I think the Pepsi example really doesn't work for two reasons:

First, the decline in sales in the sugary soft drink industry is only remotely connected to their social media advertising. It is a widely reported phenomena that is usually attributed to a more health-conscious society and a widening array of beverage choices.

Second, Pepsi's intention in offering contributions to non-profits based on social media recommendations was probably seen as a way to boost corporate image in a domain far beyond potential soda drinkers. It probably was meant to influence investors, journalists, regulators, and people like Mayor Bloomberg in New York who would portray soft drink vendors as an evil in our society. When you are a big as Pepsi, directly influencing buyers is only part of your advertising outreach.

Still, I agree with the article's overall conclusion. Social media advertising is typically not a very efficient way to convert advertising dollars to revenue. But it can be. With any advertising method, you have to devise a way to measure the results of a campaign, whatever your goals are. Otherwise, you are just throwing money in the air, hoping it lands somewhere useful.

I know many stories like these. When I ask companies "Do you generate revenue via social media? Facebook, Twitter, G+ or anything?" the answer is always no. I would love to know about counterexamples if there are any.

I would agree. I don't use social media to see information about brands. I want to see my friend's activity, not advertisements. That's why I deleted my Facebook account and just use Path and Instagram, which so far don't have a big focus on promoting brands like Facebook and Twitter do.

Social networks are for connecting with friends, and I'm not friends with LucidChart or Coca-Cola, or any other brand for that matter. Some brands I respect because of the value they offer, but I would never consider them to be my friends. Hence it grates on me when companies try to use social media to connect with me as if they are my friends instead of just providers of quality goods and services, which is what I really want from them.

I won't speak to what's right for anyone else's company but I will talk about where I work;

We engage in social media because our business is a service business. Our customers are paying us every month to continue to serve them. It's therefore important to stay in communication with them and stay engaged with them.

We don't see social media as a major traffic source, let alone sales source, but it is useful for engaging our current customers and communicating with them.

We do also use it as an opportunity to spread the word about ourselves and have more presence but we don't expect, and don't see it as a major source of traffic or sales. That's ok because the purpose of those pages is not to be a sales source.

I think if the point of this article is; don't sink tons of money into social media expecting an immediate boost in sales, I'd say that's a solid point.

But if the point of this article is abandon all social media ye who enter here, that's probably silly. It's not that hard to keep up a Facebook page, Twitter account and even Google+ page.

It's odd that "most people have no idea who we are, have no reason to care and therefore aren't seeing our social media updates" didn't make it on the authors' list of considerations.

Then comparing to Coke is just goofy. Without even discussing the merits of what Coke's SM strategy looked like, there's no useful comparison between a tiny web company and a century-old international beverage conglomerate.

I have no idea about the actual value of social media, but this evidence is clearly stacking the deck:

* Search engines: how does your product become highly ranked and easily findable?

* Partner websites: ditto, how do people find those?

* Friend: how do those friends communicate about stuff like Lucidchart in 2013? This one is not even funny anymore...

* Co-worker: ditto. A lot off our conversations not directly about the work at hand happen either during lunch via social media. "Have you seen this cool app?"

* Other: seriously?

* etc..

I could go on, but social media clearly plays a major role in transferring this information. It's impossible to calculate to what extend these other channels would dry up if you would take social media out of the equation.

It's pretty much the same argument as it used to be about advertising in the pre-clickthrough era: it could not possible be measured in direct revenue. Doesn't make it worthless.

Posting my comment on the site here:

Of course social media results will suck if you’re doing it wrong.

Most people have no idea how to optimize their social marketing efforts; that timing can drastically effect the ROI of a tweet; that topics and geographies should be optimized differently.

Here’s an example: https://www.dropbox.com/s/5clvhpib0drqv8s/social_infographic...

---

In addition, we just built http://www.rewardrkt.com to integrate our API with the http://rewardstyle.com API.

According to rewardStyle, approximately 80% of their publishers are earning revenue directly from social media. Some publishers, generating $20-30k per month in revenue, see 60%+ of their revenue from social channels.

