How Social Media Agencies Thrive On The Ignorance of Businesses

How Social Media Agencies Thrive On The Ignorance of Businesses

Social Media Agency: Hey guys, it’s been a month since we launched your amazing sponsored social media campaign. Your results are ready. Boy, do we have some fantastic results to share with you.

Business: Oh great, we’re all really excited to hear what the Facebook advertising has achieved. We keep reading about how important social media is for any business…

Social Media Agency: That’s right, it’s incredibly important, and the paid campaign is going to totally transform your online operations.

Business: So exciting!

Social Media Agency: And you guys won’t be disappointed. With your £1,000 per month fee for our expert social advertising and creative services – with all media expenses included – we have generated the following results. Drum roll please.

Business: (drum rolls on table).

Social Media Agency: Are you ready? Here goes: in month one we have achieved 500 new likes of your Facebook Page, plus 200 clicks to your website!

Business: Wow! Is that good?

Social Media Agency: You betcha! That’s a cost-per-like of just £2. It shows that our audience targeting was spot-on, and our ad creative really got to the heart of your customers. Just imagine – if you invested another £10,000 over the next ten months, then that’s a guaranteed 5,000 extra followers, plus an additional 2,000 clicks to your website. That’s pretty impressive!

Business: 5,000 likes on Facebook over ten months? That’s pretty amazing, our competitors barely have 50 likes between them.

Social Media Agency: Exactly! You’ll be the envy of the… remind me what it is you guys sell again?

Business: Onesies.

Social Media Agency: Onesies, of course! And really fetching ones, too. You’ll be the envy of the onesie industry.

Business: But what about sales? Did any of those clicks turn into sales? Are we generating a return on our £1,000 investment? After all, each onesie only retails at £12.99, and our profit margin is about 50%, so we really need to be generating sales on Facebook at a cost-per-sale of no less than £5.

Social Media Agency: Well, social media doesn’t really work like that. Social media is less about measurable sales and more about endorsements. It’s about giving trust to your brand. You can’t really attribute a sale to Social Media. I mean, you’re investing in your brand’s potential, it’s trustworthiness. How do you give a value to that? You just can’t. And your brand has received 500 new endorsements already. Amazing!

Business: I guess so. But our PPC agency reports total revenue and return on investment every month. In fact, so does our affiliate manager. They both tell us how much was spent and how much revenue was produced. They mentioned something about sales tracking and add-to-basket events. Is that something you guys can report to us?

Social Media Agency: Well, technically it is possible, but as I say, it’s not really relevant to social media. Social media doesn’t really work that way. It’s a much more complex channel to quantify.

Sound familiar? Before I start passing judgment on all social media agencies, let me first quickly say that some social media accounts are an important source of brand awareness. A company’s follower count can be so immense and its brand may be one that commands huge influence on its followers. Often the work involved in managing such a large social following requires the input of a team of social professionals. However, the dangers I’m covering in this article relate to small-to-medium-sized businesses who have been sold by the idea that paid social media advertising is the channel that will somehow transform their business.

Let me quickly state the most important goal of any advertising campaign: generating profitable sales or leads. All paid media investment must pay for itself, ideally with a spend that is scalable. In other words, increasing the spend once profit is achieved should – all things being equal – generate greater revenue and even more opportunities.

Businesses who approach a digital marketing team that specialises in omnichannel marketing – offering SEO, PPC, Social Media, Remarketing, ECRM, etc – are more or less in safe hands, and there’s a good reason why: it’s in the agency’s best interests to produce positive results for the client, as this ensures a long-term relationship with them. That means that digital teams can experiment with multiple forms of advertising until they find the channels – paid or otherwise – that work best for the client’s brand. If a paid channel proves unprofitable, then the marketing team can simply move on to the next channel until profit is achieved. Profit = happy client = more regular friendly lunches with them (preferably involving alcohol).

What Should Businesses Consider Before Approaching a Social Media Agency?

There is one, all important question you have to ask your prospective social media agency when they pitch their services to you: “will you be reporting on leads, sales and/or revenue volume?” If they answer “no”, then say thanks, but no thanks, and end the meeting.

