Five Things You Should Know About Social Media ROI

8 Jun

In a January post of 2009 social media predictions I wrote:

2009 will be the year when the pendulum swings from experimentation to accountability.  2009 will raise the bar on all of use to demonstrate how social media and PR programs are helping to drive desired business outcomes.

Are you are seeing the accountability bar being raised this year?  In my corner of the world, the volume of conversation about social media ROI is high and accelerating. Unfortunately much of the conversation has been misinformed and misguided.  It seems like every week brings another post attempting to reinvent the acronym or the meaning – ROI really means Return on Influence, or Return on Engagement is the new ROI, and on and on.  There is another group of online Zen Masters who would have you believe social media ROI is old school thinking and not in tune with social media Zeitgeist.   In that case, I’ll take’ Old School’ for $100, please.

Here are five things about social media ROI you should know:

  1. Return on Investment is a financial metric.  It tells the percentage of financial return you generated for a given investment level.  The financial return is usually revenue, butdollar-sign.jpg (JPEG Image, 520x731 pixels) - Scaled (85%) may also be money you saved by making the investment or money you avoided spending in the future.   Notice the common thread here – its about money.
  2. Attempts to reinvent the acronym are counterproductive.   Return on Influence/ Engagement/Whatever; do not ever get to the basic money question.  Most of these attempts share two characteristics – they are confusing ‘return’ with impact/results (read Olivier Blanchard’s The BrandBuilder Blog for more on Impact/Return confusion), and/or they are making an argument that social media ROI is largely intangible, represented by relationships, engagement and community.   What they are really saying, perhaps unintentionally, is ROI is often difficult to determine and I really don’t understand it.  In my opinion, attempts to reinvent or circumvent ROI discussion in social media actually hurt credibility with the people writing the checks.  They expect an apples-to-apples – money in and money out – discussion.
  3. ROI in social media has a time dimension.  Value may be created in the short-term and longer-term.  Social media-specific promotions are an example of easily measuredsand.jpg (JPEG Image, 300x400 pixels) short-term ROI.  Longer-term value is much more difficult to quantify.  There are some similarities between social media and brand in this regard.  Success in each is a process and not an event.  You generally will have ongoing activities that sustain the brand/social media program and brand building events or campaigns that provide short-term spikes in awareness and engagement.  Contribution to organic search results is another example of longer-term value creation with branding and social media efforts.   Managing and measuring your social media effort properly requires thinking about the value you are creating in the short and longer-term.
  4. Linkage and correlations are important.  In order to demonstrate ROI in social media it is necessary to link the results seen in social media with the relevant business processes they are addressing.  For example, in a B2B company, you might try to link social media efforts with the lead generation and closure process.  For a program aimed at empchain-links.jpg (JPEG Image, 245x328 pixels)loyee engagement, you might link social media efforts to the employee recruitment and retention business process.  For an eCommerce company you might be able to directly link to the sales process through unique URLs or click-tracking technologies.  When attempting to show statistical relationships, correlations become important.  We might try to correlate social media brand engagement and audience influence with metrics like likelihood to recommend to a friend, likelihood to seriously consider the product or likelihood to purchase the product in the next X months.
  5. All ROI studies are custom.  The simple fact is you cannot buy an off-the-shelf solution to calculate the ROI of your social media effort.  All ROI studies are custom.  This is primarily a reflection of the unique objectives each company may have for their social media efforts.  Objectives are specific and contextual, and your ROI measurement efforts will need to be as well.   Attempts to develop ROI Calculators where you simply plug in several numbers and hit a button to calculate your ROI are not worth the time it takes to plug in the data.  They are a one-size fits none approach to ROI.  (Read this brilliant and very humorous post by The Brand Builder where he methodically skewers a recent ROI calculator attempt).

We are in the very early stages in our ability to measure the ROI of social media.  Not enough cycles yet.  Case studies are limited but growing.  The need to demonstrate a financial return on social media investment, if not here already, will be here shortly.  We have a lot of work to do.  Let’s get started.

17 Responses to “Five Things You Should Know About Social Media ROI”

  1. Mike McCready June 8, 2009 at 11:14 pm #

    I am trying implement social media usage at the college I work at. Its a slow go at best, and I’ve often thought about the business justifications to use social media. I haven’t yet identified any really good indicators, but one thing I know is that we need to at least have a presence on the social networks and be listening because that is where our audience is. How much effort we put in, I’m not sure because I haven’t really been able to quantify the return. I like the point you suggest of creating correlations between social media and business outcomes. I think that is a critical first step to gauge the success of social media.

    I look forward to mechanisms and ways to track this return and hope to see some soon.

  2. metricsman June 9, 2009 at 10:01 am #

    Hi Mike,
    Thanks for stopping by and leaving a comment. SM usage within a college environment is interesting. Many students are still text-oriented. At the beginning of last semester, only a handful of my students were familiar with Twitter. That is changing rapidly of course. I think there may be merit in deciding at a high level what types of stakeholders of the college could be supported by SM – applicants, early decision candidates, enrolled students, alumni. Probably worth researching how other colleges are using the tools and seeing what might work best at your school. You might also explore how your alumni groups are using social networks. They already may have a presence on Linked-In and/or FaceBook.

