New research suggests that social media is a bubble – how long before it bursts?
These are heady days for social media interests. Facebook and Twitter run rampant, Pinterest, LinkedIn, YouTube, Vine and Instagram are booming, Ello is all kinds of interesting, and somehow or another Google+ and StumbleUpon are still hanging in there. While there isn’t literally a new social net rolling out every 15 minutes, it sometimes feels that way.
The money in social is just insane. Take the leader of the pack, for instance. Facebook’s market cap is just north of $200B and NASDAQ’s analysis is all kinds of bullish. Why not? Have a look at their revenue projections.Social is stealing search share, too, which is very encouraging on the face of things.
According to the Shareaholic study, the eight biggest social networks (Facebook, Pinterest, Twitter, StumbleUpon, Reddit, Google Plus, LinkedIn, and YouTube) contributed 31.24% of total traffic to Web sites in December 2014, up from 22.71% in December 2013.
It’s worth noting that the vast majority of social referral traffic was from Facebook, which soared from 6.53% of all traffic referral in December 2013 to 24.63% in December 2014. Pinterest’s share also grew rapidly from 0.65% to 5.06% over the same time period.
If you hold stock in one of these companies, you have to love this headline: CMOs Plan To Invest More In Social.
Social media marketing will be the number one area of new investment for marketing executives over the next three to five years, according to a survey of 478 chief marketing officers and senior marketing executives around the world, conducted by the Economist Intelligent Unit on behalf of Marketo.
Asked where they plan to increase spending in the near and mid-term, the largest share of survey respondents (37%) said they plan to direct their technology investments to social marketing. That was followed by mobile marketing at 28%; marketing analytics at 25%; email marketing at 23%; advertising management at 22%; and content marketing at 20%.
The future’s so bright you gotta wear shades, right? Except maybe not.
If you’ve been paying attention to industry research of late, you’re justified in wondering if social media, for all its popularity, might not be a castle built on sand – from a business perspective, at least.
Consider this, from the Shareaholic study cited above:
It’s also worth noting that while social’s share of total referrals is expanding, its share of e-commerce traffic remains low. Earlier this month, a report from Internet Retailer tallied online spending from social media and found that total sales came to $3.3 billion in 2014. However, separate figures from eMarketer suggest that total e-commerce spending in 2014 came to around $304 billion. So e-commerce from social media made up around 1.1% of total e-commerce revenue in 2014. [emphasis added]
Hmmm. Social’s share of site referrals is skyrocketing, while its contributions to commerce are almost nonexistent. $3B isn’t nothing, of course, but 1.1%? What about that number justifies the dramatic investment increases planned by CMOs (especially when weighed against the significantly better results from strategies like content marketing)?
This is just the tip of the iceberg, too. Let’s have a look at some recent headlines.
Total online sales for Black Friday in 2014 grew 20.6% compared to 2013, Custora found, up from 17.8% growth in the 2012-2013 figures. However social media channels, including Facebook, Twitter, Instagram, and Pinterest contributed just 1.7% of total e-commerce sales. By comparison email contributed 27.3% of total online sales, followed by 18.9% originating from free search, and 18.5% from paid search marketing.
Take a look at most big companies’ followings on social media and it’s rare to get above 2% to 3% of the brand’a customer base. However, most of these are “sleepers” who liked a brand in a competition or for some other reason they can’t remember. If you look at how many people choose to interact with a brand on social media, the figures go to way under 1% — in fact, [Melbourne Business School professor Mark] Ritson quantifies it as a very rough average of 0.02%.
It’s a similar story with Adobe’s research into shopping over the festive season with social providing just under 1% of clicks that ended up in a purchase compared to 40% of people who went direct to a Web site to transact, 36% who came through search and a little over 20% who came from another Web site.
Thus, to Ritson, social is — and I quote — “the greatest act of misselling in the history of marketing.”
“Many marketers just can’t seem to find success on Pinterest,” Forrester analyst Nate Elliott writes in a new report. “Barely one-half of top brands maintain branded Pinterest boards — and those that do are unsure what to post, collect few followers, and see little user interaction.”
Coca-Cola, for example, has fewer than 5,000 Pinterest followers, while its last 50 pins have been repinned an average of just 11 times each.
But there’s another awkward fact that has received less attention in this debate, which could nevertheless render the whole thing moot: consumers have already learned to ignore branded content.
