Should Small Business Be Using Social Media Marketing, Key Lessons Learned From Big-box Players On Social Media Spending?

The often unproven yet popular hypothesis of behavioural targeting on social media is also deeply refuted and never proven by the researchers and academicians. In a recent study published by Marotta et al 2019, one of the lessons learned was when the user’s cookie is available, the publisher’s revenue increases – but the increase is just about 4%. This corresponds to an average increase of $ 0.00008 per advertisement meaning an insignificant increase in the economic outcome.

Two recent surveys of brand marketers suggest that even though marketers buy a wide range of audiences, including behavioural and location data, the most popular digital information purchased by the majority of advertisers is the basic demographic data of age and gender, including personal data, location information and interests, (Lotame 2018, Salesforce 2018).

The most baffling results from the research by Bradley et al is that estimated advertising elasticities are small, nearly 2/3 of all estimates are closer to zero and about 7% are negative, and 70% of all brands have a negative ROI of advertising at the margin, it’s also to keep in mind that almost 50% of the brands, the observed spend on advertising has a positive retunes over no ad spending.

Fig 1: Advertising Elasticity of Demand (or simply Advertising Elasticity, often shortened to AED) is an elasticity measuring the effect of an increase or decrease in advertising on a market.

The results also reveal that the effects of advertising are very complex to measure and the size and direction of the effects are not always as expected.

In conclusion, 

1. Incremental clicks don’t mean incremental sales.

2. Key is to deeply understand the performance and relate that to an increase in sales

3. Optimise the myriad of data to focus on lifetime customer value. 

4. The effects of advertisement are difficult to measure often not perform as expected at least in the short-term. 

5. Finally, business to consumer space is very competitive and consumers are inundated with humongous sales pitches, focus on key value proposition is the most sustainable way to build a long-lasting brand.

Appendix:

Salesforce (2018) Digital advertising 2020: Insights into a new era of advertising and media buying. Accessed August 15, 2018, https:// www.salesforce.com/form/marketingcloud/digital-ads-2020-research .jsp?d=cta-body-promo-13. 

Lotame (2018) The new state of audience data: Accuracy matters. Accessed August 5, 2018, https://www.lotame.com/lotame-research-report-the-new-state-of-audience-data-accuracy-matters/. 

Bradley et al   https://ssrn.com/abstract=3273476