The new cost of social marketing

As social grows up determined to make a profit, marketers are finding it more expensive

Here’s a excerpt from “Social Costs,” which originally appeared in the April 2014 issue of Marketing

Scott Stratten is sweating on stage at the New Media Expo in Las Vegas, Nevada.

Billed as his “triumphant return” to the conference where Stratten made his first major keynote on social media in 2010, today’s Jan. 5 talk is four years in the making.

The event draws mostly social media types—bloggers, community managers and social media consultants—and Stratten is armed with a message for them that will later make the rounds on YouTube. He raises his arm , fist clenched with a pointed index finger and slams it down. “When you post an ad, you should pay to post an ad. That’s why it’s called advertising!” he shouts, charging stage right.

“But it’s $100!” he says, mocking the outrage of incredulous marketers. “Kiss my ass and pay the hundred dollars… You built your house on rented land. Now you’ve got to pay the rent.”

He’s talking about Facebook. Exactly one month earlier, on Dec. 5, Facebook announced a tweak to its news feed algorithm that some within the social media marketing bubble branded the death of organic reach. A Facebook sales deck also leaked that day, showing the company is telling clients organic distribution will continue to “gradually decline” and that paid distribution is recommended “to maximize delivery of your message in news feed.” Translation: unless you pay, it’s going to be tougher to get into the news feed of potential customers.

Facebook may be leading the charge on paid social, but it’s far from the only social network looking to squeeze more dollars from marketers’ pockets. Ads are popping up all over the social web, a space many consumers once saw as ad-free.

None of the social networks are turning back the dial on earned media quite the way Facebook is—at least not yet—but as the major social networks mature, they’re all gunning for their share of media dollars and trying to shed the old notion that brand posts on social are freebies. Like Stratten, they’re armed with a message: the rent’s due.

In the past two years, Twitter has rolled out scores of new options for advertisers, including a dashboard that let s you sync your tweets with your TV ads, a rich media unit, Twitter Amplify , for sharing video content and the ability to send tweets from a brand handle to just one country—a boon for global brands. So far, they seem to be working, with ad revenue rising 121% in Q4 2013 to $220 million from $99 million in Q4 2012.

LinkedIn has made an aggressive play for ad dollars, too, introducing a native ad unit called “sponsored updates,” a move Macquarie Capital predicts will make the company $46 million this year. In the same time period, Tumblr, Instagram and Pinterest all debuted their first ad units, eager for the same piece of the pie that the more established social networks are after.

In Canada, the collective effort is paying off, with social spend up 35% to $257 million in 2013, according to eMarketer. For marketers, the shift means it’s time to earmark dollars for distribution on social. But for many, the sting is that paid media was never part of the initial pitch from social, a medium that for years was lauded by consultants and “gurus” as cheap or even free.

Dave Fleet, senior vice-president at Edelman Digital, says marketers have long understood that it costs to produce content for social, but that initially most expected to invest time in social media, not hard dollars and certainly not for distribution.

That perception is quickly fading as brands wise up to the reality of today’s social climate, says Fleet. Two major shifts have happened since the early days of social that led to today’s paid imperative, he says. First, the platforms need to monetize. LinkedIn, Twitter and Facebook are all public companies and large user bases of non-paying customers aren’t enough to satisfy investors, so each has turned to advertisers to fill their coffers.

Second, there has also been an explosion of content. Social media is now mass, with more than half of all Canadians (51.2%) who use the internet logging into a social network each month, according to an eMarketer study published in October 2013. Those 17.7 million consumers create a tonne of content. Today there is an almost incomprehensible number of tweets tweeted, pins pinned and vines vined every day . And on Facebook, there are 1,500 stories eligible for the average user’s news feed on any given day—far more than anyone would have time to consume (most see between 150 and 300).

Paired together, says Fleet, the networks’ need to drive revenue and advertisers’ need to compete with thousands upon thousands of Buzz Feed posts and baby pictures are turning paid media into a necessity on social. That’s increasingly true for all of the major social networks, though the tactics may vary. On YouTube, for example, the most successful campaigns have a 50 /50 split between paid and earned views, according to Google’s president of American operations, Margo Georgiadis.

“If you’re trying to use [YouTube] as an advertising medium, and you’re trying to ensure you get a significant reach, fueling that and helping it be discovered through some paid media has always helped accelerate the idea,” says Georgiadis, who adds that in general she’s seen a shift towards paid media on social.

Kirstine Stewart, head of Twitter Canada, says using Twitter’s ad units can help extend a brand message from 10 to 100 times the organic reach of their handle.

“Marketers know now that the most successful campaigns start with a great earned base on Twitter , but need to augment through paid programs to achieve real reach,” she says.

“There’s some good brand loyalty work to be done through a brand handle, and it is fine to preach to the converted. But with Twitter you get access to a much broader group of people who are found and matched because of their interest—and that’s a powerful connection.”

Unlike Facebook, Twitter likely won’t tinker with the organic reach of brands since messing with the timeline would change the network’s value proposition to advertisers. Twitter is billed as a real-time peek into what’s happening online, which is what makes it attractive to both users and brands.

“It’s going to be a lot harder for Twitter to regulate what gets seen and what doesn’t in a news feed scenario,” says Karel Wegert, vice-president of digital solutions at media agency Media Experts.

“It’s not as much that you won’t be seen unless you’re money, but there are many more ways to be seen if you’re willing to pay money now,” says Wegert.

There’s more! The full article – including a ranking of social services for any budget and our “When to Spend” guide – is available in the April 2014 issue of Marketing, available now to subscribers in print and on the iPad newsstand.

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