The problem is looking at this case study in a vacum, ie. Pepsi spend millions on a social marketing campaign and it did not produce the expected ROI - so what? That is no more determinative of social media than say a company that runs a TV commercial that does not produce the expected ROI - in a vacuum no one would say that TV advertising is worthless.

We all know there are successful social marketing campaigns - so why shift the blame on social media and not those responsible for the failed Pepsi campaign?

Social media for businesses is not simply about marketing but offering people a way to directly interact with their favorite brands - which really has never been available until social media. For example, and in my opinion one of the most successful companies at using social media is the UFC, who first uses social media to interact with fans of the brand (they have bonuses for fighters who use twitter), second as a form of customer service (when people tweet their PPV went out, UFC responds in real-time sending service people out to fix the PPV); and lastly marketing/promotion is an after thought (don't miss tonight's fights #UFC) - probably not a whole lot of measurable ROI but no arguing it is immeasurably increasing brand loyalty.

I do know that direct social media marketing works like a charm. It has saved me a lot of time and generated good results ever since I started doing it. You can generate sales from it without much hassle. No need to purchase a lot of ads, either.

A lot of these huge companies market very differently than startups (those that do market) and small businesses. They focus more on branding. So, any result they get does not translate to you.

I discover almost all new music via Twitter, be it by following other musicians who share who they like or magazines like Pitchfork who publish critics.

Both musicians and magazines are businesses selling something.

Just today I discovered Microsoft's Infer.Net for probabilistic computations. It's not a commercial product but it's a product nonetheless, and it's a tweet that made me read their documentation.

Social media is definitely not inefficient, if done properly.

The article is written very much against social media sales people, who are basically just like sales people in any other field. The truth is that an awful lot of companies have hopped on the social wagon and push for it themselves, without needing to be sold on it.

Social media is just a small part of my company, we offer it as a service but only to companies who specifically request it, and then we ask that they provide expected KPIs up front which we can hit, and that KPIs should be related to the platform (e.g. likes, reach on Facebook), not related to sales - this way it is up to them to decide whether the spend is worth it or not, all we do is ensure that we deliver what they want from us. We've never pushed anyone to increase spend on social media (from a company point of view, we'd far rather they spend marketing budget with us away from social media...)

Despite this, despite the fact that we don't push it at all, our biggest social account spends $500k/year on Facebook with us, purely on community building. So sure, maybe some companies are being sold on it by salesmen, but plenty are making their own choices here.

I came to the opposite conclusion last night and wrote about it here:

http://tomakefast.com/seo-vs-social-bots-vs-people-2617/

Essentially, SEO can really work against you if Google doesn't see your business the way you see your business. Google rarely gives anyone special treatment and once the algorithm makes up its mind, it's very slow to adapt unless you do something drastic (what I did last night) like take down entire domains that aren't getting the queries you want.

Part of my comment on the blog:

You'll change your tune when Google changes its algorithm.

You have one big point of failure on the left side of your chart. And let's be real, I bet Google is 98 percent of your "search engine" traffic. That you have no control over. Risky! Even worse if "partner website" is on the Google gravy train too.

Take it from me, someone who received millions of clicks from Google. Now I'm lucky to get 100 queries/day from them.

Some kind of social media presence is a hygiene factor. Also it's a given your SEO is working due to positive social signals.

Well, flowchart software isn't especially sexy, and unlike clothes or music or a game or something along those lines you're probably not going to be intrigued by the prospect of flowchart software unless you're actively looking to make a flowchart.

Pepsi's also a bad example, it's a 100-year-old behemoth of a company and it would be difficult to point to any single thing as responsible for a loss in revenue, especially a social media campaign. Pepsi also isn't especially sexy from a social media perspective, if you check their twitter it's a lot of "Hey, anyone drinking a Pepsi right now?" which to me at least isn't particularly compelling.

Social media can be extremely effective, local businesses especially can get a lot from not a ton of investment. Bars and restaurants can post specials, parties, pictures from past events, do ticket giveaways, etc. In SF at least a lot of nightlife promotion and engagement happens on Facebook, and you only really need a person or two per venue or production house to make that happen effectively.

