Social media advertising is a category of digital advertising that places ads on social networking sites.
The five largest social media companies at the time of this writing are in order of audience size according to Quantcast are:
What makes these sites attractive to advertisers starts with their vast reach.
“Worldwide DAUs (Daily Active Users) increased 19% to 864 million on average during September 2014 from 728 million during September 2013,” Facebook said in a quarterly report.
The ability of advertisers to communicate with such a vast number is impressive, but in reality the attractiveness lies in segmenting that huge audience. The larger the audience, the greater the ability to target at a micro level.
A social network with 1 million users of whom 10,000 who have an interest in gardening is not attractive to a company such as Home Depot. But a network with 1 billion users and 10 million gardening enthusiasts is more attractive.
Add the ability to segment those gardeners even further — landscapers versus flower gardeners — creates numerous opportunities for campaigns based on location, a specific sale or the time of year.
Twitter echos the world-wide reach of Facebook in its own recent quarterly statement: “As of the three months ended September 30, 2014, we have 284 million average MAUs (Monthly Active Users) spanning nearly every country.”
Those statements alone reveal a second appeal to advertisers — the ability to target users geographically.
Geographic targeting is available not only at the country level but also at the state, city and zip code level.
Social media companies are able to target down to the zip code level because they encourage users to provide personal information in order to maximize the usefulness of their accounts.
Again, mass reach provides great value. Having 10,000 users at zip code 55555 is more attractive to a Lowe’s store located in that zip code than a network with only 50 users in the same zip.
Some users provide more information than others, so they don’t have a complete profile on every one of them. But knowing the zip code of a user is only the start.
The networks also gain an understanding of age and sex. They track and grasp users’ interests based on the social network groups they join or the comments they post.
That means advertisers can target geographically, demographically and psychographically.
Targeting Increases ROI
Any form of targeting potentially increases the return on investment for the advertiser because it is cost efficient.
An advertiser can spend $10,000 in a mass marketing campaign to reach 10,000 people, of which 9,900 aren’t interested in that product or service. In reality, that advertiser has spent $10,000 to reach only 100 people who do have an interest.
The cost to reach that entire group is $1 per person, but the cost to reach the target is $100 per person.
With targeting, that same advertiser might spend $2,000 to reach that same audience of 100 people.
The cost to reach the entire target is $20 person — much higher than the first example — but the total cost is much lower. The cost to reach the target is usually higher per person with targeting because of the costs that go will developing a targeted solution.
The trends of social media advertising show that it is becoming an extremely popular way to reach audiences.
The most recent quarterly report from Twitter showed a 109 percent increase in revenue year over year.
Facebook reported that revenue per active user increased 40 percent over the same quarter a year ago. Total revenue increased 59 percent.
Likewise, Linkedin’s SEC filings show a 45 percent year over year growth.
All three companies show growth rates dramatically higher than the 3 percent a year average for all advertising, which means they are taking away market share from other companies and media.
Best Uses of Social Advertising
OK, social media advertising provides the ability to target in a cost efficient way. It has wide reach and rapidly growing acceptance.
Why should a business use it?
All advertising provides either branding, response or a combination of both. Ads on these platforms serve three primary purposes:
- They promote the business’ brand.
- They promote the business’ social media presence.
- They send social media users to the business’ Web site.
The ultimate goal of course is generating new clients and new revenue.
So it is up to the business to decide if a social media advertising campaign is beneficial and then decide how the campaign should be used to get the best return on investment for the expenditure.