Fifty-eight percent of retailers are increasing their spending on social media ads this year, just behind the rate seen for paid search spending. Those spending trends highlight a closing value gap between social media advertising and paid search, according to the National Retail Federation. According to the organization’s “State of Retailing Online” report, Facebook has become a critical new source of customer acquisition. More than one quarter of retailers surveyed in the study cite Facebook as a key means of finding new customers, and half of all retailers are increasing their paid spend on the social network.
At present, Facebook is far ahead of other platforms—only 29 percent of retailers plan to increase spending on YouTube. Twenty-seven percent have similar plans for Pinterest, and just 22 percent for Twitter.
The report’s findings don’t paint search and email marketing in a negative light. Instead of pulling resources away from these tried-and-true channels, social media has risen as a paid channel through which brands are more eager to diversify. Companies are making more aggressive moves to reach new markets and connect with new customers, and increased spend on social media reflects those efforts.
“With so much marketing ‘noise’ and competition these days, retailers are testing and investing in a variety of acquisition media to appeal to their customers and to make the most effective use of their tight marketing budgets,” said NRF SVP Vicki Cantrell, in a press release.
The challenge of managing tight budgets could be a bad omen for paid search as a customer acquisition channel. According to a new report from Merkle, the cost of cost-per-click on paid search increased 40 percent year-over-year in Q2 of 2015. The minimum thresholds to buy paid search real estate, meanwhile, were three times higher.
Paid search is known to be effective at driving traffic, building awareness, and attracting new customers, but the costs could be an impediment—especially when social media is so cost-effective by comparison. If those costs continue to climb, it could create more urgency for brands to use social media as an acquisition channel—steering some of their budget away from paid search.
At the moment, though, that threat doesn’t appear imminent. Paid search spending continues to climb despite its rising costs. Social’s race to leapfrog paid search may be a matter of data access and utility—while social networks are more cost-effective, they don’t offer the same caliber of analytics and data input that Google can provide through its own content analytics tools.
Social media advertising has demonstrated itself as a critical channel for customer acquisition, given the rapid rates at which brands are upping their investment. But paid search is keeping pace for now, creating distance between other acquisition channels and turning the present paid ad landscape into a two-horse race.
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