There is no shortage of hype around social media, especially for the space’s most dominant player, that 500 million user-strong behemoth called Facebook. For businesses of all shapes and sizes, the need to jump on the social Web bandwagon is pretty much a given at this point. Indeed, more than 70% of small businesses use Facebook, according to a recent Merchant Circle survey.
While the perceived urgency of getting on board is clear, what’s less obvious to businesses is whether or not social pays off. Of course, the question of what social media ROI even means varies across different types of businesses, all of whom have different goals in mind for their social marketing strategies.
For most e-commerce-based businesses, the use of Facebook is not translating into cash, at least according to a recent report from Forrester.
Of the 24 companies interviewed, only 7% cited social networking as one of their most effective sources of customers. Affiliate programs, organic search traffic and even offline advertising scored higher than social. By far the most effective channel was paid search marketing, which 90% of respondents put in their top three biggest sources of customers.
Is it just a matter of time? Not so fast. As the report points out, paid search marketing was viewed as effective pretty much from the beginning. Seven years in, shouldn’t Facebook be driving e-commerce by now? The businesses surveyed reported a 1% click-through rate on Facebook posts, which pales in comparison to the 11% average click-through rate seen with good old-fashioned email marketing.
Some Hope For Small Businesses
The report leaves hope for certain types of businesses, who it says may be in a better position to make money from their Facebook presence. Among them are what they call “small pure plays”, small businesses for whom “Facebook is the 2011 version of Yahoo Merchant Solutions or eBay ProStores.”
Because the online sales of these sellers are often generated by their own word-of-mouth advertising and because Facebook is essentially their eCommerce platform, it is not uncommon to hear of 100% of the online revenues of such sellers coming through Facebook.”
For small businesses, using Facebook for their e-commerce needs frees them from some of the administrative headaches of hosting their own solution, not to mention the lower cost of entry (free). Indeed in the Merchant Circle report we cited above, nearly 37% of small businesses named social networking profiles as their most effective marketing method, second only to search engine marketing.
“For such small businesses, it can be more cost-effective to direct customers to one’s fan page on Facebook rather than invest in setting up one’s own website,” the report said. “Local businesses or offers are particularly suited to Facebook as well because individuals often have other local friends in their online social networks.”
