Marketers are NOT spending their money where users are spending their time

by Justin Kistner on Aug 06, 2010

Earlier this week, Nielsen released their latest report on where U.S. Internet users are spending their time online. Social media dominated all other categories at more than twice the time spent on the next closest category. It occurred to me after reading that report that social media is not where marketers spend most of their money. So, I wanted to look further into the difference between where users spend their time online and where marketers spend their budget. Here is what I found.

Marketers are not fishing where the fish are

Social media not only represents the area where users spend most of their time today, but that was the case a year ago. Social media saw the largest growth of all areas at a whopping 43% increase over last year. It was also the largest growth area last year tripling in usage between 2008 and 2009. Yet, Marketing Sherpa reports that marketers are spending disproportionately less on social media.

Search dominates the marketing budget

The darling of online marketing, search represents the lion’s share of online marketing dollars. Accounting for a mere 3.5% of time spent, search accounts for the most dollars at 31% of the total budget. Search is an important acquisition channel for marketers because users have intent to engage at the time they are searching, but when combined with the budgeting dollars spent on the website they land on; 58% of the total online marketing budget is way to high.

Email is used a third less than it was last year

Users spent almost a third less time on email than they did last year, yet it still represents 19% of the budget. In fact, Forrester sees the spend on email marketing continuing to rise through 2014. What?! Users spend almost three times as much time on social networking, but marketers spend about half as much on social. This is the biggest disconnect in the modern marketing budget allocation.

Destination not Acquisition

The cornerstone of online marketing has been to drive traffic to the company’s website. This kind of acquisition marketing comprises 83% of the total marketing budget. Maybe more because 6% is spent on “other online marketing”, which likely includes more types of advertising. And this is a problem. Because unlike search, social networks and games are destination sites, not acquisition channels.

Nielsen also recently reported that users spend more time on Facebook alone than they do on Google, Yahoo, YouTube, Microsoft, Wikipedia, and Amazon combined. That means if you want to reach users, you need to set up shop inside Facebook, as compared to thinking about it like Google, which is a jumping off point. Facebook users are far more likely to watch your movie trailer or download your coupon if that activity happens inside Facebook, as compared to trying to drive them back to your website.

Given that users are spending the majority of their time on destination sites like social networks and games; marketing budgets look foolishly allocated by focusing on luring people away to corporate websites. The greatest opportunity for modern marketers is to shift online acquisition budgets to social media destination budgets.

Post Author

Justin Kistner is author of the 2013 Social Rich Media Benchmark Report and Sr Director of Strategy at ShopIgniter. Justin has been a well-renowned leader in social marketing strategy for over ten years with leadership roles at Spruce Media, a...

  • http://www.robinbalmer.com Robin Balmer

    Great article, really shows the disconnect. And by the time old-school marketers catch on, Facebook will be something else.

  • http://jackieadkins.com Jackie Adkins

    You sort of have to be careful looking at the graphs. Just because they spent 1/3 of the amount of time on email marketing, that doesn't mean they used it 3 times less. Email marketing programs are getting better with more features that make it easier to distribute newsletters and campaigns in less time.

    I'd also be interested to see what they were including in the “budget” category. Does this include salaries of employees dedicated to those tasks? Social media isn't a platform that really requires much of a monetary investment in most cases, outside of the employees salaries who manage it and possibly investing in a brand monitoring service (which may even fall into another department's category). Whereas, search marketing and email marketing don't really require much of a time investment, rather most of it is paying for the tools and ad space.

    Trust me, I'm definitely not saying marketers shouldn't be focusing more on SM, rather that the graphs and info leaves a lot of questions and are somewhat misleading :)

  • Tim

    The disconnect definitely exists. The most common *rationale* behind that disconnect that I run into is, ironically, the lack of measurability of digital and social media. But, wait, isn't digital the most measurable medium ever?! It is…but what's cheap and easy is measuring activity — we haven't cracked the nut of actually having media mix models that can effectively incorporate digital and social investment, that can really capture the complexity of the whole marketing channel ecosystem.

    Take brands that are used to getting hard numbers from an MMM exercise, and they're used to the status quo of traditional media investment, and they try to drop the incredibly fragmented and noisy data of a minimal investment in digital into their models…and they can't detect a signal! We've got boatloads of clients who are living in this “the secondary research says consumer behavior has shifted, but our budgets have to rely on our traditional models” conundrum. It's tough.

  • http://www.masstransmit.com/ Adam Q. Holden-Bache

    There's a big issue with the Nielsen research- its all based on percentages. It's not based on total amount of time. Nowhere does it say how much time users are spending online overall. Its possible that social sites are driving up total online time, so when you look at percentages of that time spent then its not an accurate picture. If someone is spending an addition 20 hours per month online now than they were last year and dedicating that time mostly to social, then the percent of email, search, etc will go down even if they are still doing as much of that as they were previously.

