Social Media Spend Continues to Soar

Results from The CMO Survey, February 2012 indicate that marketers continue to increase spend on social media. In the next 5 years, marketers expect to spend 19.5% of their budgets on social media, almost three times more than the current level! Within a year, marketers expect to spend 10.8% of their budgets on social media. These figures deserve a deeper investigation into what has been happening over time. First, social media spend, as a percent of marketing budgets has continued to increase over the last 2.5 years I have been measuring these levels in The CMO Survey. From the initial level of 3.5% in August 2009, we have witnessed an 111% increase to the current levels at 7.4% (see Figure 1).

Figure 1. Social Media Spend as a Percent of Marketing Budget

Second, one year out growth expectations have not been met. If so, we would see that projected spending levels for the next 12 months from the prior year equal the following year actual spending. This nearly occurred between August 2009 and August 2010 when the one year projection was 6.1% and actual spending one year later was 5.9% (see Figure 1). However, in the periods that followed, the gap between projected and actual widened (August 2010 projected 1 year 9.9% vs. 7.1% actual one year later and August 2011 projected 1 year level 10.1% vs. 7.4% actual one year later). Marketers think that social media is going to grow more than it is appears to be actually growing. However, it is still growing more than any other marketing investment (see the full set of results at cmosurvey.org/results/).

Third, not all industries are growing their social media budgets at the same rate. Table 1 shows current, 1 year, and 5 year projections from the last two surveys for four key sectors. We can see that it is B2B-Product companies that have grown the most in the current period (47%) and expect to grow social media spend after one year (34%) and five years (38%) more than other sectors. B2C-Product companies continue to spend the highest levels, but B2B-Product companies have the steepest growth curve. I preface the social media questions with the following definition, noting that “Social media is online content created by companies, customers, and others on the web. It can take a variety of forms, such as blogging, product reviews, product design, social networking, forums, and video/photo sharing.” Given the role that social media can play in acquiring and retaining customers, I think it is perfectly logical that B2B-Product companies are amping up their investments in this area. The advantage B2B companies have is that they often know who all their potential customers are. This means engaging with them using social media tools is easy and content can be customized. I would guess that B2B-Service companies have the same opportunities. Why aren’t these companies increasing their spending at the same rate? In fact, this sector shows consistent decreases in the current year and one year out. Perhaps it is because B2B-Service companies are already spending 100% more than B2B-Products (8.6% vs. 4.2%)? I would love to have a few companies weigh in on this point.

Table 1. Social Media Spending Across Sectors

Human resources dedicated to social media also have increased dramatically in the past year. Results from The CMO Survey indicate that the number of people employed in-house to work on social media has increased 70% from an average of 5.3 employees to 9 employees (see Figure 2). Likewise, the number of employees working for outside vendors involved in the company’s social media activities increase from an average of 1.8 people to 4 people, reflecting a 122% increase. So firms are hiring or training people to do social media inside as well as hiring agencies to do some of this work for them. No doubt we will have increased pressure to deliver these skills in universities and community colleges. We are not there yet but hope that we can help marry the technical skills with the strategic and marketing skills essential to making social media spending pay off. Also we need people that can manage social media groups and build the operating procedures that move this human capital in effective directions. I think we will see more programs that offer this cross-cutting skill set.

Figure 2. Number of Employees In-House and Outsourced Engaged in Social Media for Companies