Where is the ROI in Social Media Advertising?

Nearly all firms adhere to the principle that to remain relevant, they need to have a strong social media presence. However, the ROI from these investments—which often involves spending with third-party vendors as well as paying for internal social media management teams—is questionable. In August 2013, a survey discussing this concept with various Chief Marketing Officers revealed that only 15% of CMOs can quantify the impact of social media advertising. Perhaps even more startling, however, is that this same group envisions doubling this expense over the next five years.

This behavior is indicative of social media’s place in today digital marketing world: it is still in its infant stages, and is little understood. Although sites like Facebook and Twitter are now monetizing their large, global user-bases, the advertising spend of many firms is purely experimental at this point. There is little long-term data or research to say what is effective, what isn’t, and what kinds of ROI can be expected.

In their inability to estimate ROI, firms are showing their lack of strategy within social media. They want to show that they are up-to-date and competing against other players within the industry, but jumping into the deep end may not be the behavior that shareholders expect or invest in. The next several years should be telling for social media as it continues to evolve and social media outlets gain experience in understanding advertising impact. In the meantime however, CMOs might be better served by spending money on social media research rather than blindly throwing money into the social media black hole.