. Fewer than 10% said their campaigns were very effective in carrying out strategic goals, while 15% said they were not effective at all.
“This integration gap is kind of natural” for a relatively new marketing medium, says Moorman. “When companies first started doing broadcast advertising, they didn't know how to integrate it with their sales activities.”
Likewise, marketers' social media metrics don't focus on ROI contribution. “Conversion rates” finishes fourth and “revenue per customer” eighth on the respondent's list of top 10 metrics. The top three are “hits/visits/page views,” “number of followers or friends,” and “repeat visits.”
“It's difficult to conceive of the direct impact of social media,” she says. “The customer is moving through a process—learning about a product, getting a referral. Social media metrics are leading indicators for downstream revenue, so that's how marketers are approaching it.” Moorman notes that evaluation of social media is a key topic in several courses offered on the subject at the Fuqua School of Business.
Marketers appear to be in a transitional phase, too, with the analysis and implementation of the large amounts of customer data that emanate from social and digital marketing efforts. While respondents, on average, said they would increase marketing analytics expenditures by 66% in the coming three years, they intend to decrease the number of projects fueled by analytics in 2013 from 37% to 30%.
Human resources issues, posits Moorman, may be a key obstacle to company's social and data-driven marketing efforts. “Companies have just not figured out who the social media people should be and where they should fit in their organizations,” she says. “Where do you hire them? To whom do they report? What's their career path? The routines are not developed yet.”
Moorman allows that five years is a long time in the world of social media, and that the 20% spending number is, at this point, more of an expectation of the cost of competing than an actual commitment. “The question really is,” she says, “will social media earn its keep and really become an integrated part of companies' marketing strategies?”