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It isn’t true that 82% of TV ads generate negative ROI. And what would this mean for social media ROI anyway?

A post by Joanna Stratmann, head of marketing at social media agency FreshNetworks, caught my attention this morning. The post is titled ‘If 82% of TV ads generate negative ROI, why are we obsessed with social media ROI?’.

Hang on, I thought. If TV advertising doesn’t work – and this is somehow an established ‘fact’ – then are most marketing directors idiots?!

I wanted to find out more about this ‘fact’, so I delved a little deeper.

Joanna attributes the 82% figure to The Social Media Management Handbook: Everything You Need to Know to Get Social Media Working in Your Business by a team from Accenture.

But it seems the original source is a 2004 study by Deutsche Bank titled Commercial Noise: Why TV advertising doesn’t work for mature brands.

There are a few important things to note about this research:

  1. 18% of campaigns showed positive ROI in the short term, but the figure rose to 45% in the ‘long term’. Deustche Bank defined ‘long term’ as one year.
  2. The research was limited to mature brands. It did not include growing brands or new products. So, for example, campaigns for the launch of the iPad or a new price comparison website starring a meerkat would not be covered.
  3. The research was limited to consumer packaged goods.

But the most important fact that Deutsche Bank didn’t highlight, as explained in this piece by Andy Farr, was this:

  • The average ROI across the 68 cases Deutsche Bank studied was +30%!

Yes, that’s right, overall in this study, TV ads produced a 30% ROI even for mature brands. In other words, although some TV campaigns produced a negative ROI – when the campaigns worked, they really worked.

Two wrongs don’t make a right

But there was something else that troubled me about Joanna’s blog post. Even if TV advertising is sometimes ineffective, why should that be an excuse for not being ‘obsessed with social media ROI’? Surely it is every marketing manager’s role to work out which marketing approaches will produce ROI, whether that be TV, price promotions, social media, email, web banners, direct mail, print advertising, or whatever.

Joanna puts her theory, saying: “I think we’re obsessed with social media ROI because social media, unlike TV advertising, is so much more than just another channel.”

Well, I would agree that social media success is far more about the long term (certainly more than one year!), and therefore short-term ROI should certainly not be the only measure.

But I don’t agree that this is why we are ‘obsessed’ with trying to prove it works. The reason there is so much discussion about social media ROI is that CEOs and marketing managers need to know whether to spend their budgets on social media or something else. Yes, measure the long term effects, indicators and trends, but if you can’t eventually make a good case for social media ROI, then you can’t ultimately make a good case for investing in social media.

So I say that social media agencies, consultants and experts should stay obsessed with measuring results. We believe (yes, I’m a believer) that good, strategic use of social media does contribute to business success. But I certainly wouldn’t want to try to persuade a CEO to invest in social media by using the argument that TV advertising doesn’t work either.

Would love to hear your thoughts on this…

 

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  1. Olivier Blanchard 03/09/2011 at 6:30 pm #

    You have no idea have refreshing it is to read a blog post whose author actually went “wait a minute… that doesn’t sound right; let me dig into this” instead of racing to regurgitate what some other blogger posted earlier that day. You just made my day.

    1. “It is every marketing manager’s role to work out which marketing approaches will produce ROI, whether that be TV, price promotions, social media, email, web banners, direct mail, print advertising, or whatever.” Bingo. The whole notion that TV advertising doesn’t work is BS. Of course it works. It just doesn’t work every time and for everybody. The ad could suck. The ad could be entertaining but fail to trigger a purchasing response in the viewers. It could be on at a bad time. A competitor’s product might still be so much better or cheaper that the best ad in the world would do no good. ROI is channel-agnostic, meaning that its success or failure depends on far more than simply the channels used to convey a message or carry a campaign. ROI is based on the full spectrum of an activity: idea, development, execution.

    2. 18% ROI for the advertisers. 100% ROI for TV networks. Let’s not forget that layer in our ROI taco salad. Eyeballs and context matter. The fear of NOT advertising on TV when your competitors do is a pretty powerful motivator. TV knows how to sell advertising time to companies looking for customers. They know how to go after those budgets. And you know what? 18% odds of success will usually beat most Wall Street investments. TV isn’t going to play dead and stop pulling in advertising money just because of Facebook and Twitter.

    3. “But I don’t agree that this is why we are ‘obsessed’ with trying to prove it works. The reason there is so much discussion about social media ROI is that CEOs and marketing managers need to know whether to spend their budgets on social media or something else. Yes, measure the long term effects, indicators and trends, but if you can’t eventually make a good case for social media ROI, then you can’t ultimately make a good case for investing in social media.” That’s right.

    Excellent article.

  2. asit gupta 13/10/2011 at 11:10 am #

    Great to see the digging instead of the usual re-tweet of a sensational headline. That is how we generate noise but not signal. It is good that ROI is being debated. Couple of points:
    1. It is easy to prove if marketers and agencies just set up proper tests ( pre vs post in test and control areas) where variables are clearly isolatable. Yes it can be done. I did it when I was with P&G and have done it again running my own WOM marketing agency-Advocacy. Bzzagent and Tremor – 2 leading WOM marketing companies have also conclusively proven ROI.
    2. People debate ROI on “sexy” media like TV and now social media ( which is more than just digital social media by the way), not realizing that the ROI on WOM marketing using Influencers has been proven many times over. However this channel is just not sexy enough for brand managers and neither the agency. Nobody went to Cannes for an influencer WOM marketing campaign. Video content is what still excites marketers and agencies. We forget that consumers have enough video content in their life from other sources. They are not waiting for more

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