The Social Media ROI Debate

Can the financial return on expenditures for social media business activities– in marketing, PR, customer support, HR, product development or other areas — be accurately measured? Can social media costs be justified on the P&L, so that as belts get ever tighter in this stagnant economy, these projects and tasks can be spared the budget axe?

Social Media ROI Debate? Not ExactlyAmong social media pundits, the debate rages on. The “yes” crowd argues that of course social media can be measured, and must be in order to demonstrate value to the business. You wouldn’t buy a new machine tool or enterprise software application without an ROI analysis, so why should social media be any different? Executives don’t care about shiny sparkly things or the latest fads or buzzwords; you’d better know what you want to accomplish, be able to quantify both expenses and revenue, and have the analytics in place to track results before even murmuring the words “social media” in the presence of C-level types.

The “no” group will counter that the metrics and tools haven’t yet matured, or that social media is too amorphous to even be measurable, or that it is rapidly becoming simply part of the plumbing or wiring of a modern organization, making ROI immaterial.

My own thoughts (for what they’re worth) on the matter are that:

  • • It’s challenging to measure the true ROI of social media activities with any precision because social media is as much (if not more) about influence than direct action. For example, if John Doe clicks through to your website from a tweet and buys something, that’s easy to measure. But if John Doe is influenced to buy from you based a tweet—but completes the purchase through another unrelated channel—there’s no way to assign the value of that sale to Twitter.
  • • That said, there are many aspects of social media that can and should be measured, both to show results and to help guide future activities (e.g. determining which topics generate the highest traffic and comment activity on a company blog, what time of day is most productive for tweeting, etc.). In other words, the statement “ROI is challenging to measure accurately” shouldn’t be confused with “don’t bother trying measure anything.”
  • • Metrics can be useful to help determine what to do more of, less of, or differently, but should not as the basis for whether or not to engage in social media. At this point, the adoption of social media tools is so widespread as to constitute just another communication channel. It makes no more sense for a business to shun social media until ROI can be demonstrated than it does to demand an ROI analysis for installing phone lines or email.

So much for my thoughts. What do other pundits have to say? Below are summaries of a variety of posts on the topic of social media ROI measurement from luminaries such as Danny Brown, Brian Solis, Erik Qualman, Michelle Golden and Sharlyn Lauby divided into their respective camps: yes, no, and maybe.

Is social media ROI measurable? Yes.

The Real Cost of Social Media by Danny Brown

This isn’t strictly speaking an ROI article, but Danny does dive into the “I” part of that measure, detailing the true costs (investment) of social media participation.

20 Metrics To Effectively Track Social Media Campaigns by Search Engine Land

Chris Bennett lays out the list of metrics he uses to analyze, track and “prove ROI’ from social media marketing. Compelling piece except for his use of the phrase social media campaign (argh).

Social Media ROI – How 3 B2B Technology Companies Are Achieving Revenue Results by MarCom Ink

Kim Cornwall Malseed summarizes the social media wisdom and ROI results gleaned from a panel of b2b marketing pros including Holger Schulze of SafeNet, Frank Strong of Vocus and Susan Cato of CompTIA. She reports on the revenue achieved, social media strategies used and measurement systems employed for tracking.

ROI: How to Measure Return on Investment in Social Media by Social Media Today

In this long but worthwhile post, Brian Solis reviews the evolution of social media measurement forms (e.g. “return on engagement”), the disconnect between social media marketers (most of whom can’t measure ROI) and CMOs (most of whom expect it), then offers his recommendations for improving the measurement of business objectives from social media.

Sexy Numbers: Measuring ROI in Social Media Campaigns by ReveNews

While acknowledging that tight precision is impossible because the same measures from different tools rarely match exactly (and multiple tools are still needed to end-to-end social media tracking), Angel Djambazov nevertheless makes a strong case for developing ROI metrics for social media campaigns. Quoting Brian Solis and others, Angel points out that particularly in this economy, even great ideas without a hard-number rationale are likely to get slashed; ROI measurements are needed because CMOs demand them. The post also includes some strategies, tactics and tools to assist in social media measurement.

Social Media Monitoring Techniques by WebFadds

Scott Frangos presents a concise but clear outline of basic social media ROI measurement objectives, tools and analytics.

Counterpoint: Why you can calculate an ROI in social media – and why you should do it by iMedia Connection

Uwe Hook responds to the post from Ben Cathers (in the “No” section below) on why social media ROI can’t be measured, laying out a roadmap using metrics such as frequency, yield, sentiment analysis, NetPromoter score and customer lifetime value.

Socialnomics: What Social Media Success Looks Like by Fuel Lines

Michael Gass shares a social media ROI argument in video format. “Socialnomics: Social Media ROI showcases what social media success looks like. Social Media ROI: Socialnomics is by Socialnomics: How Social Media Transforms the Way We Live and Do Business author Erik Qualman. This video highlights several Social Media ROI examples along with other effective Social Media Strategies.” Though a few of the examples are vague or misleading, most are compelling. However, after showcasing companies that have achieved remarkable, quantifiable results through social media, Qualman provocatively asks, “Why are we trying to measure social media like a traditional channel anyway? Social media touches every facet of business and more an extension of good business ethics…When I’m asked about the ROI of Social Media sometimes the appropriate response is…What’s the ROI of your phone?” He seems to suggest that while ROI is measurable, it’s immaterial. Hmm. You can find more of Eric’s insights on his Socialnomics blog.

