SimplicityDX Reveals Social Revenue Underreported by 245%
Pattern: Consumers discover products on social media but buy on brand sites
Impact: Customer acquisition costs significantly overstated
Impact: Return on ad spend artificially depressed
SimplicityDX, the edge shopping company, published its annual State of Social Commerce report to provide comprehensive insight into key social commerce trends. Results highlight that social media is the most important new customer acquisition channel for many brands, but social commerce revenue is routinely underreported by approximately 245%.
The underreporting of social revenue is due to many consumers heading directly to the brand’s e-commerce site to purchase rather than clicking through and purchasing from the social media site. By doing so, the sale bypasses the revenue tracking mechanisms used by most analytics packages and incorrectly classifies social revenue as “direct revenue.”
“Brand marketers spend on average 25% of their digital budgets on social media but are unable to accurately measure its impact. This research suggests that CAC is dramatically lower and ROAS significantly higher for social campaigns than previously thought.”
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In turn, two critical key performance indicators used every day by marketers to evaluate campaign success are significantly impacted:
- Customer acquisition cost (CAC) is used to evaluate campaign performance and is a leading indicator of profitability.
- Return on advertising spend (ROAS) is the primary measure of advertising effectiveness and used to allocate advertising budgets to channels and campaigns.
Gerry Widmer, co-founder and chief executive officer of SimplicityDX, commented, “Brand marketers spend on average 25% of their digital budgets on social media but are unable to accurately measure its impact. This research suggests that CAC is dramatically lower and ROAS significantly higher for social campaigns than previously thought.”
Additional State of Social Commerce Report Highlights
- Prefer to buy on brand site
SimplicityDX research shows a clear pattern. The majority of consumers — when using social — prefer to start their shopping journeys on social media but actually complete their purchase on the brand site. Sixty-eight percent of respondents reported that they would prefer to buy on the brand site, and 17% reported that they have no preference between buying on social media or from the brand — leaving only 15% of customers with a stated preference to buy on social media.
- Experience issues
Eighty-six percent of respondents reported issues when migrating from social media to the brand site to buy. Inventory, pricing and promotions are often not synchronized, and the returns experience following a purchase is frequently problematic on social media, causing 66% of respondents to be reluctant to make a purchase through social again.
- Live shopping
Livestream shopping events are rapidly growing in popularity, particularly with Gen Z and on video-focused platforms such as TikTok. This is reflected in our findings, with 64% reporting that they had either purchased from a livestream, been to a livestream but not made a purchase, or had not yet been to a livestream but would consider going. Interestingly, only 36% reported that they would buy from the influencer on the livestream. In other words, 64% of customers would prefer not to buy from influencers but through the brand.
Study results show that customers have low levels of trust in both social platforms and, to a lesser extent, brands in relation to their personal data. Sixty-seven percent don’t trust social networks with their personal data, and 49% don’t trust brands with their personal data.
Gen Z have a slightly higher trust level in social media platforms and the same level of trust in brands, although the differences are not significant — 61% don’t trust social networks with their personal data, and 49% don’t trust brands with their personal data. This finding suggests that the lack of trust in social platforms and brands is a trend that holds true across all age groups, indicating that it is a pattern that is likely to persist into the future.
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