I’m going to list two important facts to consider for all businesses who plan on approaching a social media agency.

  1. Most Social Media agencies only specialise in social media management as a service. In other words, this is all they specialise in.
  2. For the vast majority of businesses, paid social media advertising does not generate a sustainable return on investment.

Let those two facts sink into your mind before you readily part with your marketing budget and give it away to a creative SMA to manage a paid campaign. Given that social media agencies only offer one service, and their channel is one which predominantly fails to provide a consistent paid stream of profit for businesses, the question arises: what happens when the data held by the social media agency shows that the campaign is not profitable? Will they share the honest data with the business or will they carry on with the campaign even though it is not in the client’s best interests, thus losing the client from their books?

As a digital analyst, I very rarely see paid social media campaigns that are run by social media agencies that are successful. And it is often because they have not been optimised to generate profit. Instead, they focus on secondary metrics involving brand engagement. A counter-argument to this is that the agency is carrying out a social growth plan, rather than a sales or lead generation campaign. But if this is the case for you, then do read on.

How Social Media Agencies Avoid Addressing The Elephant in the Room

SMAs successfully get passed the hurdle of poor sales or lead performance by reporting on a mostly insignificant, yet highly coveted metric: likes (or followers).

The likes metric is a pure vanity metric – every business owner wants to have more social followers than their competition. Just as every business wants to be no. 1 in Google for their main key terms, so too do business owners want to show off to their pals how many followers their company page has accrued on social media. But there’s a major difference: being no. 1 in Google drives huge volumes of free traffic to their website – traffic which comprises users who are actively seeking its products or services. This achievement can drive huge volumes of leads or sales. Amassing thousand of followers on Social Media, however, may generate traffic from people who like the company’s social message, but aren’t necessarily interested in buying the company’s product. In fact, social media users are so far up in the sales funnel that they are, in my opinion, absolutely no different to display traffic. No matter how on-point the paid campaign’s audience targeting is, most of these users are not high-intent shoppers. One counter argument to this is that Remarketing can be carried out on social media, but this is not an acquisition channel – it’s a re-engagement channel.

I can understand why businesses are impressed with the likes/followers metric, as do social media agencies who use this knowledge to their advantage. But what is the actual value of a social follower? I would very much like to invite all social media agencies – because some SMAs have the morals to do this anyway – to begin reporting to their clients not only the return on investment of each and every one of their client’s social campaigns, but also the measurable value of a follower. What is the overall conversion rate of a follower and how does this differ to non-followers? If likers are more likely to generate leads or purchase, then what is the actual conversion rate of a liker compared with non-likers? And, with this data, surely a predictive, future value can be reported to the client – how much more revenue would an additional 1,000 followers bring to the business?

The truth is that return on investment metrics are not provided in a transparent fashion by most SMAs, because they know that the value of a follower acquired through paid advertising is rarely enough to warrant continued investment. In other words, sponsored social media advertising for small-to-medium businesses rarely generates a profit. Of course, there are some cases where social media really lends itself well – typically amongst brands that offer a highly social, unique product that is naturally well tailored to social media. For many businesses though, the paid social route will simply not offer a sustainable digital growth plan, at least not until all other channels have reached a bottleneck and time can be spent optimising the product for a social audience. And given that SMAs often only provide the one service – social media promotion – it’s not in the agency’s best interests to fully disclose the main data: leads, sales or revenue.

Most digital analysts will tell you that social media conversion rates – even when looking at them from a broad assist-style sales attribution model (the influence the channel has on sales) – has one of the lowest conversion rates of any digital channel. It’s true: social media is still the buzz word for small-to-medium businesses. But the reality is that paid social advertising will not be the channel for you to grow your business. SMAs will not help you here.

So, if you are a business who has been sold by the idea of paid social media advertising, do insist that your social media agency reports to you the total volume of leads successfully generated and, if you are an e-commerce business, the total revenue and return on investment. All of this data is basic, top-level reporting. If the agency tells you that this reporting is not available with their service, then steer well clear.

 

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