As I meet with many social media start-up hopefuls, I find that nearly every company is pinning its monetization hopes on one thing — advertising.  I began to wonder … where is all this advertising going to go? Where will come from? And how are we going to know if it is doing any good? Will it be diluted into oblivion? Luckily, I found somebody with an answer …

Guest post by {grow} community member Irv Shapiro

Social media providers are under intense pressure to generate additional revenue through advertising. The upcoming Facebook IPO is just the tip of the iceberg. The social media giant also announced it will soon display ads on mobile apps, thus contributing to the race to capture additional advertising revenue in the social space.

Twitter’s “enhanced profile pages” — and features on other social networking sites — are also clearly intended to drive ad-based revenues and bolster the bottom lines of social media providers. Everywhere you look it seems, we are going to be dealing with more and more advertising!

Obviously this presents new multichannel opportunities for businesses and marketers. But with all of these new forms of social media advertising targeting consumers, how can businesses ensure their ads are actually generating a return on their advertising expenditures?

The Problem with Social Ad Spend

The connection between social media ad spend and social channel ROI has been murky. Even those fully committed to social advertising have not always demanded the kind of rigorous ROI analyses that are typically applied to other marketing investments. In many cases, businesses have simply lumped social ad returns into the generic category of “improved brand awareness.”

Yet in today’s marketing environment, there is no excuse not to have total visibility about the returns we are receiving for our social ad dollars. Luckily, the technology is keeping pace.

A new generation of analytics

The gap between social channel investments and clear ROI is driving the implementation of a new generation of online and offline analytics, many of which utilize “call tracking” solutions.

Call tracking enables marketers to identify the social ads and campaigns that are producing the best results for the business, tracking the impact of advertising across multiple channels and delivery platforms. By assigning unique local numbers to each social media ad, the organization achieves a new level of granularity, capturing actionable insights that can be used to justify social channel spend and create a more optimized social marketing strategy.

For example, New York City’s Marquis Dental Spa (client) was struggling to determine the actual ROI of specific social channel ads and campaigns. To gain a more accurate picture of the returns they were receiving for the social investments, the company assigned more than 250 unique local numbers to ads delivered through paid search, Facebook, LinkedIn and other channels.

The campaign’s use of unique local numbers enabled the company to connect leads to specific social ads, thus generating solid ROI for every dollar invested in social media and other channels. As a result, the company optimized its advertising strategy and reduced its cost-per-new-patient metric by 50 percent. They plowed this savings back into ad spending on Facebook, their highest performing lead source during the campaign.

The opportunity for highly targeted ads has never been greater, and as more channels emerge, it is likely that the costs will be very competitive compared to other alternatives.  But like all good marketing efforts, we will need to use these new analytic tools to optimize  social channel investments.

Irv Shapiro is the CEO and CTO of Ifbyphone and is responsible for overall business strategy and corporate leadership.

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