    Regarding budgets, time spent doesn't necessarily mean that's where money should go. Budgets should be determined based on ROI. Search and email are channels that have proven value, so I don't see budgets being pulled from there simply because more time is being spent on social sites. Regardless, marketers should be figuring out how to generate ROI from social channels and then allocating proportionately.

    In a few years these charts will look quite different. With such rapid growth in social channels it's implausible to think budgets will react as quickly. But once social stabilizes and budgets catch up, these numbers won't look so lopsided.

  • http://twitter.com/justinkistner justinkistner

    A few quick clarifications:

    - It's not that marketers are spending a 1/3 less time creating email campaigns, rather that users are spending 1/3 less time on email.
    - I'm sure that this budget is program dollars, not operational costs.
    - Social media has a high cost for tools and ad space, as well as agency bills. Brands just aren't investing in those social media costs.

    These graphs do leave a lot of unanswered questions. The biggest unanswered questions are around marketing effectiveness, which is what Adam refers to below (spending where ROI is proven). I see perceived effectiveness as the reason for the gap. My take on the gap is that marketers need to be more effective reaching users where they are, particularly since tactics in social mirror search and email.

    Search is all about placement in the results pages. Social offers an even more powerful stream via the news feed. Recommendations from friends are stronger influences on buying decisions that top billing on a search engine results page. Prediction: news feed optimization (NFO) is the new search engine optimization (SEO).

    Also, fans are subscribers, just like in email. Only there is more you can do with fans. Not only can you send them messages, but:

    - Users can interact with each other driving organic interest.
    - You can target ads at only your friends, which is useful for retargeting.
    - You can publish campaign apps on your fan page that offer embedded conversion and transaction opportunities.
    - Users can promote your messages and apps to their friends, which is more likely to happen than forwarding emails.

    Bottom line: the lack of marketing effectiveness in social isn't because the format doesn't offer it, it's because businesses aren't investing in it.

  • http://jackieadkins.com Jackie Adkins

    Thanks for the clarification, Justin. I do definitely agree that fans provide a lot more options in terms of what actions you can inspire them to take than say an email subscriber or an advertising eyeball.

    Something I have been putting a lot of thought into lately is how, although people spend less time in areas like search, much of that time is spent near or around purchasing decisions. For example, you are searching FOR something, oftentimes a product or service, whether it be a gadget, a musician, or anything else, so these ads are targeted both demographically and contextually.

    Advertising in social media (or advertising messages in social media, on a Facebook Page or Twitter account) may be targeted to people effectively, but they also may not be ready to receive that message as much as when in search or email (because they're just wanting to look at what their high school sweetheart is up to nowadays). A bit of a tangent from where we started :), but wondered if maybe (at last until social networks can make their advertising messages more relevant contextually) this could be part of why spending isn't quite as much in this area. Interested to hear your thoughts…

  • http://twitter.com/justinkistner justinkistner

    Honestly, I think it's just that investment is lagging.

  • Nicole Reber

    Agreed! Just because audiences are spending more time, it doesnt mean they are more active or would be more likely to take an action a marketer would like.

  • http://twitter.com/aaronfossum Aaron Fossum

    It's an old adage that marketing dollars should follow the market. I think the growth in Social marketing demonstrates this shift happening, as we figure out how to reach the Social market. My bet is this gap shrinks.

    We need to consider consumer intent in our marketing mix. It affects both approach and results.

    Consider the difference between Search vs. Social. Search is considered king because users are expressing their intent through their search terms. We target ads based on the terms and get a rather direct response. On the other hand, Social users typically aren't using Facebook with any commercial intent. We can't engage Social users the same way or expect the same outcomes.

    Marketing to Social users can't follow the same approach as traditional search advertising. Marketing needs to politely interrupt the user to get their engagement. But Social users can rebel against advertising seen as “over the top” or that doesn't add value. So our approach is different, our marketing has to add value and contribute to the conversation.

    We can't expect the same outcomes, either. We love search and email for their direct response power (and back in the day we loved display ads for that, too). But getting “liked” on Facebook is likely to have more branding power and long-term conversion opportunity. We're engaging in conversation with our customers – interestingly enough this was part of the original promise of the Interweb!

    I'll be interested to see what innovations come about to increase Social commerce, especially on the Facebook platform. We're already seeing experiments with virtual currencies and virtual products, ala SecondLife, FarmVille, etc. I have seen a few social auction efforts, too. Wonder how long it will be until we figure out how to do a true “Facebook Store”. I have to think this is technically possible, but maybe against the Terms of Service?

    Thanks for sharing – this is great research, and an exciting discussion!
    -Aaron

  • Buck40five

    Sure, no question about that. Marketers still do not have a solid, repeatable strategy for communicating to social media users when they are using social media apps. It's still a fairly new medium and few marketers (at least the ones that control the budgets) are willing to invest money in something that they haven't figured out yet. They KNOW email, they KNOW search, but social media is a whole new animal that is much more “personal” than the other marketing mediums. Holla!

  • http://twitter.com/mooncheonghwa Cheong Hwa Moon

    marketers, wake up!

