IMHO the latter. Returns were and are always terrible, with occasional "home runs" that then get parroted by every marketing guru as an example of how powerful social marketing campaigns can be. But of course, your plumbing business, or accounting firm doesn't have the same business model, market or customers as said example.
My point is that social media is no worse, or better than traditional marketing, it's just that, we can prove it's terrible with data. Of course, if everything is "terrible" ... none of it is.
Well, it's just advertising that's terrible. Businesses can spend their money in lots of different ways. If advertising is understood to not be effective, perhaps we'll see more investment in things like wages and product quality, which, unlike advertising, deliver real social value.
We (a local micro-business) tried tracking our print adverts by including coupons and found nearly the only people using them were current customers.
Direct word-of-mouth was by far our most successful advertising (either from customers, or staff handing out leaflets in the street).