Strategic CIO // IT Strategy
03:21 PM

Should SMBs Spend Big On Social?

New research projects social media ad spending by SMBs will skyrocket during the next five years. Is it money well spent?

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A recent forecast by researcher Borrell Associates says small and midsize businesses (SMBs) will triple their national advertising spending on social media during the next five years. Budgets for social campaigns in local markets, meanwhile, will increase sevenfold. Where the heck is all that money coming from?

"That's the billion dollar question," said CEO Gordon Borrell in an interview, referring roughly to $1.1 billion spent on local social advertising and promotions alone in 2011, a number he expects will double in the coming year and reach $7.7 billion in 2016. Borrell's firm pegged national spending in the same category at around $8 billion last year and expects that to hit around $24 billion by the end of 2016.

Bear in mind, the numbers reflect only paid social media advertising and promotions, and exclude other online marketing categories such as paid search on Google's AdWords and other advertising channels. (Borrell's definition of advertising holds no great surprises: display ads, video, sponsored search results, and the like. Promotions include discounts, whitepaper distribution deals, and loyalty programs.) Nor does the data account for less-visible costs, such as time spent updating the corporate Twitter handle. If Borrell's numbers are even in the ballpark, either SMBs are going to enjoy tremendous revenue growth in the next half-decade, or they're moving money around in their marketing budgets. What's behind the numbers?

[ Need help creating a social presence? See 10 Tips For Creating Killer Social Content. ]

Those that enjoy ringing the death knell of print might feel a twinge of satisfaction, but it's hardly a new--or complete--story. Borrell said newspapers, phone book ads, and direct mail will continue to get drained by online media--again, not exactly a new story. But he takes a broader view, using a profile of a typical small business. Of all the money that business spends to market itself, one third usually goes to advertising. The other two thirds goes to everything else, a category that could include everything from a new storefront sign to website design to issuing a press release. That's where social ad budgets will siphon dollars from.

"[The money] comes from any one of the myriad expenses they currently have in marketing," Borrell said. Indeed, expect anything that requires printing to get hit hardest--but if the numbers play out as projected, social advertising and promotions also will eat a larger piece of the SMB online marketing pie--which includes slices for paid search, email, nonsocial advertising, and other tactics.

Sounds reasonable, but let's play the skeptic: Why should a small business with little or no room for error in its budget be shelling out significant ad dollars on social sites when it can do so many things for free? Borrell, himself a small business owner, is inclined to agree--SMBs with high social IQs can do a whole lot on Facebook, Twitter, LinkedIn, and a host of other sites, without spending much more than time.

Better yet, there's a tremendous level of satisfaction in making the cash register ring without spending money to do so. "It feels great to me as a business owner not to spend a dime in advertising and make sales," Borrell said. But he issues a rejoinder to the do-it-yourself ethos: "We're both wrong," he said.

Although some SMBs will succeed with social on their own, many run the risk of doing more harm than good--and they'd rather pay for help, including buying advertising. Borrell is quick to note that he spends a ton of time on social media; in fact, he likens it to a psychological disorder. That obsessive level of attention is something plenty of SMBs don't have for reasons of time, knowledge, or other factors. Borrell said those businesses can't ignore social, but they also run a big risk of making damaging mistakes. Even for the socially savvy, Borrell thinks the magnifying potential of good advertising--particularly when it's done as part of a complete media mix, social and otherwise--will continue to grow.

Borrell's take is fueled by the freakishly fast adoption of social media in general by SMBs. In fact, he's staggered more by those numbers--64% of SMBs reported having some social presence at the end of 2011, and that's expected to hit 80% in 2012--than the ad-spending figures. Historically, Borrell said, small businesses spread their marketing thinly across a wide range of activities, rarely devoting too much time or money to any one category. Not so with social, though that's not necessarily a good thing.

"[SMBs] are turning to social media as the Holy Grail," Borrell said. "I don't think it's going to work out all that well for them unless they get professional help."

His reasoning? He likens it to the old Amway party--let's gather all of our friends for dinner and then try to sell them stuff over dessert. Too many SMBs, Borrell said, pursue a similar approach to social, and would be better served by advertising as a result. Indeed, the top metric that SMBs reported in Borrell's research--by a wide margin--was acquiring new customers. Not sales, not loyalty, not website traffic, but bringing new, paying customers through the door, real or digital.

"I got a Twitter account, I got a Facebook page, and now I'm going to tell everybody about my products. I'm going to tell everybody when I have specials. And they don’t quite get it," Borrell said. "While they have a presence, they have the opportunity to ruin it."

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