Customer Experience

By adaptive - August 13th, 2013

Brand owners have long lamented their difficulty showing tangible ROI with their social media activity. But could this be about to change?

Over the past few years there have been many that claim to be able to deliver a metric to brands that clearly shows high levels of ROI across their social media networks. Indeed, the value of social media has been hotly debated since the first Facebook account was created.

Post Facebook’s IPO the potential for engagement is not in question, it’s the value of those engagements that still troubles brands that continue to throw substantial resources at this and other social media platforms. With research indicating that less than one quarter of one percent of customer acquisition comes from Facebook, it’s not surprising that a shift in attitude is needed, or empirical evidence to show brands once and for all that their ad spend isn’t in vein.

A comprehensive new report from L2 has recently been released, and offers some hope to brand owners battered by their social media experience. L2 identify what it calls the ‘second order effect’ that looks set to deliver the levels of engagement and more importantly, conversion that corporations are looking for.

Social commerce

L2 state that of the top-10 factors that correlate with strong Google organic search, seven are social media dependent. After launching Facebook Exchange in August 2012, Facebook now accounts for nearly half (46%) of retargeted clicks on the web. In 2013, a third of Facebook’s revenues will come from mobile, constituting 13% of global mobile ad revenue—second only to Google.

Advertisers find using both ad formats (retargeting and mobile) yields greater conversion and engagement. And visual platforms, most notably Instagram, register 25 times the engagement of community-based platforms. Lululemon Athletica saw conversion rates double after it linked its #thesweatlife Instagram gallery to its product pages.

Says Scott Galloway, Professor of Marketing, NYU Stern Founder of L2: “The ecosystem has become more complex. The touchstone for social media, Facebook, reflects the shift. In December 2008, the platform registered 150 million users, 81% from the U.S. and Western Europe.

“Facebook now boasts 1.1 billion consumers and APAC (at 29%) is the largest (and most engaged) user base. In addition, there are more than 10 platforms with 100 million+ users including YouTube, Twitter, Google+, and China’s Sina Weibo. High growth platforms Instagram, WeChat, Line, and KakaoTalk are mobile native, visual, and dramatically influencing how consumers create and engage with content.

“The initial stages of social media were about showing up and experimenting; in the next chapter, organizations will strive to find their point of variance. Prestige brands are present on an average of seven platforms, with 15% on 10 or more. However, many organizations are starting to question the return on investment of creative, human, and financial capital. As shareholders pressure platforms to monetize their audiences, the cost of brand participation has increased and engagement is now largely pay to play across the legacy platforms. Brands are still searching for the right balance between promise and performance and, as costs increase, will likely pare down the number of platforms they invest in.”

What is clear is that corporations’ uses of social media have to evolve. L2’s ‘second order effect’ means more focus on fewer social media networks that in turn, will enable brands to better connect with their consumers. The massive success of Sina Weibo is a clear pointer to Western brands to how they should be approaching their social media activity.

Mike Lazderow, CMO at Salesforce Marketing Cloud said it best: “We’re moving away from a page-centric world, where it’s all about what happens to our Web pages, to a people-centric world. It changes what you do when you can treat people as people and not anonymized cookies.”

Intelligence Report: Social Platforms 2013 from L2 Think Tank on Vimeo.