How to Measure Social Media ROI – Is It Even Possible?

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It seems preposterous to suggest that there are online companies that put time and money into social media and don’t bother to measure their return on investment (ROI). In fact, it is believed that over 70% of online businesses that utilize social media as part of their marketing drive are guilty of this crime. When you consider the fact that sales from social media commerce are in the billions of dollars, this is an unbelievable statistic. Some experts believe that discovering social media ROI is an impossibility because it relies on too many intangibles, such as “Likes” and “followers.” However, such information can be used to paint an accurate picture of a company’s ROI if used correctly.

Calculate Your Reach

You need to determine how many people you could potentially connect with on social media. In effect, this equates to the number of Facebook fans and Twitter followers you have. However, this is not the end of the story. Your content reach is limited only to the amount of friends and followers that people who engage with your brand have. For example, if you have 500 followers on Facebook and Twitter and they have a combined total of 10,000 followers, then your content reach is 10,500.

Time & Trust

Every single comment, photo, video or post takes a few seconds for a user to digest. It is estimated that the average “like” on Facebook takes seven seconds per person while close friends of this person will take an average of five seconds to digest that “like.” Now, you need to look at how many close friends shared the brand experience. On Facebook, analyze the comment to like a ratio of posts while on Twitter; the retweet to tweet ratio is all-important. The higher these ratios, the better.

Sentiment

This is a measure of how your business is perceived on social networks. It can be extremely difficult to measure sentiment although you do need to compare the number of positive and negative mentions. Fortunately, you don’t have to spend hours painstakingly going through tweets to find out what is being said. It is possible to get natural language processing tools from a variety of sites online that will quickly and effectively help you discover whether mentions of your company are positive or negative.

Metrics

If you really wish to calculate the ROI on social media, it is imperative that your company has clearly defined goals because ROI is impossible to calculate without a baseline of some sort. When it comes to calculating your ROI, it’s essential to note that you need to focus on what the numbers lead to rather than concentrating solely on the actual numbers. For example, does an increase in website visits actually lead to a higher income? Do people who find your site through social media click on your website’s product pages? You can find all the data you need through the use of Google Analytics, HootSuite, Omniture and other sites of this nature.

Using The Data

This is where it gets tough and is also where certain experts suggest that social media ROI can’t be accurately measured. And they have a point because coming up with the dollars and cents of your campaign is virtually impossible to nail down because there is some guesswork involved. Nonetheless, you can give it a pretty good go.

For example, you can go back to your goals. If you are measuring ROI through sales, you will need to analyze the metrics from your monitoring tools to see if your level of sales has increased. If it has, you can then look at the number of referrers on your e-commerce site from Twitter or Facebook or the amount of coupons given away in a Facebook offer. It is also necessary to look at trends. For instance, did your website store experience a spike in traffic soon after you posted on Facebook? Is it the case where a high sentiment analysis on Twitter results in better sales?

Conclusion

In the end, it is important to realize that measuring social media ROI is far more complex than the usual cost versus increase in sales equation we are used to measuring. While you can find out if social media is positively impacting your business, it isn’t possible at this point to know its full effect.

Ultimately, there are far too many variables to limit social media to a single fixed point. Additionally, social ROI is inevitably delayed ROI because it takes time for a post to resonate with the customers to the point where they go from visitors to paid customers. You can’t pinpoint when a certain customer decided to make this switch either. What you can do is stop being so focused on social ROI and concentrate instead on finding out what you have learned from your customers.

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Author

  • Sara Carter

    Sara Carter is a professional guest writer and blogger. Her writing experience encompasses technology, mobile, SEO, blogging and social media. Sara has written for many websites and blogs. She is a regular contributor to techrepublic.com. Sara is also a certificated Google Adwords expert.

    Sara graduated with a Bachelor’s degree from the Massachusetts Institute of Technology (MIT).

    Sara also specializes in Computer Repair, Tech Support, Social Media Marketing, computer and mobile apps, Web Design, and Consulting. She is the co-founder of Mac-Reviews.net, a website that was created to help Mac users choose the best products for their Mac. You can contact Sara at saracarter231@gmail.com.

11 Responses

  1. Sonia Fogal says:

    Great article! One of my goals for 2013 is to wrap my head around social media. This is a great help! Thank you!

  2. Michael says:

    Nice post Sara. I just noticed Facebook has a promote option now. For $7, facebook will give your shares a prominent spot on others pages. It creates a greater demand for the number of followers, as you outlined. I am going to sit back and monitor how others’ sentiment grows towards the promotion option. Social Media is a difficult beast. It’s a modern version of word-of-mouth advertising.

  3. Al Wilkins Jr. says:

    Via LinkedIn Groups

    Group: Band of Entrepreneurs
    Discussion: How to Measure Social Media ROI – Is It Even Possible?

