Is social media advertising really worth the time and money?

A growing army of Australian business owners are dipping their collective toe in the waters of Facebook and LinkedIn advertising. But do the returns make it worthwhile?

There’s no denying that marketing your business via social media is one of the most affordable, targeted and measureable tools around.

So it’s not surprising that droves of SMEs are turning to sites like Facebook and LinkedIn to spruik their business, tapping out a quick post or banner ad before sitting back to see what sort of response they get from the masses.

But there’s far more to come, with an explosion of businesses predicted to turn to these sites in the coming year or two. There’s plenty of room for growth, according to the 2012 Sensis e-Business report, which found that just 27% of SMEs connected to the internet have used social media for their business.

The two main reasons that businesses turn to social media is to build relationships with customers (55%) and to market their products and services (50%), according to a recent nationwide American Express survey.

It’s also cheap, with SMEs forking out an average of just $550 to develop a social media presence. You can either engage consumers via your Facebook page by posting regular comments, or take an ad on the site, which is increasingly popular.

However, some business owners do have concerns about using social media for business, with some worried about privacy (36%) and the resources and time social media requires (34%).

But it’s a great way to build relationships with customers and generate new leads, according to Amelia Zaina, director of marketing and customer engagement, small business services at American Express.

“It’s understandable that small business owners have reservations about social media, because it opens a business up to the community. However, with careful planning and by identifying the most effective use of social media for their business, it can deliver great returns,” Zaina says.

Netregistry, which helps businesses get online, says businesses operating in the fashion and baby products sector have seen a better response compared to B2B providers. Return on investment should not only be measured on revenue, but also in brand recognition and popularity, general manager, Sam Shetty says.

“Social media has a bigger influence in decision-making and is now considered as the new (and probably more effective) word of mouth channel,” Shetty says.

The success stories

Facebook advertising is a key marketing tool for Melbourne mobile bar business Liquid Infusion.

Managing director Ben Neumann has been using the social media site for years, tweaking and increasing his budget the past two years.

“Facebook is a highly targeted branding exercise – like a billboard, except you only have to pay for it to be visible to your target market, making it a cost effective form of advertising,” Neumann says.

Added benefits from Facebook advertising include building your fan page, which captures interested fans for future sales potential, he says.

“For example, we have amassed almost 14,000 fans, and our last post attracted 850 likes, 45 comments and 115 shares – on a viral standpoint, this accounted for about 70,000 people interacting with our brand.”

Facebook has also been a roaring success for Gold Coast-based conference, events and coaching operation, Strategic Anarchy, which began using the site in 2009 and instantly saw results to the bottom line.

Business founder Leela Cosgrove says she has spent around $50,000 on Facebook ads to date this year, which has yielded her business around $250,000 in return.

She committed $5,000 to Facebook ads in a recent week, which she says yielded $20,000 in sales, although given current enquiry levels from the ads, she expects the ads to net her a further $10,000 or so.

Cosgrove updates a spreadsheet to track Facebook traffic, assessing the cost per click and cost per lead to keep track.

“Facebook ads are so different to Google Ads, because people aren’t on Facebook searching for solutions. They’re there to be distracted and entertained,” Cosgrove says.

“It’s been an unreal tool for our business and we will continue to use it.”