As part of our #socialstrategy2020 series of blog posts and events, this post explores current trends in social media budgets and asks: what should your company be spending on social media?
We draw heavily on the findings of the August 2019 CMO Survey report, which can be found here.
Companies spend 12% of their marketing budget on social media
While the overall figure is 12%, there are quite large differences in spend depending on the size of company…
Companies that attract 10% or more of their sales from the Internet spend, on average, 17.6% of their marketing budget on social media. This equates to £88k of a £500k marketing budget.
While not huge, it is significant. It is especially impressive when you consider that 31% of businesses remain unable to evaluate the impact of social media on their bottom line [we explore this further below].
Companies that make 0-10% of their sales on the internet still spend around 10% of their marketing budget on social media. This suggests there are other, non-monetary benefits from investing in social media. We imagine brand awareness, market position and customer service play a part.
Social media is for disruptors
Interestingly, smaller (but still quite large) companies with <$25 million in revenues spend the highest percentage of their marketing budget on social media: 14.7%.
The CMO Survey contends that these companies could be using social media to out-wit larger competitors, who can out-spend them in traditional marketing areas. As you might expect, upstarts and disruptors seem to be using social media innovation to circumvent traditional market forces.
Use of agencies for social media is on the rise
According to the CMO Survey nearly 25% of social media spending is allocated to agencies.
While in-house teams retain the lion’s share of the budget, agency spending is increasing year-on-year. In 2019 agency spend on social media was the highest ever recorded.
Social media is at the heart of several of the biggest trends in marketing – including influencer marketing and experiential marketing – both of which require specialist expertise to manage at scale.
This, along with the continued desire to outsource BAU (Business As Usual) social media management and social advertising, may be behind the growth in agency usage.
Social media spend to rise by 89% between 2019 and 2024
This is possibly the ‘stand-out’ finding of the CMO Survey from a social media perspective. Budgets for social media are expected to nearly double in the next 5 years.
Companies that make 10% or more of their sales online expect to be spending 27.6% of their marketing budget on social media by 2024. And even those making no sales or up to 10% of sales online plan to spend 20% of their budget on social media.
Companies in the communications industry expect their social spend to be fully 31% by 2024.
Companies still unable to connect social to company performance
In spite of increasing spend and activity on social media, most companies are still unable to connect social media to business impact. This is hardly surprising – given how difficult attribution tracking remains – and how most social campaigns are better suited to driving awareness than sales.
Trying to track sales from individuals who have multiple digital personas and use multiple devices across multiple platforms (that refuse to share data with each other) is still a largely thankless task.
As the CMO Survey Trends Report points out, most businesses can’t tie Mobile Marketing and Marketing Analytics to business performance either – but continue to see value in investing in them. This suggests there is a residual appreciation of value that isn’t tied to trackable ROI.
69% of companies now able to evaluate the impact of social media
This is a heartening stat for anyone in marketing. While five years ago 45% of businesses claimed not to be able to evaluate the impact of social media on their business, this figure has now decreased to 31%.
Improvements in the professionalism, training and experience of social media teams must be partly responsible for this, along with companies starting to track the right metrics (vs vanity metrics or attempts at pure ROI calculations).
That said – there is clearly still a long way to go.
So, what should you be spending on social media?
It’s tempting to suggest you should spend 12% of your budget on social media – given that’s the overall average.
But as we’ve seen, e-commerce businesses should probably be looking higher (20%) and disruptive startups not far off that too (15%). As you plan for 2020/21, those figures should be increasing by 15-20%.
You should also consider which elements you outsource to agencies – e.g. activities that require specific skills and can be managed independently – and which you keep in house.
An enlightened approach to measurement, which doesn’t set unrealistic hopes on tracking ROI, but looks instead at the contribution social makes to brand recognition, market positioning and customer lifetime value may also help with evaluation (not to mention peace of mind and sanity!).
If you would like you discuss your social media planning for 2020 – join us at our upcoming #SocialStrategy2020 events in Cambridge or Peterborough, or just drop us a line.