You’ve likely heard that social media has the potential to help you multiply your revenue, far in excess of what you spent over the course of the campaign. A few years ago, there were reports of businesses seeing returns of 100, 200, or even 1,000 percent, and even today, most marketers will tell you it’s one of the highest-ROI online marketing strategies available, in part because of the low costs and nonexistent barriers to entry.
But social media marketing has become more competitive and commercially-saturated. Organic reach is declining precipitously. And that means that there are some hard truths we need to accept about social media marketing.
1. Not all marketers see a positive ROI. Despite the fact that 77 percent of marketers are using at least one social media channel to market their business, only 48 percent of businesses claim to see any ROI whatsoever. There are many reasons for this discrepancy — most of which are accounted for in the following points.
2. It takes significant time and effort to be successful. Social media isn’t something you can “turn on” and expect to start seeing an increase in revenue or conversions. It takes time and effort to build a successful social media presence; you need to have a thorough understanding of your target market, you need to carefully craft your messaging and time your posts adeptly, and on top of that, you need to be active consistently, engaging with your audience, sometimes for months or years, before you see a return on the investment. Chances are, you won’t break even your first month, both because it takes a long time to generate a significant following and because you’ll make lots of mistakes when you’re first starting out.
3. The definition of a “return on investment” may vary. Let’s say one of your fellow business owners tells you they’re seeing a 500 percent ROI. That’s impressive, but where is it coming from? Are they measuring that based on the number of visitors they’re getting from social media? Based on an increase in sales that may or may not have come from the channel directly? To make things even more complicated, are they calculating costs accurately, including the time of the full-time employees working on the campaign? In most cases, ROI is self-reported, so it’s hard to ensure you’re getting an accurate account.
4. Social media ROI depends on other marketing channels. In many cases, the strength of your social media campaign will be dependent on the strength of your efforts in other channels. For example, let’s say you have two companies essentially doing the same thing, Company A and Company B. Company A launches a social media campaign and starts paying $100 a week toward marketing. Company B spends $100 a week on traditional advertising, and starts building an initial client base. After a few months, Company A has made some progress and is breaking even on its social media spend. Company B has a thriving customer base, so they decide to start a social media presence. By the end of the month, both companies have 1,000 followers. By this point, Company A has invested more than $1,000, but Company B has only invested $100 — yet their posts are getting a similar amount of reach. This example shows how the numbers can become skewed in favor of brands with big advertising budgets being spent on other marketing efforts, or those with an already-existing audience.
5. A positive ROI is getting harder to earn. A positive social media marketing ROI is harder to earn today than it was a few years ago, in part because of an overall decline in the organic reach a brand can achieve on social media platforms. Social media apps have intentionally decreased the amount of visibility an organization or company page can get without paying, in part to ensure that mainstream users have a less commercial experience when browsing their newsfeed, and in part to drive more necessity for paid advertising. At some point in the not-so-distant future, ads may be necessary to be seen on social media. Social media ads can yield a positive ROI in their own right, but they’re inherently costlier than purely organic strategies.
6. Some industries are naturally better suited for social media marketing than others. I think it’s foolish to say that some industries can’t be successful on social media; almost any company has the potential to see a positive ROI using social media marketing. Yet, some industries are going to have an easier time than others. Those with strong visuals and interesting content topics, or those that are mass-marketed to a demographic that uses social media heavily will almost always outperform a business with sparse demographics, or one in a typically “boring” industry.
7. Explosive growth requires a bit of luck. Just one piece of viral content can quickly scale your social media presence from “amateur” to “professional,” but the science on viral content is fairly limited. Even if you have all the “right” ingredients in place, there’s still an element of luck to your success. A competing piece of content might see 10 times as many shares as yours just because it was timed differently, or because the right person happened to see it first.
These facts aren’t meant to discourage you from pursuing a social media marketing campaign, nor are they a criticism of the stats themselves. I’m a major proponent of social media marketing in my own right, and I stand by the idea that social media is still one of the best, most cost-efficient marketing strategies.
But if you want to be successful, you need to set realistic expectations, and that means thoroughly understanding the nature and potential of the strategy before jumping in.
For more content like this, be sure to check out my podcast, The Entrepreneur Cast!