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“Every time some new medium comes along, it completely eclipses the old medium,” says Northeastern marketing professor Koen Pauwels. “I think social media was very new maybe eight or nine years ago.”
With 5.2 billion users worldwide, one might assume that Facebook, Instagram and other forms of social media would be the choice for marketers.
Not quite, says Northeastern University professor Koen Pauwels. In fact, Pauwels’ new research finds that social media marketing investments recently declined to their lowest level in seven years.
“It’s no longer the shiny next big thing,” Pauwels, distinguished professor of marketing in the D’Amore-McKim School of Business, says of social media. “What’s important in the history of marketing is that every time some new medium comes along, it completely eclipses the old medium — I think social media was very new maybe eight or nine years ago.”
According to Pauwels’ research, outlined in the Harvard Business Review, social media spending surged to 23% of marketing budgets in June 2020 as the pandemic kept consumers home and connections increasingly moved online.
But social media investments declined from 17% in spring 2023 to 11% in spring 2024 — the lowest level in seven years.
Pauwels cites several reasons for the decline.
First, marketers are, naturally, always looking for the biggest bang for their buck — they want to know how effective their ads are.
But while social media can provide lots of information about its users’ activities on their sites, it can’t necessarily share hard data on what users are actually buying.
“Social media has always had the issue that you typically go outside of social media to buy stuff,” Pauwels says. “They typically lack this kind of data on actual purchases, which ultimately the brand is interested in.”
But retail media — sites where retailers leverage their consumer data to sell ads to brands — does have this data. For example, Amazon’s knowledge of your shopping habits enables the company to hit up your favorite brands to buy ad space tailored to you.
As a result, spending on retail media is surging — it currently accounts for $125.7 billion in advertising spending and is expected to overtake TV advertising by 2028, Pauwels finds.
The “cluttered landscape” of ads on social media as well as users’ expectations for a social media experience are further reasons for the decline in social media spending by marketers, Pauwels says. Users — and regulators — are also increasingly focused on privacy on social media.
“People using social media want to connect with friends and family, not see ads,” Pauwels says.
All this being said, Pauwels sees “opportunity” as well as threats for social media marketing.
“With more scrutiny, just comes way more opportunity for the better sites to shine and to offer that consumer privacy, to offer that advertiser trust,” Pauwels says.
Pauwels cites LinkedIn as a site that he feels has recently focused on improving its user experience by getting rid of spammers, focusing on promoting interesting discussions in user feeds and limiting ads.
At the other extreme, Pauwels cites X, which advertisers have fled and where disinformation has proliferated since the site was purchased by Elon Musk.
“I think the sites that are just very good in giving the consumer what they want and kind of build on the trust they have with users — I think they’re going to do fine,” Pauwels says. “I don’t think the current dip in social media spending is necessarily a trend, I think it’s more of a pendulum switching away from, ‘hey, we really have to be on social media no matter what our product or service is and trust us, it’s going to pay off,’ to ‘hey show us the money.’ Once social media shows the money, marketers will return and increase their spending.”