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social media researchAre you using Facebook to acquire customers for your small business?

Do you struggle to measure the return on your social media marketing investment?

Despite a lack of concrete proof of sales, small businesses are devoting time and dollars to Facebook marketing.

In this article you’ll discover findings from recent studies focused on Facebook marketing.

facebook roi research

Discover new research on how small businesses struggle with Facebook ROI.

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#1: Most Small Businesses Don’t See a Return From Their Social Media Efforts

In April 2015, small business directory Manta surveyed 540 small business owners for their insights on social media return on investment (ROI). Fifty-nine percent report that they did not see ROI from their social media activities. Because the vast majority of small businesses puts most, if not the entire, social media budget into Facebook, this article focuses on that channel.

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The majority of small business owners don’t see revenues resulting from their social media efforts.

Of the remaining 41% reporting that they did see returns, 17% received less than $100, and 57% received less than $1,000 for their energy and budget. One-third of that 41% (63 individuals) report outearning their social media marketing spend by more than $2,000.

Social Media Examiner’s 2015 Social Media Marketing Industry Report findings echo those in the Manta study. When the team asked 3,720 marketers whether their Facebook marketing is effective (which we can interpret as driving return to some extent), only 45% reported that it is. (Read here about how 60% of the respondents for the report were small business owners or executives. They either worked in companies with 2 to 10 employees or self-identified as solopreneurs.)

The report also reveals that just 33% of the self-employed described Facebook marketing efforts as effective. Larger businesses have a slightly higher regard for their Facebook marketing efforts, with 50% pleased with their Facebook returns. B2C marketers also have a more positive take than B2B, with 51% of B2C marketers finding Facebook effective, compared to just 36% of B2B respondents.

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Overall, 45% of marketers agree or strongly agree that their Facebook efforts are working.

Key Takeaways: The significant 35% of respondents who are uncertain about whether their Facebook presence helps their business is telling. With barely enough time to keep up their Facebook page, small businesses typically lack the time and resources to gather the data needed to determine whether their Facebook efforts work.

Gathering data requires that either the business owner or staff member learns or understands Google Analytics and Facebook Insights. Both of these tools require time and effort.

Further, as Facebook’s former Global Head of SMB Marketing Chris Luo explains in his March 2015 Fast Company article, effective Facebook advertising is moving away from the simple updates and boosting that small businesses could master easily:

“Facebook has also introduced new, more sophisticated, advertising tools to directly target any user on Facebook in their newsfeed, but for the most part, these tools are used by savvy direct marketers at mid-sized or larger companies and not small businesses.”

#2: Small Businesses Are Reluctant to Invest Money in Social Media

Small business owners are indicating their suspicion of social media marketing with their dollars. The Manta study mentioned above found that 47% of respondents invest less than $100 per month, and 40% spend between $100 and $1,000 monthly.

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Most small businesses spend less than $100 on social media marketing each month.

Low spending numbers like these are surprising, given the hype Facebook marketing receives in the media. In a seeming contradiction, a recent poll of 547 small- and medium-sized business owners conducted by BIA/Kelsey and reported in The Wall Street Journal claims that social media marketing gets the majority of small businesses’ ad budgets at 21.4% of total dollars. Further investigation, however, reveals that small businesses don’t spend very much on marketing at all.

A January 2015 BrightLocal survey of 736 small businesses revealed that 70% spend $500 or less per month on marketing. Fifty percent spend less than $300 per month. Combining this finding with the BIA/Kelsey report’s 21.4% of total marketing spend going to social lands small business social media marketing spend back at $100 per month.

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BrightLocal surveyed 736 small businesses for its study. Image: Placeit.

Key Takeaway: Spending $100 monthly or $25 per week on Facebook ads and boosting doesn’t get small businesses very far. Some marketing experts speculate that small businesses are still testing Facebook and are therefore not willing to commit more money to the channel.

#3: Most Small Businesses Struggle With Measuring Facebook ROI

While the data above indicates that the majority of businesses don’t see a return on investment from Facebook, digging deeper reveals that most just don’t know whether they’re getting new leads and sales through the channel.

Social Media Examiner’s 2015 Social Media Marketing Industry Report shares that, of the 3,720 respondents (the majority of which are small businesses), only 42% stated they are able to measure the ROI of their social activities. Again, given that Facebook dominates small business social media marketing by a long shot, we assume that about this same percentage cannot measure the ROI of their Facebook efforts and expenditure.

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The majority of businesses aren’t confident about their ability to measure their Facebook ROI.

