Social-Media ROI – Fact, Fiction or Fantasy?

Posted by on 3 Feb 2014 | 0 comments

Social-Media ROI – Fact, Fiction or Fantasy?

When I was young (don’t ask) writing budget proposals took time – but the rules were clear. There was a formula that most business people accepted, and it produced an easily recognized answer – the ubiquitous Return on Investment – that satisfied bosses the world over. I should know, I’ve written proposals by the dozen, approved a few and worn out the tee-shirt.

Fast forward to the 21st century and the era of intangible assets and difficult-to-measure outcomes – no, make that damn-near-impossible-to-measure outcomes. How do you go about pinning the tail on the ROI donkey today?

Working in manufacturing industry had its advantages; it was easy to show the cost of the latest widget-stamper you coveted, calculate how many extra widgets you planned to make with it and how many revenue dollars they would generate. Throw in a few expense items, a little extra working capital and a pinch of cost-savings, and “Voilà!” – a return-on-investment projection appeared as if by magic.

Social-Media ROI

When the intangible in which you want to invest happens to be a social-media tool that arrives as a software-as-a-service subscription and the potential outcomes range from a few hundreds of new Facebook followers to millions of additive revenue dollars, the math isn’t so simple. I have yet to find two “authorities” on the subject who agree how to establish the magic ROI figure — and I have a view that won’t please many.

Social-media ROI is fiction at best, but more likely fantasy.

Here’s why …

One of the first lessons I learned when writing investment proposals was “don’t claim the same revenue twice.” If I needed a widget-bender as well as a widget-stamper to make my extra widgets, I couldn’t submit separate proposals for the two machines, each claiming the same revenue hike; they had to be justified as a package.

More often than not, this was how it turned out, and I don’t see much that’s different today.

How easy is it to identify the single marketing action or point of contact that drove a consumer to buy a particular brand of car – or soda, or any product you care to name for that matter? Throw social media into the mix, and you’re almost always facing an impossible task.

Used as a business tool, social media rarely, if ever, operates stand-alone; it should not be evaluated in isolation. Dr Anthony M. Cresswell of the Center for Technology in Government, University of Albany, puts it neatly:

“[Conducting] a meaningful return on investment (ROI) analysis in … technology is a little like saying you want to live a healthier lifestyle.”

When you finally succeed in shedding those unwanted pounds, do you attribute it to a healthier diet, the extra visit to the gym or taking the stairs at work instead of the elevator? Probably a little of all three, if you’re honest (and lucky enough to be in that position). So it is with social media.

When a customer finally converts and buys a new branded camera, is it because she followed the brand on Facebook for a month before choosing the latest promotional offer? Or is it because she read an article on a photography blog that sent her to the Facebook page? Or maybe she was influenced by a TV ad for the brand that made her think about buying a new camera in the first place? Where does the credit lie? Who knows?

But … social media offers big benefits for business

Yet social media offers huge potential for businesses that use it well. Advertising aside, the benefits of brand-ambassador programs, employee-advocacy initiatives and similar social-media-driven projects are well established. So how do I convince my client, a no-nonsense business leader, that spending hard-earned dollars on projects like these is a sound decision?

Social-Media ROI is Fantasy

I went looking for an answer. Stimulating discussion on the topic in relevant LinkedIn groups wasn’t difficult. Several useful ideas emerged from the fifty-or-more shades of opinion that were hurled into the arena.

One that I like a lot not only has legs, but also precedent; it goes like this:

Stop thinking about social media as a tool that drives revenue. Sometimes it may do, but more often, its impact is “limited” to raising awareness and engaging people, be they employees, customers or the general public. Because people trust people that they already know more than almost any other form of recommendation, social media is exceptionally powerful. It reaches an audience that most organizations can’t even imagine.

And that’s the word that made me think again: reaches

Traditional advertising may be losing out to its younger, digital cousin, but it’s well-established, and with a full set of metrics to boot. Agencies have long been accustomed to using those metrics – among them reach – to Justify campaigns. Let’s take social media there.

And I don’t mean paid social-media advertising with its cost-per-click metrics. Yes, maybe that offers a comparison at the end of the justification, but I’m more interested in applying the sort of data that a good social-media analytics package gives you. Monitor every contact arising from non-paid social-media activity, treating it as the outcome of earned advertising, and see where it takes you.

Measuring reach, impressions, mentions and engagement for an item (all now accepted by the Public Relations Society of America as metrics for social-media measurement) is entirely within the capabilities of most social-media analytics packages. It makes for easy comparisons with traditional forms of marketing, and delivers the type of metrics familiar to CMOs everywhere.

So, if your investment in social-media tools will reach a bigger audience and deliver a lower CPM (cost per thousand impressions) than all of your existing marketing methods, why should your CEO not sign off on it? It’s one of the most cost-effective parts of your marketing budget, right?

Or are you still trying to calculate that non-existent ROI?

Image Credits:

LinkedIn Chocolates – nan palmero via photopin cc
Social-Media ROI – Svilen Milev
Social-Media ROI is Fantasy – Sergio Roberto Bichara
Mike Bailey is a Business Advisor and Creative Writer. He works with small businesses and start-ups to improve their business performance and presentation. Connect with Mike on LinkedIn or

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