My wife works in online marketing for women's retail. Every time they spend a dollar on Facebook or Twitter, they make two, or sometimes four, or more. An ad click or promoted post results in a measurable real sale.
Social media advertising is not that different from the kind of Google Adsense ads you see on blogs, at the end of the day. Sure, they convert less than Adwords and are less profitable since there's less intent, but these things are still a quantum leap beyond what was possible before the Internet.
New channels spring up and they turn out to be valuable and help businesses make a lot of money and build real brands. My wife worked at Modcloth and now at Bebe. Modcloth is probably going to go public in the next few years, and all with an online-only, email and social media-based marketing machine. They're a profitable real business built on a new channel.
Bebe was started in 1976 and also piggybacked on a new form of advertising medium that was unexploited. In 1976, it was bus terminals and bus shelter ads - they were cheaper than any other method (magazine, etc) and got their brand everywhere. Today it's a public company.
It is in 2013 as it is in 1976. I'm sure some people made bad ads and lost money on bus shelters back then too.