Despite the fact that the majority cannot measure social media ROI, this number has been dropping over the years. In 2013, just 26% felt confident about calculating Facebook return. By 2014, the number had risen to 37%. Perhaps the 2016 Social Media Marketing Industry Report will reflect as robust a leap, with more than half of respondents claiming they’re measuring ROI just fine!

While there haven’t been many studies on small businesses measuring social media ROI, in general, marketers from companies of all sizes struggle with how to know whether a Facebook post contributed to a sale or an email conversion.

According to a Duke University study reported in The Wall Street Journal, only 15% of the 350 top marketers in the study could show the impact of social media on their businesses using quantitative approaches, and 40% could demonstrate it qualitatively. Nearly half of marketers said they haven’t been able to demonstrate the impact of social media spending on their business at all.

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The Wall Street Journal reported on a Duke University study of marketers. Image: Placeit.

BrightLocal’s survey mentioned above also indicates trouble for small businesses in the digital marketing sphere. In 2013, when asked about their confidence in digital marketing (of which Facebook marketing is a part), 40% of small business respondents claimed, “I can understand and do it all myself.”

By 2014, the number of these confident responses had slipped 11 points to 29%. It’s possible that business owners and marketers are just now realizing the complexities of digital marketing and becoming suspicious of the “3 Easy Ways to Get Thousands of Facebook Likes”–style hype around social media.

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BrightLocal found small businesses’ self-confidence in digital marketing skills dropped 11 points from 2013 to 2014.

Key Takeaway: Marketers at large corporations are struggling with how to measure social marketing ROI as well. While software companies are hard at work on social media attribution tools, nothing bug-free exists yet to clearly connect a like and a sale. Still, if small businesses can keep a Facebook presence current at a low cost, testing by “dipping a toe in the water” will be the preferred mode until that fails to work due to lack of commitment.

#4: Small Businesses Are Devoting More Time to Facebook

Even without solid numbers proving Facebook posts and ads lead to sales, most small businesses will be increasing employee time devoted to Facebook for marketing.

In a survey of 350 small business owners conducted by Internet marketing firm Clutch, 38% reported they increased employee time on social media (Facebook) in 2014, and 38% reported they kept employee time the same. It’s interesting to note that the Manta study came up with similar numbers in similar proportions also.

manta research article image

Thirty-four percent of small businesses increased time devoted to social media in 2014.

The Manta study, too, shows that more than a third of respondents increased employee time spent on social marketing from 2013 to 2014. Going forward, the 2015 Social Media Marketing Industry Report showed that 53% of marketers planned to increase their use of Facebook ads in 2015. CMO Survey expects social media marketing budgets to more than double from 9.1% of the overall marketing budget now to 21% in 2019. Is this increase justified?

Conclusion

Small businesses must work to simply get a sense of whether their posts and ads are bringing in customers and sales. If they don’t use Facebook Insights or Google Analytics, owners and marketers will never have more than a vague idea of whether Facebook works.

To get started measuring Facebook ROI, check out these two articles:

How to Measure Social ROI on Facebook Ads
How to Measure Social Media ROI

What do you think? Is your small business increasing time and budget for Facebook marketing despite a lack of concrete ROI? Have you discovered a way to measure Facebook ROI? Leave your comments and questions below.

BrightLocal and WSJ screenshot images created with Placeit.
research on facebook roi

Research on how small businesses struggle with Facebook ROI.

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  • Charoenkit Khaolak

    Has anyone had success with a small budget campaign, and where to start and how to set it up would be nice to learn about, it would be nice to read some comments from anyone with great experiences on FB ads.

  • Iulian Chesaru

    If you know your target market very good (interests, demographics), you can target Facebook Ads more specific leading to better results with a small budget. I can help you with additional info if you want so.

  • Charoenkit Khaolak

    Does FB “see” people’s interests as what people themselves say what their interests are, or would you say that FB estimates what people’s interests are if they haven’t mentioned any interests in their profiles?
    I would definitely be interested in additional info about FB ads.

  • Suzanne Delzio

    I do think proper Facebook ad placement and timing has become the domain of the experienced and sophisticated ad company, but these companies tend to charge too high for the budget of most small businesses. Former Facebook exec Chris Luo explains it above.

  • You have to wonder what they are doing with the ad platform to not see any benefit. Running a campaign on Facebook is only half the battle, your website, marketing funnel and sales funnel all needs to be set up properly. Expecting someone to buy after clicking an ad is also a non-starter unless it solves a very immediate, pressing pain point.

