This is my current advice on social media to consumer brand owners. Use social media as research (into media), but you can’t justify it as part of your advertising budget.
Key to my position is that currently very little is known about the effectiveness of advertising using social media. There are a few success stories, but success stories always get a lot of attention (while the (many more) disappointing case studies are swept under the carpet) and many of the people promoting these have a vested interest. There are plenty of social media marketing zealots, who say ridiculous things like “TV advertising is dead”.
Just because successful companies are doing it does not make social media marketing effective. The Roman Army, which was very successful in its day, used to consult pecking chickens before deciding when to go into battle. My guess is that the way the chickens pecked had little or nothing to do with their success!
Also it’s worth noting that successful companies like Apple have practically no FaceBook presence – I guess Apple don’t see it as an advertising medium. Instead they use TV, print and outdoor.
Marketing science tells us that brands need to reach all category buyers over and over. This is what makes media like TV so valuable, it is vast and fast – delivering a lot of reach quickly, at low cost per contact. Also media like TV, radio and print offer us very reliable, trustworthy metrics.
When we carefully look at social media we see that it is highly fragmented (e.g. the typical tweet only reaches about a dozen people). It’s impossible for a campaign to be guaranteed reach. We just have to pray that we “go viral”. Few brands have more than 1 million Facebook ‘fans’ globally. The Sunday Mail, in Adelaide alone, can deliver that sort of audience! Or any moderately rating show on Australian TV.
Also we know very little about how viewers consume advertisements within Social Media. Do they even see them (when they are concentrating on talking to their friends) ?
So there is much research to be done – which we are doing in the Ehrenberg-Bass Institute.
I also encourage companies to do small experiments with social media, to learn something. That’s why I say it should be part of the research budget, not the media budget.
If we were looking at Social Media purely as an option for our advertising budget then most firms would conclude it is not a viable option. So it can only be justified from a business perspective if we are using it purely to learn about this new media – so that we know what it might be useful for our brand in the future (if at all).
Professor Byron Sharp (March 2011)
PS That means firms who are using social media need to have careful experimental designs in place. The expenditure should be planned by the research department (not the marketing team) and preferably with academic advice because it is really easy to muck up an experiment and waste money learning nothing.
Marketing Science 
Yes. Until some real research is laid down, the approach to SM will still be “pay and pray”. And the “pay” can take the form of costs that are hard to measure – there is a cost to employees tweeting and Facebooking and how much of the activity is in the aid of your business.
At the very least users of SM should aim to get some insight from their activity – as prof Sharp says, SM activities should be managed as a research activity more than a marketing one. And senior management need to get their head around it on a policy level.
Byron, hear, hear! look forward to seeing you wednesday and updating you all on the success of my TV only quorn media plan this year.
The irony is I am only on air 24 weeks of the year so could probably nearly double my budget and still find TV as best use of money.
Kevin
Byron, I think this post assumes social media=digital social media. This is the mistake most brand owners are also making. Social media in its simplest sense is people talking to people. Companies like Tremor ( P&G’s WOM unit and Bzzagent) have been leveraging this since 2003 welll before FB made an appearance and SM became a buzzword, via a network of brand advocates. There have been over 1000+ campaigns some with well documented ROIs via marketing mix modeling which prove the impact of community led marketing model which these companies use. The fact that Bzzagent got acquired 3 months back by Tesco plc -a sales focused retailer should tell us something about the effectiveness/ROI of a community led marketing. Prof Walter Carl and Ed Keller of Keller Fay have done stellar work in measuring the impact of such community WOM campaigns. In our campaigns in China we have conclusively proven REACH as well as IMPACT. Net, The evidence is water tight for the right kind of SM which delivers amplification as well advocacy. Of course, a focus on content led approach-viral videos- etc has low ROI, but that should be a tiny part of SM marketing in any case. It might be sexy and gets visibility in marketing press but is in its construct not repeatable campaign after campaign.