    What I find is that when I get companies ranked #1 on Google and drive the Social side viral, the owners are hard to stay in contact with. Their fear is that fees will change on the release of ROI and ROAS. The job done correct will make them want to give you stock options. It’s easy to put a percentage on the traffic increase, most will never give numbers.
    Posted by Al Wilkins Jr.

  4. Mark Traphagen says:

    Mark Traphagen posted via Google+.

    I very much agree. We see social media as being at the top of the sales funnel. It’s where you make that impression on someone that may eventually lead to a sale. Those impressions can’t always be tracked all the way to the sale point. Social media is also where you cast your net to attract new potentials into your funnel.

  5. Jan Lewis says:

    Via LinkedIn Groups

    Group: The Society For Echo Boomers International ® Entrepreneurship
    Discussion: How to Measure Social Media ROI – Is It Even Possible?

    Online media is ok, but it sure isn’t the entire answer to business profiting and networking. I think in the long run, nothing really beats face to face connecting….start off online, etc., but make sure to really connect with others.
    Posted by jan lewis

  6. Kate Copsey says:

    Via LinkedIn Groups

    Group: New Jersey Networking Group
    Discussion: How to Measure Social Media ROI – Is It Even Possible?

    I agree that too many have jumped on the social media bandwagon without much thought going into the why. Measurement is tricky unless you have an actionable component such as more coupons used/more people signed up for an event/more sales of a widget. The other error is that the social media tool used should be tailored to a specific actionable event, and should be changed when that event is over – too often a company uses one method eg twitter or Facebook and puts all their efforts into the one method regardless of what they want to promote.
    Posted by Kate Copsey

  7. Jason Bahamundi says:

    Via LinkedIn Groups

    Group: Social Media Marketers
    Discussion: How to Measure Social Media ROI – Is It Even Possible?

    This line in the article is the entire crux of this ROI discussion:

    What you can do is stop being so focused on social ROI and concentrate instead on finding out what you have learned from your customers.

    A lot of times when a potential client asks me about generating an ROI I ask them to help me calculate LOST ROI on them not running the social media marketing campaign. To me that is more important than the ROI of running one.

    The reason I say this is that social media ROI is hard to create but in addition to that there can be a huge delay in the campaign and generating revenue. Social media marketing has to be constantly ongoing and cannot have an off day because your brand can become irrelevant in that one day.
    Posted by Jason Bahamundi, MBA

  8. Jeff Stern says:

    Via LinkedIn Groups
    • Group: CXO Community – CEO, COO, CFO, CIO, CTO, CAO, CSO, and MD
    • Discussion: How to Measure Social Media ROI – Is It Even Possible?

    Article is spot on, why invest any $ if you do not have a plan to measure it directly or indirectly, In fact, for most areas of internet social media, it is easier to measure than some traditional outreach channels. Every click through is a ‘check’ it worked.
    Posted by Jeff Stern

  9. Donna Irving says:

    Via LinkedIn Groups

    Group: New Jersey Networking Group
    Discussion: How to Measure Social Media ROI – Is It Even Possible?

    I totally agree that companies/marketers are not even considering the rationale for utilizing social media. From my observation, ROI is not even considered in social media marketing planning but marketers continue to place their emphasis on how many followers and re-tweets they get, if any. Social media marketing is a wonderful tool, but how do we know (1) if we are reaching our target market (2) whether the strategies/methods are working and (3) what is its value to the company’s brand.

    Posted by Donna Irving

  10. Susan Geelmuyden says:

    Via LinkedIn Groups

    Group: Marketing Communication
    Discussion: How to Measure Social Media ROI – Is It Even Possible?

    Interesting article. Strengthened my understanding of Social Media and how it is used – especially how it relates to Professional Services marketing. I especially like the closing thought…”What you can do is stop being so focused on social ROI and concentrate instead on finding out what you have learned from your customers.”
    Posted by Susan Geelmuyden

  11. Barry Hammond says:

    As you can tell, your article piqued alot of interest. Mostly due to (as previously stated) the complexity of measuring ROI in an un-bound non-dollar invested system, such as social media. It seems as accountant types have gotten into soial media strategies and so there must be a certain dollar amount returned for each dollar spent.

    In my opinion, there is no simple equation for social media. All the metrics for clicks, Likes, Visits, Snaps, and the like only point to the amount of INFLUENCE. Then, when a product/service is sold/purchased where and how do you determine the amount of influence to achieve the dollar return. Ummm – a conundrum.

    Yes, you can have specific chews on a landing page for customers to bite and purchase, and those can be measured. But, for a wide dispaly of services across multiple platforms to entice customers to your website and then connect – then purchase – has no direct correlation to the standard definition of ROI.