    Hope this helps. Thanks again. -Don B @donbart

  3. metricsman June 9, 2009 at 10:03 am #

    p.s. to Mike,

    Also explore wikis. I have a wiki for the class I teach where I share announcements, post lecture materials and answer student questions. It also has links to blogs and other relevant content. The students seem to find it valuable.
    -Don B

  4. Katie Paine June 9, 2009 at 12:57 pm #

    Don, you are dead right on this.. brilliant! and Mike, you need to see my “measuring Social Media ROI in Higher Ed preso” sometime..

  5. metricsman June 9, 2009 at 1:49 pm #

    Hi Katie,
    Thanks for your comment and kind words.

    Mike, here is a link to a blog post from Katie on social media in higher education. Good stuff! http://tiny.cc/vkkfB

    -Don B

  6. Olivier Blanchard June 9, 2009 at 2:26 pm #

    Good post, Don.

    FINALLY someone else is making some sense of ROI and categories of measurement in the Social Media space. I was starting to wonder where folks who understand this stuff were hiding.

    Thanks for linking back to some of what I’ve had to say on the topic. I appreciate it. ;)

  7. metricsman June 9, 2009 at 2:49 pm #

    Hi Olivier,
    Thanks very much for your comment. There are three people who understand this stuff – you, me and Katie Paine ;).

    Of the people I read and follow, I have found you to be the ‘voice of reason’ regarding SM ROI, and have enjoyed and learned from your posts and tweets. There is so much misunderstanding today about ROI. Don’t know if you saw yesterday’s contribution to the lunacy – SOI = Sphere of Influence. We’ll never lack for material to blog about. -Don B

    If you are not already, please follow Olivier on Twitter: @thebrandbuilder.

  8. Rick Rice June 9, 2009 at 5:53 pm #

    Don,
    These are five points are right on. I particularly like your point – and I believe Oliver made the same one – that trying to change the meaning of ROI is wrong and not useful. That is an all too typical attempt to measure soft things we in PR hope we can actually succeed with instead of standing up and saying yes, like other functions we’re going to improve results. And we’ll prove it if you give us the bucks to measure.

    I’m glad to see this being RTd on Twitter and hope you’re getting lots of readers because these very important point that need broad adoption. Thanks.

  9. seanwilliams58 June 10, 2009 at 5:53 am #

    Don – thanks for a great piece here.

    The whole concept of ROI depends on a conceit — that financial measures are the best measure of success. I don’t disagree that all business activity has to support the business in some fashion, just that every activity must have a direct relationship to sales/revenue.

    Within organizations, this conceit gets played out frequently — the desire, for example, to continually cut “non customer-facing” costs — which too often results in a lack of attention to real opportunities to reduce expense through reengineering.

    The soft costs of decreased awareness, understanding and commitment — which place an organization at a competitive disadvantage — can be reduced through much communication activity. This can be as meaningful as increased revenue.

    The ROI question also can be advanced by our marketing brethren — their perspective is that impressions matter the most, awareness the end-all of communication with potential customers. But we know that buying decisinos are more complex than mere awareness.

    More comments at http://www.CommunicationAMMO.com.

  10. metricsman June 10, 2009 at 9:02 am #

    Hi Sean,
    Thanks very much for your comment and the complimentary post on your blog. One point – you say increasing revenue, understanding and commitment can be as meaningful as increasing revenue. Why do we want to increase awareness, understanding and commitment? Ultimately isn’t it to sell more product and services in most cases? -Don B

  11. Marc Hausman June 11, 2009 at 3:51 pm #

    Amen on this post. ROI is 100 percent about revenue generated from a specific activity.

    I’ve been fortunate to stand up social media campaigns for a number of global technology companies in the B2B and government markets. Even when the sales cycle is long and complex, we’re able to establish measurable benchmarks. I shared best practices in this blog post:

    http://strategicguy.blogspot.com/2009/05/social-media-and-enterprise-sales.html

  12. metricsman June 11, 2009 at 6:53 pm #

    Hi Marc,
    Good to see you here again. Thanks for your comment and for sharing your blog post.

  13. karen snyder March 2, 2010 at 7:38 pm #

    I love your blog. Your point about there being no “one size fits all” approach to measuring social media is very well taken. I’ve been devout follower of Katie Paine’s for years and now I can add you to my list of metrics gurus.

    You say it much more eloquently than I do — but my post might make you smile : )

    “Do Social Media = Collect Underpants.” http://socialmedialista.com/2010/01/do-social-media-collect-underpants/

  14. metricsman March 3, 2010 at 11:23 am #

    Thanks very much, Karen. Katie is a friend and I respect her and her work greatly. I read and enjoyed your post – and the cultural references did make me smile. Well done!

Trackbacks/Pingbacks

  1. Five Things You Should Know About Social Media ROI « Suzanne LaChapelle’s Weblog - June 9, 2009

    […] Read full article > […]

  2. ImpactWatch » Blog Archive » Top Social Media Monitoring & Measurement Posts of the Week - June 12, 2009

    […] Five Things You Should Know About Social Media ROI – Metrics Man […]

  3. So You’re On Twitter. Now What? : blog.devongroup.com - July 21, 2011

    […] Conduct analysis of your efforts. Understanding your online reputation is a key to managing it. On Twitter, you can get an idea of how far your messages travel by the number of followers you have and how often your message is re-tweeted (RT for those up on the lingo). However, the most effective approach is revisiting your goals and objectives to see if your strategy is delivering on its intent. Is traffic being driven to your Web site? Are you experiencing an uptick in sales as a result? Are customers telling you they’ve learned about your product or services from conversations on Twitter? Take the time to link social media efforts to business results. […]

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