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Paid Search vs. Social Media: Which One Wins?

By Paul Cook, paul.cook@tagman.com

If you’re like many online retailers, you’re probably throwing a lot of marketing dollars at paid search in hopes that as a ‘last click’ driver, your paid search spend will generate higher traffic and conversion numbers. But as it turns out, if you look at all the drivers along a customer’s journey to purchase, there are other activities that might have more influence – and thus, would be worth more of your time and money. One of them is social media.

Before I discuss the merits of social media, let me just say that paid search isn’t bad, and I wouldn’t recommend doing away with it altogether. But it’s probably not having the impact you expect, particularly when measured alongside areas like natural search and social media. And unless you’re looking at your customers’ full path to conversion, you’re probably giving more credit to paid search than is due.

Here’s why: Paid search results are usually the first or final click in conversions – so naturally, marketers believe that paid search is responsible for most online sales. However, by using this ‘last click’ method of attribution, you get an inaccurate read on how other campaigns impact your customer’s choice to click “buy.”

A better approach to measuring the performance of your various campaigns (and the true role paid search plays) is to measure both “assisted conversions” – the number of sales in which a particular campaign appeared somewhere in the path to conversion; and “attributed conversions” – which is reached by taking the assisted conversions for each campaign and dividing them by the total number of events in that path.

Assisted conversions reveal how often a particular channel plays a part in delivering a sale, while attributed conversions give equal credit for any sale to all the channels or campaigns that appeared in the customer journey. With this model, we get a more accurate view of each channel’s influence.

Paid Search vs. Social Media
Brand marketers often struggle to quantify the real value their social media efforts have on the bottom line. Everyone knows that a “like” on Facebook or “+1” on Google Plus drives more visibility and can be more credible than a banner ad or email marketing message. (Likewise, a negative comment on a social network can spread quickly and be very damaging.) Social media also presents great opportunities to talk with your customers. But just how much business is created by your own social media activities and recommendations by your followers is hard to measure. Or is it?

To show how the measurement of assisted and attributed conversions is done, let’s look at data from a large online retailer. 

To measure the impact of social media, we tracked redirect URLs from links in platforms like Twitter and Facebook. Clicks on links in these places were tracked alongside clicks and views from all ‘traditional’ channels, including paid search. By calculating assisted and attributed conversions over a six-week period, we found that social media was under-credited for its direct contribution to sales by a factor of eight.

First, we measured how many times any one channel or campaign was the last click – the number of sales with which any one channel is credited. In this example, social media was the last click on 100 occasions and so credited with 100 sales.

Next, we measured the assisted conversions of every channel – the number of successful paths to conversion in which the channel appeared. This showed us that social media appeared somewhere in the path to conversion of 2,433 sales.

Finally, we measured attributed conversions – the number of successful paths to conversion in which each channel appeared, divided by the total number of events – and discovered that social media was responsible for 795.3 attributed conversions.

With a last click attribution model, social media was credited with only 100 sales, whereas it should have been credited with close to 800 — so social media was given credit for eight times less sales than it deserved. (As an aside, using the same methodology for both generic and brand term natural search, we found that generic SEO was under-valued by a factor of 14, while brand term SEO was under-valued by a factor of nine.)

Looking at the same retailer’s campaigns, we measured the true impact of generic paid search. First, the number of last click conversions attributed to paid search was 16,579. The number of assisted conversions (amount of sales in which generic paid search appears in the path to conversion) was 31,494. The attributed conversions (amount of sales in which generic PPC features in the path, divided by the total number of events in each path) were 10,345. Therefore, generic paid search was getting 1.6 times more credit than it should have.

Now, many marketers question whether it’s worth allocating budget on paid search brand terms, given that many of those clicks would have likely gone to a natural search listing. By looking at various client examples and using the calculation method above, we have determined that on average, branded paid search is 2.5 times less valuable than what it’s currently credited with.

More Insights
As you map out your 2012 marketing activities, here are some additional insights we’ve gathered that might give you more reason to incorporate social media more strongly into your plans:

1.    ‘Share’ and ‘like’ buttons are strong traffic drivers, as click-through rates for news feed links are vastly higher than for Facebook ads, according to analytics company ClearSaleing. Additionally, the firm found that revenue per click from shoppers arriving via social media links is $5.24, versus the $3.18 per click spent by email shoppers.

2.    Full-service social commerce, or setting up a store on Facebook, may actually not be worth the effort. A recent Forrester report found that the conversion rate for Facebook stores was equal to that of standard e-commerce stores, at between 2%-4%, while also attracting traffic of between 1-10% of the total fan base rate.

3.    Social signals (‘likes’, tweets and shares) are having an increasingly greater impact on natural search rankings – so giving your social media channels more attention can with your SEO efforts as well.

Obviously, you don’t want to throw paid search out completely, but you do need to have a clear understanding of its role as compared to your other channels in driving sales. Once you do, you might just find that areas you’ve discounted are more deserving of your attention than you thought.

Paul Cook is CEO and founder of TagMan, a pioneer in the rapidly growing universal tag management space. He can be reached at paul.cook@tagman.com.

© 2014