Fans and Followers Aren’t Free: The Rising Cost of Social Media Marketing

Social media exposure goes to the highest bidder

photo by 401(K) 2013 |

There has been exponential growth in the number of businesses and consumers using the Internet and social platforms for marketing and advertising over the last five years, and online social media marketing is becoming an overly competitive, saturated market.

Generic content and basic posts are no longer new, novel, or attention-grabbing. Furthermore, between the sheer amount of content being posted on the web every day (whether original or recycled) and what seems like a new social media network popping up every week, the market is more competitive than ever. This means that you cannot standout with just minimal effort/investment. The competitive landscape is ultimately a microcosm of a very disconcerting trend: social saturation.

In such a flooded market, you need to produce more honest, timely, and creative content if you want to stand out, which requires more creativity and more resources than you may think.

Videos are the new pictures and infographics are the new text — what once garnered endless attention is now thoughtlessly glanced over.

Even a sale or a discount code on its own isn’t exciting enough — you need a Facebook promotional plugin to go along with it that syncs with Instagram, Google products, Amazon, and your back-end order processing system. (But everyone is giving 50% off, anyway. Heck, if you’re not giving it away for free, I could care less about your promotion — and even then I’ll probably assume it’s a scam.)

If you want to get noticed, you need witty, comical, or “shock-value” advertising. To succeed in the fastest-growing marketing/advertising channel (the Internet), you need to devote a significant amount of time and resources to grow, or even just maintain, your brand online.

What does this mean for brands, companies and marketing agencies?

more investment + decreased margins + high barriers to entry = the “money-backed” big fish will win

Let’s use a traditional real estate example to help explain how this happened.

Uncharted Territory

Consider a newly developed town close to the beach. The area is underdeveloped without much commercial or residential activity, but its vicinity to the beach makes it appealing. Businesses know that this prime location will attract consumers, so they see this town as a good place to invest in. Real estate prices aren’t overly expensive to start as competition was initially low, so it’s relatively easy for businesses to enter this market successfully (less supply in the market means more demand for the businesses who are trying to attract customers).

Everyone Wants In

As more and more people flock to this beach town, it becomes more attractive to additional residents and, ultimately, more businesses. And with supply from businesses going up, demand from individual consumers starts to go down. Commercial real estate and rent prices then start to increase as land and building owners gain more leverage.

With less demand for their products, store owners are forced to start advertising in newspapers, offering weekend specials, and so on — free word of mouth just isn’t sufficient anymore.

Only the Strong Survive

Ultimately, as the economy of this beach town grows and grows, it becomes more and more expensive for local businesses to operate. Commercial rent prices are now through the roof — and without an established, loyal customer base, the level of operational and marketing costs it would take to generate a profit were unrealistic for anyone without serious investment behind them.

Those who have enough money to enter this competitive market generally aren’t the mom and pop stores, rather they are larger companies who have the money to invest. Joe’s Grocery on the corner gets replaced by Costco, Small Town Hardware gets bought out by Home Depot, and The Corner Street Diner loses its customers to McDonald’s.
Now, let’s translate this to social media.

A New Frontier

When social media was just breaking out as a mainstream means for advertising, it was an absolute free-for-all — literally. We in the digital marketing world consider times like those the Wild West. Like at the beach town, there was little competition and little oversight, giving us marketers the opportunity to set our own rules to grow our clients’ businesses.

Facebook posting was free, and you had the ability to reach users who liked your products relatively easily. Basic tweets were actually read by consumers, content was readily shared and liked by those on the web, SEO algorithms were much less sophisticated than they are today, and, most importantly, there was very little COMPETITION.

Market Saturation

In this phase, the property and building owners are Facebook, and the increased marketing spend required of those original businesses is identical to the pursuit of additional marketing/advertising channels online. With Facebook having all the leverage (and going IPO), they changed their business model to be more in line with generating revenue rather than freely promoting user-added content.

With more businesses flocking to social media, the demand from consumers has become significantly diluted and it has become much more expensive to pursue the creative marketing efforts that ultimately drive sales.

You Have to Spend Money to Make Money

This example is no different than the growing Social Media marketing landscape. Those businesses looking to operate online stores or grow their brands through online marketing and social media have to be prepared to pay the piper if they expect to have any chance to succeed.
Are you saying that if I have a small marketing budget, I can’t benefit from social media?
As a growing digital marketing agency in this evolving Internet marketing landscape, my company has faced one of its greatest challenges in educating our current and prospective clients on this saturated market and explaining the difficulty in succeeding without putting forth the proper investment. ROI needs to be factored into every business decision, and our education to our clients explains that it costs more to see a return today than it did five years (due the greater cost of breaking into a competitive market).

Does this mean that if you don’t have tens of thousands of dollars to invest up front that it’s an impossibility to grow a business online? Of course not — there are always exceptions to the rule. Two major differentiators that you should always take into account are the products/brands and the competitiveness of the industry. Quality products or brands that are unique, trending, solve a problem, or have high margins are much easier to break into a market with less spend. At the same time, if your specific product or business is in a less competitive industry (say, selling fixie bikes versus t-shirts), the cost is less to get exposure.
The bottom line is that the times are changing, and while access to social media is free, meaningful marketing exposure through each of the various networks most certainly is not.

Marc Vitulli is a partner at Highly Relevant with an active interest in entrepreneurship and a love of fixie bikes.

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