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My sincere thank-you to DrivingSales and Paul Moran for his response, “Does Social Media Sell? A Harvard Professor Says No,” to my HBR.org article, “Is Social Media Actually Helping Your Company’s Bottom Line?” Paul says I am taking “a shallow perspective” on this topic. I disagree, and here’s why:
First, Paul does not take issue with the facts in my article: that most companies don’t have ROI measures for their social media investments; that few companies, according to the McKinsey research, even have accountable managers in place for that spending; that much online discourse about products and companies is fake, bought, or otherwise engineered, not “engagement” with potential customers; and that the comScore data about the unviewability of many display ads is bad news. Well, Mrs. Lincoln, except for those details, it’s a great play!
In fact, Paul agrees that many companies “are digging themselves into a large social media hole that will be very hard to climb out of.” His agreement supports a basic point in my article: “people tend to overhype new technologies and misallocate resources, especially marketers.” Don’t shoot the messenger who points out what the emperor is not wearing.
Paul also caricatures my argument (“Cespedes argues that social media . . . is a waste of time”) and he makes repeated assertions about “invaluable exposure.” I’m urging managers to demand more rigorous ROI from their now sizeable and often misguided social media investments. But repeated assertions are not a business argument. We’re talking about how a finite marketing budget gets allocated. At some point, it must be tied to customer acquisition and/or retention. If you really believe that ROI is irrelevant, then we have no argument because there’s nothing to argue about.
Finally, Paul points to the buzz generated by social media for car dealers and calls this “invaluable exposure.” Maybe, and maybe not: buzz is not biz. Opportunity costs are a core reality in any business. The issue is not whether a given medium may promote positive awareness (although my article cites the accumulating evidence indicating an essentially random-walk correlation between positive/negative social media conversations and market outcomes). Rather, the business issue is the relative expense and effectiveness of spending money on medium X rather than Y, not whether the digital marketing agency naturally prefers social media in your budget.
The fact is, much current business talk about social media is isolated factoids that ignore opportunity costs and lack a verifiable use of the medium beyond “having a presence” on Facebook or Twitter or whatever. And here’s my prediction: I believe better use of social media will come from programmatic buying and selling of ads. In these electronic exchanges, buyers meet sellers for all varieties of digital media. It’s like a financial trading desk where data are required for the real-time bidding that takes place. As in any market, the resulting price says a lot about the value of that ad and medium to that business. Programmatic buying now accounts for about 20% of digital ad spending, up from practically nothing just 3 years ago. As it increases, answers to the questions in my article will be necessary for brands, agencies, and the social media firms seeking to persuade those brands to buy their wares.
Again, my thanks to Paul Moran and DrivingSales for taking the time to respond; it’s an overdue debate.
Frank Cespedes teaches at Harvard Business School and is the author of Aligning Strategy and Sales: The Choices, Systems, and Behaviors that Drive Effective Selling (Harvard Business Review Press).