Social Media Spending Goes Up: Now What?

Inplace #2

ADOTAS – After a few years of decline and slow growth, the future seems bright for social media spending and marketing budgets overall.

According to several recent studies, increased optimism in the U.S. economy and in the future of business growth has marketing managers in both B2B and B2C sectors setting their sights a little higher for the next 12 months, and even higher over a five-year window. The biggest sector of growth is in social media ad spending, with budgets for other forms of digital advertising either holding steady or shrinking to make way for a greater social media spend.

Increase In Social Media Spending This Year and Beyond: The Advertiser Perceptions semiannual survey reported that 59 percent of respondents were planning on increasing social media ad spending in the next 12 months. Overall, social media advertising will make up 27 percent of respondents’ budgets during 2012, which is up from 22 percent  in the previous 12 months. Spending in ad exchanges and ad networks is expected to decrease.

The annual CMO Survey showed similar trends. Currently, social media ad spending is at about 7 to 8 percent of total marketing budgets. This figure is expected to increase to near 20 percent within five years. What’s more, sales are expected to climb an average of 6.8 percent over the next 12 months and profits are expected to rise 6.2 percent, which will result in increased social media spending. Over two-thirds of the respondents in this survey felt that higher revenues would lead to increased marketing budgets, and specifically to increases in social media spending.

CMOs in the survey were optimistic about the economy and rated their optimism at a 63.4 average (out of 100, with 100 being the most optimistic). This average is up 11 points from one year ago and up 16 points from the all-time low of 47.7 in February 2009.

What This Means. With higher expectations for new business and increased marketing budgets, CMOs are placing their confidence in the area that has shown the most consistent growth over the last several years – social media.

Demand for social media advertising has grown at more than 100 percent per annum as more and more brands recognize the power of targeting and customer engagement. However, social media is evolving, and marketers need to adapt. The market has reached a leveling-off point, where the growth of social media users is shifting from exponential to a more organic gradient. There are not enough new users to absorb the higher costs for marketing.

Brands will need to spend their budgets on getting the consulting and in-depth expertise that will help them further engage with users and socialize their brands. Taking a more integrated, engaging approach to social media will certainly be both a focus and a challenge going forward.

The Money Is There… It’s clear that while the money is there in the budget, many organizations in both the B2B and B2C market will need social media guidance and help. If you sell or buy social, the doors of opportunity have been flung wide open – and the budgets are there to support spending.