  • http://www.blitzlocal.com dennisyu

    So long as social media is disproportionate in spend, marketers will have incredible ROI on Facebook! Call me greedy, but I'm hoping this bonanza can last another year before the mainstream crowd catches on.

  • http://www.daviddalka.com/ Dalka

    Those Nielsen numbers are kinda misleading, and certainly doe not represent the SEO and content marketing part of the budget equation which is grossly underspent as well when compared to paid search. It would be considerably more accurate to say that spending on paid OUTBOUND media is too high when compared to inbound and 2-way content creation in blog content, on and off page SEO activities that drive search and social media conversations.

    P.S. I like Justinkistner's comments in this thread about news feed optimization. I'd like to read a more detailed article from him on his views on that topic. )

  • http://www.daviddalka.com/ Dalka

    Those Nielsen numbers are kinda misleading, and certainly doe not represent the SEO and content marketing part of the budget equation which is grossly underspent as well when compared to paid search. It would be considerably more accurate to say that spending on paid OUTBOUND media is too high when compared to inbound and 2-way content creation in blog content, on and off page SEO activities that drive search and social media conversations.

    P.S. I like Justinkistner's comments in this thread about news feed optimization. I'd like to read a more detailed article from him on his views on that topic. )

  • http://twitter.com/justinkistner justinkistner

    As a marketer, I'm inclined to agree with you. The tactics are easy right now because we're not competing against the masses. As a maker of marketing software for Facebook, I want to open the flood gates ;)

  • http://twitter.com/justinkistner justinkistner

    I like the way you framed it as the difference in spend between outbound and inbound. Makes me think about a follow up article…

  • http://twitter.com/justinkistner justinkistner

    Aaron, great comments here. Thanks for sharing!

    In regard to commerce on Facebook, they are betting on Facebook credits to power transactions on their network. It's possible now. The only problem is that they charge a 30% transaction fee to vendors. While this margin works for virtual goods, brick and mortar brands do not have this kind of margin. Real goods commerce won't take off on Facebook unless they get their merchant account fees closer to the credit card standards of 1-3%.

  • coryhuff

    There are also several companies that are offering embedded shopping experiences. Etsy & Imagekind both offer a shopping gallery for artists that can be embedded in a user's Facebook Fan page, and the consumer stays on the FB page until they click Buy, when they are then redirected to the Etsy or Imagekind checkout page. From the few artists that I've spoken to about these embedded shops, they're pretty happy, but they haven't achieved widespread adoption yet.

    Oh, and since they're taking them off-site to complete the transaction, they're avoiding Facebook's 30% fee.

  • http://www.linkedin.com/in/edborasky znmeb

    Well – they may be spending *time* on Facebook but they're spending *money* on Amazon. Of course, now that there's a Facebook / Amazon integration, everybody else loses. ;-)

  • http://www.linkedin.com/in/edborasky znmeb

    Well – they may be spending *time* on Facebook but they're spending *money* on Amazon. Of course, now that there's a Facebook / Amazon integration, everybody else loses. ;-)

  • http://www.linkedin.com/in/edborasky znmeb

    “Social media has a high cost for tools and ad space,” … really? Maybe Facebook is expensive, but I don't think the same is true for other platforms. Small-scale local campaigns can be done on Twitter, for example, with the only cost being time and an Internet connection.

    “Search is all about placement in the results pages. Social offers an even more powerful stream via the news feed. Recommendations from friends are stronger influences on buying decisions that top billing on a search engine results page. Prediction: news feed optimization (NFO) is the new search engine optimization (SEO).”

    Yep – I agree 100 percent! I think it's telling, for example, that Twitter is *not* supplying keyword tools to the general population the way Google and Bing do. I think they want to *sell* those tools and host them on their infrastructure.

    “Bottom line: the lack of marketing effectiveness in social isn't because the format doesn't offer it, it's because businesses aren't investing in it.”

    Business-to-business sales is a whole different beast from business-to-consumer sales. If businesses aren't investing in social media marketing, it's because the tool and platform vendors aren't making their case effectively. B2B selling is still being done via email, content marketing, white papers, etc.

    You're in a unique position – you're selling B2C tools to businesses. I like to think that social media will soon erase the distinction between B2B and B2C sales technologies. But I don't think it will ever change the laws of probability. There's always going to be a “long tail”. There's always going to be friction, business cycles, big slow-moving companies and small fast-moving companies, etc. ;-)

  • Greg Stobb

    Just curious as to why there is no separation here for display? The graph clearly illustrates ‘Other’ being a significant time-sink in terms of media time spent…and if there’s a more track-able an accountable online advertising tactic than display, I am open to hearing about it.

    What’s REALLY going to get interesting is when Facebook, etc. allows for third-party ad cookie tracking, showing not only a CTR (clicks are DEAD, people!) but post-impression visits as well, attributable to the last site visited. How about time spent interacting with ads? The list goes on and on…Then, we’ll all see how truly effective the Social Media sites are as advertising platforms, rather than what they really are – great PR channels.