In the B2B marketing world, paid social advertising is primarily used for lead generation. However, a recent report by Metadata highlights critical inefficiencies and costs associated with this strategy, offering sobering insights for marketers.
Lead Generation Dominates Ad Spend
A staggering 90% of advertising dollars were spent on lead generation campaigns, equating to $37 million of the total $42 million in ad spend. This is consistent with analyses across numerous companies, revealing that B2B firms focus heavily on lead generation due to outdated demand models that rely on digital touchpoint attribution. This strong focus on lead generation reveals a need to rethink and diversify digital marketing strategies.
“Download”: The (Overused) CTA
The “Download” CTA remains the most popular in B2B paid social, leading companies to funnel resources into driving downloads of gated PDFs. While this is common practice, it raises eyebrows due to its questionable ROI. The average cost of acquiring someone to “maybe” open the PDF is $126. This cost doesn’t account for whether the PDF is even read, let alone leads to actual conversions.
Lead-to-Win Rate: A Numbers Game
The estimated lead-to-win percentage based on the data is just 0.3%. This inefficiency means sales teams need to sift through 333 leads to secure just one deal. This aligns with broader industry data, where the average lead-to-win rate is between 0.1% and 0.2%. For many businesses, it takes anywhere from 500 to 1,000 leads from paid social campaigns to secure a single win, showcasing the sheer inefficiency in the lead generation process.
CPL vs. Success: A Misleading Metric
Although the average cost per lead (CPL) across all lead gen campaigns was $172, this metric doesn’t correlate with actual success. The win rate is so low that the advertising cost per acquisition (CAC) is an eye-watering $57,000 to secure one deal. This estimate only includes advertising costs and does not account for sales teams, SDRs, or other marketing expenses like events.
The True Cost of Advertising: CAC Payback Period
With $38 million spent on advertising resulting in $22 million in closed-won revenue, the CAC payback period is estimated at 21 months. This figure only considers advertising costs, excluding sales and marketing headcounts and other program expenses. Factoring in these additional costs, the total CAC payback period could easily exceed 48 months, or four years, to break even on customer acquisition costs.
Conclusion: The Need for a Strategy Rethink
These insights shed light on the harsh realities of B2B paid social advertising. While lead generation remains the focus, the inefficient cost structure, low win rates, and long payback periods indicate a need for businesses to reevaluate their strategies. This data-driven understanding highlights the importance of balancing digital marketing tactics and moving beyond outdated practices for a more sustainable approach to paid social.
Source:
https://metadata.io/resources/blog/b2b-paid-social-benchmarks