  • Nasreen Hosein

    Does anyone know the revenue range for the small businesses surveyed in the Manta study? Or is there an understood definition of small business that I am missing?

  • one of the reasons small business cannot measure ROI on Facebook is because it’s conversion pixel has an accuracy rate of about 5%. Earlier this year we use adespresso to create 1056 ads for A/B testing – we picked six of the best performing ads and spent $6000 over 60 days garnering $4000 in revenue from Facebook – this is where we also documented pixel inaccuracies because we triangulate all of our metrics our e-commerce site is 12 years old)

    Yes we used custom audiences as well as multiple “interests” matrices

    Because of a total disconnect between Facebook customer service (there is none) and we the advertiser we have ceased using Facebook for any advertising.

    After shifting our social media strategy Reddit (were new there) with 56 followers and Pinterest with a little more than 5000 followers are both outperforming Facebook (for e-commerce revenue) where we have 300,000 followers. This in spite of the 2000 to 5000 Facebook referral visitors we get weekly driven by our blogging – who buy nothing

    Statistically our site converts mobile,organic, direct & referral traffic at an overall average of 3% to 4% yet our Facebook traffic converts at .01-.02% a metric – that has been consistent for the past four years

    All the social media wonks say things like “social media people are sitting at the top of the funnel” or “people are not on social media to buy” so I asked rhetorically – Amazon prime tells me that I placed 223 orders in the past six months (literally) – why am I a different person the minute I jump onto my Facebook timeline?

    Caveat & second question – if you are an Amazon prime member you are a serious Internet shopper – are 40 million Amazon prime members not on Facebook?

    so no one who shops on the internet is on Facebook? I just don’t understand

  • Jennifer Porter

    I do not agree with this at all. Facebook analytics are very straight forward in terms of audience reach, engagement ect. In all the businesses I rep for I can quantify a 3 time return on our investment. If you cannot quantify your ROI, perhaps you don’t understand how. Each of them are small local businesses that have had very little success with conventional advertising. I have had no success with Twitter.

  • @Peter – please see my post below

  • Jennifer Porter

    I have also had a lot of success with facebook ads for small business.

  • Jennifer Porter

    I did not see one, however you can spend as little as 5 dollars a day in a small market and achieve success.

  • Mike Alstatt

    Buying likes has proven to be what I would basically call a composite scam on FB. Like farmers scoop up the paid likes to just cloak their identity. I researched my own FB campaign, and shut it down when I discovered each and every liker had a billion likes, with no interest structure to any one of them.

  • Iulian Chesaru

    Facebook also considers what pages/posts people like and interact with and determines their interests. You don’t need to complete your interests on your profile. I own a social media consulting & outsourcing company, feel free to ask more questions. I hope it’s not against the rules to post my e-mail here so we don’t spam the comment section. Use this: iulian.chesaru@bmengineers.eu

  • Gaining followers to social media platforms should be one of the important things to consider when you want to promote your product or business on social networking sites. Slapping ads on them wont always work.

  • soapboxcom

    It will take at least another three years for businesses to discover this Emperor has no clothes and never did, I’m afraid.

    In the meantime, an entire generation of really talented people are losing jobs on account of not “getting enough likes” and the generation behind that one is learning absolutely ZILCH about effective marketing and advertising, because they’re kneeling blindly at the hollow altar of social media.

  • For Facebook Ads, is Conversion Lift available to small businesses, or only large businesses with an account manager? I think that connecting offline sales to Facebook Ads would be a great help in showing ROI for bricks-and-mortar stores.

  • Suzanne Delzio

    It may be more that they’re not measuring benefit.

  • Suzanne Delzio

    Facebook seems to work best when companies invoke a fun party atmosphere. If you run a brewery, a vintage clothes store or if you’re a comedian trying to get attention, people will convert on Facebook because they’re there for the fun. While we all know that some of the dullest businesses can still put up funny content on Facebook (Cholrox, All State Insurance, Charmin), many don’t. The most fun content wins on Facebook.

  • Suzanne Delzio

    Unfortunately, despite Facebook’s efforts, fake likes still mislead advertisers.

  • Suzanne Delzio

    That’s direct, Soapbox. The difficulty is that some small businesses, while not the majority, do get acceptable returns from Facebook. The unknown is whether those that are not use Facebook in the best way for their brand. Another unknown is Facebook ROI. There may be more than small business can effectively measure at this time.

  • Suzanne Delzio

    Good ideas! Anyone try this yet?

