• by Jack Loechner , Staff Writer @mp_research, September 18, 2014

According to a new study by AOLplatforms, social media has emerged as one of the most popular marketing tools to reach consumers, with companies like Twitter, Pinterest, Facebook, LinkedIn, YouTube and others vying for advertising dollars. As with other marketing channels, it has become vital for marketers to understand the absolute value of their investments in social channels, or change tactics accordingly, says the report.

Marketers intuitively know the power of social media and its virality, but they also want metrics that go beyond tracking clicks, likes and retweets. This includes more qualitative measurement to better explain the return on investment (ROI), such as how a specific social channel influenced a purchase online or in-store.

To understand how social media channels contribute to an advertiser’s efforts, the study leveraged Convertro’s multi-touch attribution technology to analyze all social media exposures that occurred in Q1 2014 across its entire client base. To reveal true user action, this report is based on real world, third party customer data rather than relying on survey data, which can be unreliable.

Key takeaways include:

• Social Media provides significant impact on a customer’s path to purchase and strongly influences their buying decisions.
• Paid social media advertising transforms the medium from an influencer tool into an effective upper and lower funnel solution that directly moves the needle on sales.
• Some social networks are more conducive to awareness vs. conversions.
• Social performance is not ubiquitous across all advertiser verticals, it varies by channel and product category.

News stories about advertisers increasing their spend on social have dominated many of the headlines recently, says the report. It also notes that eMarketer estimates that spending on social media ads will hit $6.6 billion in the US this year, growing more than 46% from 2013.  

Spending on Social media allows marketers to reach incremental audiences that they may not necessarily get through TV and other media channels. However, it’s important to understand how a brand’s presence on those sites, from a paid and organic standpoint, affects the path of a consumer’s journey towards purchasing a product, says the report.

The report shows that Social media is much more likely than any other marketing channel to serve as a MIDDLE touchpoint (87%) along the path to purchase, which is an important part of customer awareness and consideration of a product. 

In the analysis, YouTube appeared to be the strongest of the social networks at introducing new products (18%) and driving conversions (14%). This is a good indication that video is an important format for advertising to potential customers. Facebook came in a close second place in terms of introducing new products (11%) and closing sales (10%).

It’s possible to quantify this impact by comparing organic versus paid social media conversion rates. Marketers that allocate ad spend to social channels see a nearly 25 percent lift in the number of sales generated by advertising, compared to sales generated by organic, non-paid marketing touchpoints.

As Facebook, LinkedIn and others adjust with their algorithms for displaying user content, the report feels that the ratio “sales generated by organic versus paid” will continue to skew further towards paid social advertising, allowing marketers to control what is shown, when and to whom. While some consumer surveys have shown advertising on social to have a negligible impact on actual sales, and therefore relegating the sites to being more brand awareness, the real-world data collected in this study indicates the opposite, says the report. 

If you’re a marketer holding off on paid ads on Facebook and Twitter because your earned media is performing well enough, think again says the report; your conversion rate for paid social could be dramatically higher.

The study analyzed 500 million clicks, 15 million conversions, and three billion impressions (a total of more than $1 billion of attributed revenue) gathered during Q1 2014 across Convertro customers that invested in social media. The research involved the analysis of more than 13 million unique purchase paths and the touch points involved, looking at their position in the path.AOLPlatforms, September 2014.

For additional information from AOLplatforms, please access the full report, in PDF format, here