Merchants Are Antisocial With Marketing Spend: Most Goes to Search

Social media may get all the buzz today, but online merchants say most of their marketing money is going into paid search, according to Shop.org’s The State of Retailing Online 2010 conducted by Forrester Research.

That trend held true for merchants of all sizes. According to the results, merchants that earned less than $10 million in annual revenue spent 37% of their average $600,000 budgets on paid search; this group spent 5% of their budgets on social media.

Marketers with annual sales of 10 million to $100 million spent 38% of their average $3.2 million budget on search vs. 2% on social media. And merchants with more that $100 million in annual revenue spent 39% of their average $11 million budgets on search—they spent only 1% on social.

There’s a good reason for merchants spending their money on paid search: SEM was considered the most-effective source to acquire customers in 2009 by 90% of the 102 online retailers that responded.

E-mail marketing – both to house files and prospects – was the second-most popular marketing spend tactic for small and medium size merchants, while affiliate marketing was the second-most popular for the merchants with more than $100 million in annual revenue.

Just 7% of the 102 online retailers polled listed “social network presence” as one of its top-three most effective sources used to acquire customers in 2009.

When it comes to measuring the effectiveness of social media, merchants also putting quantity over quality: Eighty percent of respondents are measuring it by growth rate of followers and 68% by total subscribers while 59% are measuring effectiveness by sales attributed to links on social networks. Fifty-nine percent are looking at click-through rates to the retail site, but just 26% are measuring effectiveness by improved SEO.

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