When (and why) should a small, niche company spend resources *promoting* Social Media Marketing rather than an email newsletter?

What are the types of situations (or examples) of when a small, resource strapped company should divert resources from other areas (product development, email newsletter) to Facebook? Some general examples that come to mind:

• When it's valuable to the reader/user to see other reader/user comments.
• Sharing a photo they would find useful/funny, etc. within 3 sec and want to share. (E.g., maybe a funny cartoon, or photo).

I can't think of examples of the above for my company but maybe someone else can provide examples.

Social Media marketing is all the rage. (I'm talking about building up your "friends"/followers organically, not paid advertising.) However, of all the small companies (<5 employees, < $500K in annual sales) I've talked to, none have had success with it.

Clarifying update :

• Resources are always limited. For the purposes of this question, I'm assuming the company is well sufficiently well established that the owner(s) do not have spare time. There is ample work to do that can turn time into money (product development/extension, sales, etc.). In order to decide how much (if any) resource(s) to divert from those activities to Social Media, It's helpful to know how and when SM can contribute something a newsletter can't.
• When I say "working on facebook or Google+" I mean actively promoting it. If it's simply a matter of posting the same information you carefully cultivated in all three places (fb, g+, newsletter, etc.) then, yes, that's a fairly low overhead, although even there I'm not sure if it's worth the extra hassle.

• users spend more time on email than on facebook (I think, based on everyone I know). Everyone touts how much time is spent on FB, but email is probably 10x.
• Easier to reuse content. If you have 10 really good tips you could assign a DRIP email to every new subscriber so they get those 10 great tips.
• Every customer who has FB has email.

• Customers may be more willing to "sign up" (Friend/Circle) you b/c they know they can easily block you later. (I think you can accomplish this if you're using a reputable email list manager and offer them something really good to sign up.)
• I might go viral. I think this is of vague benefit and a bit unlikely (lottery mentality) for a niche company. I don't know anyone who has gone viral and even if you did, it's not necessarily going to go viral to a targeted demographic.

Firstly, I would argue that an email newsletter is social media marketing. The two options you present shouldn't be mutually exclusive.

The reason that you have noticed that small companies have not had success with it is because they are assuming "success" means that having an online social networking presence will gain them customers and orders.

From what I have found in my line of work, simply outputting content (as you would in an email newsletter) via a social network has almost a negative effect on sales. Nobody wants to have newsletters served to them on Facebook.

But using social media is very effective when you engage your customers' social side, which is something that email newsletters cannot achieve.

How you are going to achieve this is not going to be easy to sum up in a single post - that's why there are companies who's sole business is offering this as a service. I can however recommend a really good book: