Social media ad exchanges are failing — and that’s not a bad thing

• Tweet
• 

• Tweet
• 

A man looks at Twitter on a iPad of tweets. Getty/ Matt Cardy

Digital innovation think tank L2 Intelligence released a report last week that said Twitter was the least effective method of directing traffic to sites. The study — which tracked 247 brands — found that search results and cost per click advertisements are still the most effective way to up traffic, followed by email. Search engine results directed 15.8% of new customers to a brand website and cost per click ads directed 10%. Email accounted for approximately 7.5%. Social media was far behind. Facebook accounted for 0.25% of new e-commerce customers, Twitter for 0.01%.

Bad news for social media. Facebook is still having trouble getting its recently launched Facebook ad exchange, FBX, off the ground. COO Sheryl Sandberg admitted during the company’s 2Q earnings call on July 24 that the site did not have a large number of users. Twitter is also reportedly planning to launch an ad exchange site similar to Facebook’s. Selling the ads to corporations will be even harder if traditional methods of advertising continue to prove most effective in driving traffic.

But rather than solidify the theory about the inefficacy of social media for commerce, the numbers might be signaling the need for new metrics in the advertising world. An infographic released by Hubspot (data compiled from Nielsen and Search Engine Land) shows that social media is taking over word of mouth in product discovery. Consumers are 71% more likely to purchase a brand if it is recommended to them via a social media channel. A report by Vancounver-based research company Vision Critical found that that 17% of Twitter users had purchased an item after sharing it on the social media website.

Good news for social media in general. More bad news for ad exchanges like FBX. Facebook and should have been focusing on their strength (their active user base) instead of adapting ill-fitting monetization models of the past.