  • Suzanne Delzio

    Jennifer: can you reach out to me at suzanne@informedwebcontent.com? I can’t find you online. Maybe different name?

  • Suzanne Delzio

    Keep in mind, too, that data from the 3720 marketers and business owners in the 2015 Social Media Marketing Report (http://new-theme-socialmediaexaminer.pantheon.io/SocialMediaMarketingIndustryReport2015.pdf p.18) showed that the longer businesses use social media (of which FB is the largest part by far), the more likely they are to report that it boosts sales. Specifically, just 26% of those using social media for one year or less report that it helps sales. A whopping 70% of survey respondents using social media marketing for 5 years or longer claim it helps sales. At the midpoint, 50% those promoting on social channels for 2 years say it boosts sales. You mentioned you started a dedicated campaign just a few months ago. Do you think you’ll give it another year? Fun photos of parrots would be welcome on FB.

  • Karen Ellis

    Through ad spend.. I have not gotten ROI.. keep trying, but no conversions. I have highly specified target – and yet.. no conversions , poor ineffective ROI.

  • Kate Gleim

    I have a small, bricks and mortar, home decor store – have worked very hard at engaging our customers with facebook for three years. At first it was suggested not use a lot of posts to promote product, but rather provide information, how-tos, fun info about the business etc. Now it seems that it is only about ads and promoting product, particularly because to get your posts seen, they must be boosted or promoted. I went from posting three times a week, to once, because our organic reach went from 300-700 + down to 50-150, with rare exception. Are we no longer to share general information and focus only on selling with our posts? I am not sure how ROI is determined on posts that are not selling anything? I would appreciate any thoughts on what the content of our posts should be – selling and/or engaging our clientele.

  • LA on a Leash

    I have found the same issue as Windy City noted – serious pixel inaccuracy that overestimates traffic and clicks and does not come close to matching the website traffic reported by Google Analytics. Additionally, I’ve recently found the audiences to be very inaccurate. I targeted motorcycle enthusiasts within 20 miles of a city for an event and got mainly people from around the globe, and no they were not friends of current page fans – current fans were excluded. I had two other similar instances of obviously inaccurate delivery, and of course, there’s no recourse with no FB customer service. In the past, I’ve had good luck with little $5-$20 post boosts, but not anymore. FB isn’t getting the audiences right, so even if you target carefully, who knows who you’ll reach?

  • Suzanne Delzio

    I have noticed that even paid reach is dropping for the same spend. Anyone else?

  • Ross Marchant

    Some great points here – and thank you for mentioning the BrightLocal survey. I think a lot of small businesses are caught up in the fact that a) they don’t often have the budget to hire a specialist (as mentioned above), and b) they don’t have the necessary expertise to do it in-house – or even the time to learn / experiment with different campaigns / mediums.

  • Gavin Radzick

    Great point Peter. In fact, it may be only 20% of the battle!

  • I agree with your assessment about Facebook’s accuracy relative to targeting. If Facebook can not find enough people in the geography or demographic you specify, they will expand that until they do spend all the money you are offering.

  • SuzanneDelzio

    As Facebook gets more complex, perhaps small business dollars best spent on email newsletter which has much higher conversion rates anyway?

  • This is an interesting and insightful study. I thought with the hype of social media marketing especially Facebook marketing that every small business is making their millions off Facebook, that is is only I who is very skeptical about all these social media buzz on social media marketing with particular reference to Facebook ads.

  • I have too – regardless your budget is big or small, it’s always important to set tangible goals for businesses. People often think about building an audience, and translating that audience into leads and then sales. But often that method doesn’t work with smaller businesses. It’s important to understand the marketing strategy of the small business, what assets they have, and determine if it’s a right time to invest in Facebook. For example, if they have a working website, but without a good converting page, perhaps the investment can be made in improving and creating that page rather than buying ads right away.

  • Yup, there’s so much more work involved. People usually think ads will help them but they won’t do much if you don’t already have a good strategy.

  • marie.cosgrove
  • For a small business, Facebook is quite expensive. Let’s say for a single employee business that earns $1500 per month (minimum wages?) and he spends 1 hour per day to update, add new news and maintenance the facebook page, it means 24 hours per month, its $180 wasted in Facebook.
    BTW, big businesses have a big titanic task to prove if a campaign is (or not) effective. However,small companies are more easy to know if a campaign was successful or not. For example, for my biz, i spend $x money in a ads in a local newspaper, i know that i earn around $y every month. My sales during the next months doesn’t changed at all.