That’s according to new research from Havas Media and Crowd Emotion, which measured consumer responses (or lack thereof) to branded content using technology that can pick up emotional responses based on subjects’ facial expressions. The results were not encouraging: a mere 20% of branded content posts appearing on Facebook generated any emotional response at all, meaning the large majority were completely ignored.
The study authors termed this branded content “blindness,” and it sounds exactly like the same phenomenon which has developed around more traditional forms of advertising, as consumers learned to “tune out” TV and radio ads, as well as earlier forms of online advertising, like “banner blindness.”
Even worse, the paid ads on Facebook received even less of an emotional response from subjects in the Havas-Crowd Emotion study — to be precise, none at all.
…most people still don’t view social media as a suitable channel for customer service.
That’s according to a new survey of 1,000 U.S. consumers ages 25 and up by M2Talk, which specializes in customer service technology, which found that just 2% of consumers said they prefer social media as a customer service channel. That’s especially damning when you consider that this isn’t a hypothetical choice: fully 67% of consumers surveyed have already used a company’s social media channel for customer service — meaning they have actually experienced it and were obviously not impressed. Meanwhile, 25% said they have never used social media for customer service, including 39.7% of respondents ages 55 and over.
At least as community-building tools, marketers should forget about Facebook and Twitter. That’s the crux of a new report from Forrester Research, which suggests that the social giants are losing their grip on what has historically been known as “social” marketing.
“Top brands Facebook and Twitter posts reach only about 2% of their fans and followers, and less than 0.1% of fans and followers interact with each post,” Forrester analyst Nate Elliott explains in the new report.
“On average, only .073% of top brands’ Facebook fans interact with each of their posts, [and] the numbers are even lower on Twitter and most other social networks.”
What does it all mean?
- Companies are spending billions of dollars on social marketing.
- CMOs are budgeting significant increases in social spending.
- Social marketing doesn’t drive conversion.
Okay. So what does social do? Well, it promotes a measure of “engagement,” although data suggests that those doing the engaging aren’t representative of the broader customer base. Worse, marketers simply don’t have the kinds of tools they need to accurately assess what’s really happening – what is the return on all that social investment, anyway? No one knows.
If you’re a marketer, this is all very bad news. If you’re one of those folks who hates the fact that social networks treat you like a commodity to be bought and sold, well, these findings might bring a smile to your face.
Make no mistake – people love social media.
The bet by social media investors has been that this obsession with online connection can be monetized to the tunes of zillions of dollars. There is absolutely no doubt that so far the bet has paid off.
Still, what if the emperor is buck nekkid and whistling through the graveyard? What happens if it becomes clear that yes, people show up in droves, but a) they ignore the ads, and b) they never buy anything? If I’m a CMO for a major retailer I might be planning to spend big on social in 2015. But what if I see those 1% conversion numbers, and when I press my staff to show me metrics justifying our social budget they tell me they got nuthin’?
What does my 2016 budget look like, do you think?
The word we’re looking for here is “bubble,” and when it bursts a lot of shareholder value is going to evaporate.
Social media is social media
If all this recent data is true, it suggests that social media is going to continue being really important, only not in ways that Mark Zuckerberg (and all the other social execs, entrepreneurs and investors) hope.
Let’s face it. There are times when we want to be marketed to. When we go to the store. When we browse a catalog. When we surf the Web looking for the best price on the current Chelsea away kit. There are times when we’re in shopper mode (or shopper research mode, or browsing mode) – these are moments when psychologically we are aligned with the idea that we might want to buy something.
There are other times – and this would be most of the time, by far – when we’re not in shopper mode. In these moments we don’t want to hear from marketers. We have developed the ability to shut ads out when they aren’t appropriate to our mindset, and if you do manage to break through and reach us in those moments our reactions are likely going to range from mild annoyance to open hostility. We really hate those telemarketers who call us during dinner, don’t we?
Here is what I suspect about social media, and it’s a theory that all the recent studies are bearing out. We go to social media to connect with friends, to make new friends, to browse cat videos, to be shocked by the latest political outrages, to see cool photography, and so on.
When we enter shopper mode, we don’t go to social media. We hit Google or Amazon or eBay or hunt down own favorite local businesses (Tattered Cover, anyone?) or, heck, maybe we get off our butts and visit an actual store.
In other words, shopper mode and non-shopper mode are inherently linked to mutually exclusive Web sites.
When all is said and done, maybe social media is doomed to be, well, just that: social. If so, it’s only a matter of time before the market figures it out.
That’s the day you don’t want to be holding lots of shares of Facebook.