Direct benefits from Social Media are very low, yes. But this article ignores the fact that a lot of modern SEO relies very heavily on Social Media. So even though direct links from Social Media are worthless, the effect it will have you more likely making it on page one of a Google Search result makes all the difference.

I agree with the author in that many businesses don't see much RIO on their social media marketing efforts. However, I would tend to think that is more of a reflection of a poor social media strategy as opposed to social media being worthless. Additionally, the article mentioned a brand ran a huge social media campaign and accumulated massive increases in likes, but this did not translate to an increase in sales. Social media is about scaling relationships, not about accumulating likes. The brand may have increased their likes but may not have done an effective job of building meaningful relationships with their customers.

Here's the truth: Lucid Chart hasn't figured out how to do social media properly. Now they're making excuses.

The fact is, many business are making a lot of money with their social media efforts.

My little company has tripled revenues since implementing an effective social media strategy. Nearly all of that increase is directly trackable back to the social media marketing we are doing.

Social media marketing can be hard. It requires different strategies than most people are implementing. But that doesn't mean it's worthless, it means that some strategies are worthless, while others are very, very, valuable.

It depends on the product - few people seeing lucidchart in their facebook feed have any use for it (or at least don't recognize said use). Lucidchart is a product where you only need it under fairly special circumstances (small niche).

The case for Pepsi is completely different - anyone can drink it, and just about everyone already knows about it, so social media is largely brand marketing.

I'd like to see comparative analysis of different social media campaigns broken down by what the existing ad spend is intended for, and also broken down by the main pre-campaign marketing channels.

Social media loses a ton of its value when we abstract away the usage/meaning of it in order to view/use it only as a tool. Once we start plotting it into a plethora of graphs, charts, and marketing plans, OFTEN egocentrism and depersonalization happen.

We begin talking about users as "users" (a metric) instead of users (people). Likewise the same happens to a variety of the other attributes (i.e. interactions, etc). ROI this, reward plans, etc.

The best social media plans are the ones that don't lose the core component to any real marketing:

Empathy.

Right now social media is probably not generating real revenue for the vast majority of companies. But the decision makers in those companies are probably like me: in their 40s, distaste for social media even if they are generally tech savvy.

Let the current 20-somethings become decision makers and my kids become consumers and it'll be a whole different story. And I'll be cursing from my rocking chair in the retirement home, maybe I'll even be sending incendiary tweets at that point.

Social media and SEO are fields employing many thousands of people. They will do or say anything they can to defend their existence regardless of their efficacy.

Oh you mean your product has something to do with your distribution? You don't say!

I thought I could just spam people's Facebook walls and get rich. What gives?

The Pepsi example is a brain-dead application of social media. Of course it didn't matter when people are deciding on healthier beverage choices and the market is increasingly saturated. Not to mention Pepsi hasn't iterated on their product in years, and people simply are getting bored.

No social media campaign in the world can save a shrinking business.

Obligatory: http://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines

That said, I think the real answer is "it's complicated". I'm pretty some businesses benefit from Social Media, but I expect there are a lot of variables that affect how much value they derive from it.

It also depends on how, exactly, you define "social media". It's become a bit of a catch-all term these days, and to the extent that it's been very generalized, I'd argue that the answer to the posed question is even more "No".

Anyway, FWIW, one more anecdote for you... so far the vast majority of the traffic to our blog and our website is traffic from links submitted here at HN, on Reddit, through Tweets, posted on G+, Facebook and LinkedIn, etc. We spend essentially nothing (other than a little bit of my time) on this, but I believe it is increasing our exposure and brand awareness. Social Media activity also seems to contribute to generating backlinks, which improve our positioning with the search engines.

We're still "pre revenue" so it doesn't make sense to talk about the ROI of our social media efforts yet, but my impression is that it's a valuable part of our effort to get the word out, without spending a pile of money.

shrug

Obviously it depends on the business. If you're trying to market work tools, people generally don't (or don't like to) discover them socially (apart from JS frameworks). However, if you're trying to market an album, movie, or media, it does quite well.

