Why Social Media Spending is Declining: What Marketers Need to Know

In June 2020, social media spending surged as marketers pivoted toward digital channels during the pandemic. By 2022, over half of marketing budgets were allocated to digital marketing. Fast forward to 2024, and social media investments have declined sharply, hitting their lowest level in seven years according to the latest CMO Survey. This dip in spending highlights a shift in how brands are evaluating the value of social media in their marketing mix.

Social media, once seen as an essential tool, now faces increasing competition from other digital channels, such as retail media. Meta’s growing ad revenue reflects just how crowded the landscape has become. With so many brands vying for attention, it’s harder to stand out, and many consumers are experiencing social media fatigue. Attention spans are limited, with users toggling between an average of seven platforms. This saturation can diminish the effectiveness of social ads, driving marketers to look for alternative ways to reach their audiences.

Adding to the challenge, the contribution of social media to overall company performance remains modest. For the past six years, marketing leaders have rated its impact around 3.5 on a 7-point scale. Demonstrating the direct link between social media campaigns and product sales is still difficult, further complicating efforts to justify the expense.

Another issue is the potential misalignment of social media strategies with broader marketing goals. Brands often prioritize creative content but miss the mark on messaging consistency. Leaders report only a moderate connection between their social media efforts and the company's overall marketing strategy, suggesting that the platforms may not be fully utilized in service of brand building.

At the same time, retail media—ad space on retail websites—continues to gain ground. This rapidly growing channel, pioneered by Amazon, is competing with social media for ad dollars. Retail media is currently valued at $125.7 billion and is expected to surpass TV advertising by 2028. As brands seek more direct, purchase-oriented marketing solutions, retail media is beginning to outperform social media, which has traditionally focused more on engagement and awareness.

Interestingly, marketers tend to overestimate their social media budgets. The CMO Survey found that leaders predict a 66% increase in social media spending over the next five years. However, historical data shows these projections are rarely met, with actual spending often falling short of expectations. This over-optimism suggests that marketers may still hope for social media’s potential but aren’t seeing the returns they anticipated.

Innovating with Social Media

Despite the challenges, social media can still be an effective tool if used wisely. Leveraging large language models (LLMs) for content generation is one-way companies can maximize efficiency. According to recent CMO data, while many marketers are using LLMs for content creation and personalization, only 25-30% of companies use them for social media content specifically. This gap represents an opportunity to enhance social strategy by generating personalized posts at scale, all while keeping costs down.

Another strategy is integrating social media with other channels to create a more cohesive customer experience. Data from the CMO Survey shows that companies have struggled to effectively combine customer data across different platforms, with weak performance reported over the last decade. Investing in customer data platforms that allow businesses to unify information across channels could improve the effectiveness of social media efforts.

Companies should also look to use social media for more than just selling products. Currently, fewer than 20% of businesses are using social media to improve existing products, identify new opportunities, or connect with new customers. Social media can be a powerful tool for gathering feedback and engaging with audiences in ways that go beyond simple transactions.

Marketers can also benefit from benchmarking their efforts against those who are performing well. B2C companies, internet-based businesses, and those in the consumer services sector are often more successful with social media. Studying these companies and identifying what drives their success could help other brands refine their own strategies.

Creativity is another essential component. Given the saturated nature of social media, campaigns need to stand out. For instance, Dunkin’s collaboration with influencer Charli D’Amelio, which involved renaming a drink and launching an interactive contest, resulted in a 57% increase in app downloads and a 20% boost in cold brew sales on the day of the campaign. These types of creative, engaging partnerships are key to cutting through the noise and achieving real results.

Finally, brands should be ready to improvise and respond to real-time events. Lego’s quick response to Tesla’s Cybertruck window mishap, which involved a humorous tweet about a "shatterproof" Lego truck, is a prime example of how timely and witty engagement can drive significant buzz and social shares. Marketers need to build processes that allow them to notice these opportunities and act fast to succeed.

Rethinking Influencer Marketing

According to the CMO Survey, influencers' performance in contributing to business success has also been weak. Many brands focus on influencers with large followings, but research shows that smaller, niche influencers can often drive stronger engagement. Nurturing relationships with micro-influencers—those with smaller, more passionate audiences—may provide better results than competing with high-cost macro-influencers.

Brands that invest in long-term influencer collaborations, rather than one-off deals, tend to see better engagement and more authentic connections with their audience. It’s all about finding influencers who align with your brand’s values and who can grow their audience while maintaining high levels of interaction.

Social media may not be delivering the same returns it did a few years ago, but it still has potential. Marketers need to rethink their approach, integrating social media with other channels, leveraging AI tools, and fostering creative partnerships to cut through the clutter. By experimenting with new tactics and staying responsive to audience trends, brands can maximize the impact of their social media spending and build stronger connections with consumers.

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Source: Harvard Business Review