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Social Media service providers: addressing the problem of plenty

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By: Lakshmi Jayakumar
Lead Analyst, Marketing Agencies

calender28 Feb 2018

Abstract

Digital marketing spend across industry sectors has been steadily increasing from $503 (2015), riding on predictions, to $663 (2018), with social media contributing to almost 13–15 percent of the overall spend. According to the CNBC, social media advertising is witnessing a Y-O-Y growth of 20 percent and will be worth $50.2 billion as against $50.7 billion by 2019. This is mainly due to the increased adoption of technology by the public. Marketers have been using social media to target their audience effectively. The current supply market for social media management is very dynamic and diversified. There are a lot of agencies that claim to provide social media services.

This whitepaper evaluates the options available to a buyer to source social media services and conducts a detailed comparative analysis of each approach.

Introduction

Digital channels contribute to almost 50 percent of the global advertising spend and have witnessed a tremendous influx in the last few years, thereby becoming the most accessible medium of communication. The time spent by viewers on digital mediums, such as desktop and mobile, is driving companies across industries to increase their digital spend. According to Hootsuite, social media currently has close to 2.78 billion users globally, out of which almost 2.5 billion users access social media through mobile phones. Facebook and Whatsapp are the most prefered user platforms where maximum time is being spent. These channels ensure that marketers have a visual presence, and thereby have a better brand reach.

Ground Level Realities:

Social media buying is highly fragmented, with all the suppliers including creative agencies, media agencies, PR agencies, digital agencies, and specialist players claiming to deliver superior results. Many companies, such as General Mills, have also started their in-house social media management teams to manage their social media pages.

 Issues Arising Out of Fragmented Social Media Buying :

  1. Lack of clarity on channel spendings: A host of procurement managers find it difficult to identify the agencies that offer social media services . This ambiguity in the role played by the agencies leads companies to pay multiple suppliers for procuring the same service.
  2. Distortion of Communication: With multiple parties managing different aspects of a client’s social media account, there is a lack of uniformity in communication. This leads to complex issues in managing the brand image.
  3. High cost of engaging with multiple suppliers: Engaging multiple suppliers for availing the same service makes it an expensive affair for the buyers as they have to incur multiple agency fees to avail the same service.

Alternatives to Social Media Sourcing:

Based on the client’s spend, geographical reach, and future scope of social media marketing in social media advertising, there are three options that can be considered for sourcing social media services.

Option

Advantages

Disadvantages

  • Engaging Freelancers
  • Leveraging on industry knowledge and experience: Independent contractors have a sound understanding of the industry dynamics that helps in the formulation of marketing campaigns. ; however, the in-house teams are constrained by the requirement of working according to the marketing tactics in the same industry, which may introduce redundancy in their approach
  • The independent contractors are not on the direct payroll of the company and not subject to the taxes and legal process requirements, unlike the in-house team.
  • Challenges to provide a full stack of services: Although the independent contractors provide expert consultation, they may not be able to provide a full array of services like strategy, ideation, technical support, and execution of the project, and hence are not advised to undertake a project involving a higher spend.
  • Project Fees: An independent contractor may charge up to $200/hour based on industry experience and project complexity; this may overrun the project budget in some cases.
  • In-House Team
  • Leveraging on in-house Knowledge: In-house professionals have a higher edge than external agencies in understanding company’s customers and products, among others.
  • Retaining ownership: An in-house social media manager would be familiar with the state of a business at all times. Buyers can easily monitor and verify the activites of an in-house social media manager.
  • Speed to Market: It is vital for marketers to react quickly to path-breaking news, “this would enable them to hit the right window and increase the volume when launching social media campaigns, among others. In-house professionals have a higher competitive edge than outside agencies in all the above situations
  • External parties are better equipped: Agencies are often better equipped to oversee their social media campaigns and to potentially report social media monitoring outcomes.. It is quite likely that they have been doing it for longer than an in-house team and have templates set up for reporting.
  • Work volume versus cost: If a client has a small business and a small social presence and/or is in a very niche category, then the client might not have enough work to justify hiring an in-house person (even part-time). In this case, it may be cost-effective to outsource social media operations until business expansion necessitates in-house hiring. .
  • Outsourcing to a third party
  • Optimal Capacity Management: Engaging with a marketing agency ensures optimal management of projects and availability of resources to execute tasks while ensuring that the best talents work for a strategy, which will facilitate the delivery of a full portfolio of services to the client.
  • The marketing agencies have multiple pricing models to suit the client’s needs and have experience and resources to manage the costs, and hence they ensure minimal overheads.
  • The marketing agencies typically enroll a client for a contract period of 2 to 3 years. In such cases, when the services fail to meet the client’s expectations or the business needs change, then it would become difficult to terminate the contract immediately.
  • Although the marketing agencies work effectively for large spend projects, it is equally important to monitor the project at each stage  to ensure that the overall project is aligned with the business goals; this might typically need the contribution of a dedicated resource form the company.

 

Cost Analysis of Each Approach:

Note: In-house costs in the above table do not include the cost of content, costs of social media staff (extra benefits), and cost of monitoring tools could be $30,000 – 80,000a year necessary to implement, track, measure and analyze effectiveness of social media campaigns etc.

Conclusion

Social media marketing can be managed in-house by buyers to ensure higher efficiency over the whole process. However, ideally, buyers should have an average monthly resource spend of $8,000 and above to set up their in-house facility because the minimum spending on social media advertising software alone amounts to nearly $5,000 to $10,000. Though the competitive advantage is higher while engaging an in-house team, buyers have better access to resources, audience, innovative and latest technologies while engaging a digital marketing agency; this is because these agencies have a specialization in this domain.

Marketers across various industries like the food, beverage and tobacco (FBT) and pharma, among others, are investing in developing in-house facilities. However, buyers should always explore various scenarios to ensure that they are following the right engagement model based on their requirement.

Analyst View

Scenario

Approach

Why So?

When there is a need to procure end-to-end social media services

Outsource to a global digital marketing firm.

 

Cost efficiency, technical and resource advantage, rich cross- industry experience, and higher audience reach.

When there is a requirement for specific social media services, such as maintenance of social channels

In-house team.

 

Better monitoring and control, low response time, and low audience reach.

When there is a need for end-to-end services and the need of monitoring the campaign at each stage

 

Hybrid model is a mix of digital marketing firm services and in-house team. Industry experts recommend collaborating with a marketing agency partner for formulating marketing strategy and engaging an in-house team for executing maintenance activities

Better monitoring and control, low response time, optimal utilization of resources and marketing budget, and scope to develop and educate in-house team comprise a long term strategy.

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