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Is Social Media really worth the money for businesses?

Is Social Media really worth the money for businesses?

Last updated on: December 3, 2012 at 3:34 pm by Desh Kapoor

Is Social Media really worth the money for businesses? 2012-12-03T15:34:03-06:00 Desh Kapoor

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JC Kendall makes an interesting point in his article on the impact of Social Media on sales of the businesses. He says the impact is negligible.

On this recent 2012 Black Friday, Online Sales grew 20.7% from last year. Online Sales on Cyber Monday grew by 30.3%. Those numbers represents HUGE growth in the Online space. Within those numbers however, Social Media overall was responsible for 0.34% of Online sales on Black Friday. Allow me rephrase this in case your glasses fogged over? Social Media was responsible for one third of 1% of Online sales on Black Friday. Do not despair however, because on the following Cyber Monday, Social Media represented a whopping 0.41% of Online sales, or less than half of 1% of overall Online sales.

Why is this so? Because, the Facebook users or Social media users do not bring the “Commercial Intent” to the table. And this can be seen in the difference between efficacy of Google ads versus Facebook ads.

In 2011, Google, through its AdWords advertising service represented 9% of all Online ads on the Internet. CTR (Click Through Rates) on ads on Google resulted in sales revenue to the tune of 36.4 Billion Dollars. In 2011, Facebook represented 17.1% of Online Advertising. Facebook Ad revenue in 2011 returned 3.7 Billion dollars. Again, allow me to summarize. Facebook advertisements almost doubled those of Google in 2011. Facebook revenue from advertisements was barely one tenth that of Google.

So, why did Google make 10 times as much as Facebook last year on just over half as many advertisements? The answer is “Commercial Intent”. When people are shopping, they have what is called Commercial Intent, which means they are looking for something they want to purchase. It is no different from back in the days of searching through the Yellow Pages for a business that is selling what you are interested in buying. Your Commercial Intent is to find those who provide what you are looking for.

Commercial Intent does not exist on Social Media, because the overwhelming percentage of its users is not there for shopping. They are there for the purpose of conversation and interaction with others.

Which is surprising, because many other studies so say that the chances of someone buying something increases when it is recommended by someone you know on social media. Then, what about this?

Guess there is a difference between Facebook ads and Facebook recommendations. Former isn’t as good, while latter can be a game changer. But how does any company harness the latter?

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