It really depends on who your target market is.. but I can see the pros of this article.

The Old Spice social media campaign was very successful:

http://www.jeffbullas.com/2011/08/30/11-social-media-marketi...

As anecdotal evidence, both of my late-teen/young adult sons have started using Old Spice deodorant since that campaign started.

Edit: I think Barak Obama's campaign would be another example of well-spent social media dollars.

Trivial counter-example: foodtrucks.

Outside of that, well, um.... er...

EDIT: Further thought would suggest, Facebook, G+, Twitter, etc. That seems to hint that maybe the main business of social media is: spreading social media. Ruh oh.

I'm sure there are some small, local companies who can't afford to/don't have the expertise to manage a website, that can leverage social media for promotions, sales, and general brand awareness. But those are also the people who tend not to measure ROI, so who knows? This was a really interesting article on the subject, if a bit biased: http://www.fastcompany.com/1760849/does-social-media-have-re...

It seems to be a self-perpetuating cycle from social media "gurus". Audi's manager of social media says "Today the equation to measure that doesn't exist" when asked about measurable results. So he (and much of the industry) claim that they just don't know, but it's probably doing something, and it can't hurt, right? So their clients/supervisors are scared of missing out and they continue to approve these gimmicks that, in my opinion, aren't very effective.

Yes. I work for a national professional body - a membership organisation - and we generate business (i.e. new members) through social media. We also retain more members because we can subtly remind them of the benefits they get, and respond quickly to their customer service needs, through social media.

Twitter is perfect for raising brand awareness, dropping hints about the benefits of membership to non-members, and quickly resolving issues members are having.

We also use social media to position ourselves as being at the forefront of our industry by being the first to break news, RT things people wouldn't have spotted, provide practical advice and create debate via our blog, etc.

Works for us.

Local business - yes, if their customers make regular purchases

Fashion brands - yes, if it's a brand name that people are excited about sharing, and again regular purchases helps - people want to keep checking back for what's new

It's tough; I work with a lot of different retailers, everyone wants to believe that social media is going to be good for them, but it depends on both their business and their customers.

I see agencies pitch the miracles of social media and it often just doesn't pan out.

I get 100% of all my sales through Facebook... as a small business owner social media is the lowest price entry point directly to your audience

Depends on your definition of generating revenue. For example:

1. If Coca-cola starts a social media campaign (and gets 1million likes) and Pepsi doesn't (0 likes), Coca-cola has a stronger brand position. Is this easy to calculate in real terms? No. But then again, Coca-cola nor Pepsi actually bottle their own products so they are measured on brand awareness anyways.

2. A friend of mine just started making custom bicycle wheels. He's gotten 3 new customers literally from our triathlon facebook group alone. Also, I would guess at least 5 people (probably way more) have had massages from a sports massage therapist in our club, simply because they posted on our group "I'm in need of a sports massage who knows a good one?"

"Social media" isn't necessarily a new way of driving business, but rather it's a new platform for capturing something that has been happening for decades - word of mouth - and then trying to position yourself (at scale) to exploit that word of mouth.

If there were any compelling counterexamples, they would already be touting them already. Glad someone is calling out the emperor for wearing no clothes. Hope this idea gets traction.

Direct response ads have turned out to be very successful for brands on Facebook. Once they have reached a healthy fan base size they sell actual products to their fans in their newsfeed. Example: Domino's offering a special only available to their Facebook fans. With Facebook's pixel tracking you can back out the exact ROI for every dollar spent promoting that offer to fan's & friends of fan's.

Burberry is great example of using social media to completely revitalize the business. The stock as grown over 300% since 2007. One can attribute their success to a variety of factors but an important prong was social media. I think the difference with Burberry's strategy and say Pepsi's is using social media to enhance the key values/identify of the business.

A lot of small online businesses in my area are killing it through Facebook.

Though they use the Facebook pages, not ads, and the ones I know of that are doing great post stuff for women mostly :) (clothes, bags, nail accessories, beauty stuff, home decor).

Many generate 100% of their sales through Facebook.

Zynga (and most games).