StartUP strategy: Should You Invest in Paid Social reach ?

I am often asked by new brands/companies on how to use ads on social media to boost their brand and/or why their ads are not creating a desired return. Both questions are answered by understanding digital media consumption patterns and how paid digital can create an impact. In this article, I discuss both, and, also, argue that given the nature of the beast, there are more efficient ways of brand building for new products/services, with limited marketing resources, than paid social media posts. 

Digital & Social Media ads are optimized for Action NOT Awareness

For a growing startup in a blank space or nascent market, with limited consumer awareness, paid social reach is ineffective and rather costly in value terms. This is particularly true for products with more involved decision journeys - such as food, travel, financial services, electronics - and less significant to fashion and lifestyle segments in B2C marketing. For B2B solutions, this applies across all industries.

The essential key to internalize about these platforms is that digital ads are not optimized for awareness building and function best for discrete actions, such as a promotion or sale, to an already educated audience.

Now, let's sequence the steps in how a viewer responds to a display ad. When an ad is placed in the news feed or sidebar, it has to go through a multi-step process of registering in the viewer's mind before any action can take place. 

  1. The ad creative has to register in lateral vision in a fleeting moment.
  2. If the creative catches that fractional attention, then the mind will allocate resources to view the ad.
  3. Once the ad is viewed, it may create brand retention or action. Effectiveness of the ad can then be measured through action or non-action.

As a new company, the probability of your ad even registering in the fractional view is extremely low, especially, since your ad is fighting for mind-property space with several others from better known brands. Further, the success of display ads in general is questionable with very low conversion rate and high distrust rates.

  • Average clickthrough rates of display ads is 0.06% across all formats and placements (Think Google).
  • 33% of users find them intolerable(Adobe) and
  • 54% don't click on banner ads because they don't trust them (BannerSnack).

Now, here are a few more reasons, why paid social should not be a significant marketing strategy for you -

An Ad's success goes beyond targeting

In limited-awareness phase, the creative and messaging is ALL THAT COUNTS for the effectiveness of an ad. That is 80% art and 20% science for blank space subjects. While, you can segment and target as scientifically and analytically as the platform allows, an ad is inherently a creative entity. If you want to stand out, your creative has to be differentiated. That is an expensive venture.

Ad monitoring and optimization is a full time job

If you don't have a dedicated marketing TEAM or an outsourcing creative agency this is a suboptimal strategy and a waste of scarce resources.

Costly Reach inefficiency

According to Digital Ad Ratings by Nielson, on average, only 59% of digital impressions reached the intended audience. Which means, assuming you have everything else aligned, your marketing just got 40% more expensive. 

Paid social reach starts seeing strong returns when you cross the 10K mark in owned network size and continues to deliver significant value for networks with less than 1Mn followers.

Owned network is too small to create significant reach

Digital marketing in general really pays back when you have a significant owned network. These are people who like and follow your brand on different platforms. While, you are still in the network acquisition phase, you have not yet sufficiently delighted them to create any virality of sharing. The perceived reach quoted by the platform based on tree approach is more a mirage than reality. A good benchmark to use is a base of 10,000 followers on a platform before you consider paid marketing as a mainstream growth strategy.

Unknown brands cannot convert 

As a new, limited tested brand, your ads fail the screen test itself. So, it is extremely unlikely that they will meet your desired goals and ROI.

Organic versus Paid is a running debate, no matter the size of the company. Neither is free and both create value to a brand when used properly at the right stage of the brand's growth. As a growing brand still creating a market, you can effectively create an integrate digital platform strategy to build your brand and increase conversion. In the next StartUP Strategy series post, we will explore, the best ROI optimized ways to cost effective digital spending.

Sources: eMarketer study of ad consumption behavior