Measuring ROI of Social Media – Another Perspective
Posted on 27. Jan, 2009 by Pete Hollier in Search Marketing, Social Media
Last week I posted an article on Measuring The ROI of Social Media. This topic produced numerous responses on the Social Networks I participate in. Many of the comments were outstanding. It was clearly a popular topic and one of concern to businesses. In an effort to broaden the expertise in this topic I asked a number of the respondents to guest blog on the topic of Social Media and ROI.
The Introduction
Mark Havenner,
Account Manager at
The Pollack PR Marketing Group has agreed to share his perspective and experience in Measuring The ROI of Social Media
3 Steps To Figuring Out Your Social Media ROI
Now that you’ve finally admitted to yourself that Social Media is an integral part of your marketing plan, you may be sitting in front of your monitor staring at a Twitter Feed or Facebook Gadget with a furrowed brow. “Just how”, you may be asking, “does this discussion about some guy’s morning hygiene habits and this application that throws virtual pie at people translate to my bottom line?”
Fair question. And one that many people are asking right now. Ever since Twitter started splashing itself all over the business section of nationally syndicated newspapers, Facebook kept on bring in billions more in revenue every year, and every person in your target demographic change their status updates and share photos of their cats on Flickr you’ve realized you can’t ignore the movement any longer. Still. You are sitting in front of that monitor because you need to invest in this monolithic and constantly changing communication medium, but you need to determine what you are going to get out of it.
Here’s how you figure that out:
Step One: Circulation
In Social Media, your circulation is equal to how many people you are connected with (Followers on Twitter, Friends on Facebook, Connections on LinkedIn, etc). To value this, take the hours it takes for you to work on that network and compare that to the cost of an ad with similar circulation.
For example, I have 643 followers on Twitter and it takes me an hour a day to work that network. I value my hours at $250 per hour, so my “ad cost” is $250 for a circulation of roughly 650 on a daily message.
Step Two: Conversions
When you ask, “What is my ROI?” You must first determine what you consider a “return”. If you are creating brand awareness, is your return increased traffic to your site? If you are promoting a blog, is your return a comment? If you are selling widgets, is your return a sale? At what point has the prospect been converted into a customer? Why would you have advertised?
Generally refining a conversion as closely as a “sale” will give you a low ROI. In Social Media the objective is often more about awareness and driving traffic to a Point of Sale. So setting realistic conversions will give you better value.
Let’s say, in my scenario, my conversion is to drive traffic to my site. Than my $250 investment has yielded 40 visitors.
Step Three: Assessment
How successful were your conversions? Social Media may have a larger investment in terms of time and the yield may be smaller given the heavy lifting it takes to get there, but the conversions tend to be more meaningful than standard advertising.
Advertising may reach more people at once, but there is often a high ad-avoidance margin and so the market doesn’t see or care about the ad they are exposed to. In Social Media, the major engine is word-of-mouth and so while the reach is smaller, there is much less avoidance. The message comes from a trusted source and so is accepted more than advertising.
In Social Media, the effectiveness of a conversion can be seen through interaction. You can see if they are sharing your message with others, talking about your message, or going over to your website all within your normal social networking channels.
Compare those results with other conversion sources. Do you drive more traffic to your site, for example, with ads? If so, how long do they stay on the site as compared to Social Media traffic? If you have 2,000 visitors to your site but they bounce out within a second 99% of the time, than only 20 are meaningful conversions. How does that compare to the 40 that showed up from Twitter and read 2 pages after commenting on your blog?
Meaningful Interactions Yield A Meaningful ROI
With these three steps you can compare your Social Media ROI with any other promotional investment you are making. Often what you will find is that conversions made through Social Networks are more targeted, responsive and longer lasting that those made from traditional advertising.
There is a caveat. For you to have these glistening and wonderful conversions, you must first be a valuable and contributing member to the community. Splashing spam and ads in Social Media won’t make friends. Contribute and build a level of trust. The more meaningful and resourceful your investment is, the more valuable your return will be.
Mark Havenner
http://ppmgcorp.com – Follow Mark on Twitter
Guest Blogs
If you would like to be a Guest Blogger on any SEO / SEM topic please email your suggestion to pete@seowizardry.ca I look forward to hearing from you.
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16 Responses to “Measuring ROI of Social Media – Another Perspective”
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Pete,
Great article. Social media is tough in terms of quantifying results. This article has contributed to my practical knowledge.
Frank Dobner
Guys, this is a great overview and very “to the point”. We are in the Social Media analytics market and provide business intelligence level details about online conversations. What I’m looking for is a credible study on the economic impact of consumer activity using social media across various industries. Our industry needs tangible ammunition to show companies the impact of social media on their business. Once we can show that, then we can get to the point of developing specific ROI’s.
Thanks for the great tips on measuring my time investment in social marketing. Articles like this help me justify supporting the trend.
Pete thanks for the comment on my blog. I appreciate someone who knows what “organic” seo is. I think one of the downfalls of the said “social media expert” is that they think they know everything. They aren’t willing to keep digging to get to better and better solutions and methods. Good job on being genuine.
Great content. You earn a new rss subscriber!
Very good insight. I was frustrated with my current position because old school rules do not apply. Conversations are the best way to stop the fire and to promote your product. They are always happening and people need to realize that they are part of what is going on in this world.
Too many old school journalists are afraid of bloggers. If you think of them as people having a conversation and NOT as citizen journalists then you will have a better approach to the conversation.
I know when I am having a problem on a paid website. I would rather hear from the person in charge why this is going on then be ignored. Too many times they are ignoring their audience when that is something that you should not do. People are your largest supporters. It is time to acknowledge them!
Great article. It was to the point and I actually learned something.
Thank you!
Spot on regarding ROI. I think on the whole ROI in social media is misunderstood but this illustrates changing methods of assessing ROI. This may apply in other marketing communications also.
I have NEVER been able to think about measuring ROI on my hard-to-explain Tweets, now I have the simple tools to make it so. Thanks, Captain!
I am monitoring my growing followers, see my friends come and add pictures to flickr.com but I have yet to see an Ann Arbor real estate sale as a result. To that end, I will try to add value to my network for referrals and clients. @annarborrealtor
Thanks for this post. To echo Steve Dodd’s sentiments: “What I’m looking for is a credible study on the economic impact of consumer activity using social media across various industries. Our industry needs tangible ammunition to show companies the impact of social media on their business.”
We (Room214) are working diligently on contributing to such studies – and believe one path to success is tying social media measurement alongside existing customer service and/or CRM standards. In many cases, ROI has established benchmarks here, and the conversation is different from an ad equivalency approach.
I read your posts for a long time and should tell you that your posts always prove to be of a high value and quality for readers.
I always enjoy your information and want to first say I agree with your points not only here but in your original blog. The dirty side to this is that it does have a long term focus and payoff. In this economy that is hard to sell. Some companies don’t have that long with the dollars they have left.
We(Yepser Internet Strategy) continue to try and find more ways to bring a more immediate reach without coming off “pushy” or sounding too sales focused within the community. Let me know if you have any ideas?!?!?