Making sense of social-media ROI with Olivier Blanchard by SmartBlog on Social Media

Rob Birgfeld talks with Olivier Blanchard, introduced as “perhaps the most sought-after expert for those looking to connect the dots between social media and return-on-investment.” Perhaps. Blanchard contends that most self-proclaimed social media “experts” have difficulty articulating ROI because they have no business management background (agreed, I’ve seen these types — which is why our agency has an MBA who helps clients with social media). With that background, he argues that “the question can be answered in about three minutes. All it takes is someone on the social-media side of the table who understands how to plug new communications into a business from the C-suite’s perspective.” He also makes the case that being able to prove social media ROI is essential. The post just doesn’t specify how to do this.

Social Media ROI — No.

Social media (finally) returns value by The Communicator

Peter Schram doesn’t come right out and say that social media ROI can’t be measured, but rather that organizations should “focus on five key areas where social media will create actual value” that aren’t strictly about sales ROI, including corporate reputation, employee engagement and customer service.

“What’s the ROI of Social Media?” Is the Wrong Question by Golden Practices Blog

Michelle Golden makes a compelling argument that ROI calculations apply only to discrete projects with a beginning, middle and end, such as a direct mail campaign. Social media is a tool, not an event, so such calculations don’t apply.

5 Problems With Measuring Social Marketing by Web Worker Daily

Aliza Sherman articulates some of the frustrations with any social media measurement, much less something as precise as ROI, including the fact that the term “social media” is nebulous and that many traditional marketing concepts (e.g., “reach,” “promotions” and “campaigns”) simply don’t apply to social media –and the industry hasn’t yet developed widely accepted new measures (though Daniel Flamberg attempted to answer this last challenge in 4 Social Media Mining Metrics).

Why you can’t calculate an ROI in social media – and that’s okay by iMedia Connection

Ben Cathers argues that, because the advanced analytics tools that would be required for such measurement have not yet been developed, “In many forms of digital media, you can spend 1 dollar knowing you will earn 1.30…Unfortunately, you cannot do the same in social media, just yet.” He suggests instead that marketers estimate the payback on social media by assigning a value to metrics they can track, such as each follower, each retweet, each “like” of an item, etc.

CEOs Love Pie: The B2B Social Media Case Study, Part 2 by iMedia Connection

In this follow-up post to Conversations that Aren’t about Mel Gibson: the B2B Social Media Case Study, Part 1, Eric Anderson writes that “today you can’t throw a virtual rock without hitting five blog posts about how we all need to simmer down about ROI,” and places himself firmly in the “simmer down” camp. He recommends instead serving them pie, as in pie charts showing measures like “the proportion of their paid impressions that can be replaced or augmented with free impressions. PR agencies have long been selling the value of this pie as earned media or ‘ad equivalency value,’ so CEOs are used to seeing it. They get it. Once you’ve done your social media market analysis, it’s relatively easy to project how big that social media pie wedge will be.”

Social Media ROI…Maybe.

Quantifying Social Results by eMarketer

eMarketer reports that while marketing pros generally agree that quantifying the benefit of social media marketing is important, they are split on whether it is possible. Measuring certain types of activity or behavior is easy; translating those measures into ROI, not so much. As this article notes, “There is a leap, however, between finding appropriate metrics and monitoring them on the one hand, and quantifying results on the other. Marketers must tie the social metrics they settle on directly to business goals, such as increased sales and leads, before social media return on investment can be quantified.”

A call for more accountable social media marketing by iMedia Connection

After acknowledging that “ROI is difficult, if not impossible, to measure with social media. An astounding majority of professionals do not even try to take it into account.  According to a survey late last year from Bazaarvoice and the CMO Club, 72 percent of CMOs did not attach revenue assumptions to social media in 2009,” Jerry McLaughlin goes on to say that marketers must do it anyway. For example, one of his recommendations is to “reach specific social media goals with a tangible ROI, such as tracked discounts or coupons.” While that’s certainly not a bad suggestion, it covers only one very limited aspect of what social media marketing can do.

5 Ways To Set Goals & Measure Social Media Marketing Success by Smart Insights

Danyl Bosomworth summarizes a Jason Falls presentation on various ways to measure social media outcomes. While the post seems to suggest that measuring ROI is easy (measurement #5 casually includes “generation of sales and leads from blog visitors and from social interactions”), it also points out several other benefits that unquestionably have value (e.g., product innovation, branding and awareness, links for SEO benefit), though that value may be difficult to quantify. The message seems to be that if you can directly measure sales and leads then by all means do so, but recognize that social media can provide many other important though less quantifiable rewards.

Marketers Use Varying ROI for Social Media by Marketing Charts

According to a new study from King Fish Media, Hubspot and Junta 42 summarized in this post, most marketers perform some type of social media measurement (e.g., website visits from social media referral sites, new fans/followers, number of links shared, etc.). However, nearly half (43%) admit that they aren’t even trying to measure ROI. And only 29% say “they will have to show positive ROI to continue their social media programs.”

How CEOs are Using Social Media for Real Results by Mashable

Though Sharlyn Lauby shares numbers here from two CEOs able to correlate hard sales data with their social media efforts, she also points out that “even when there might not be data supporting a direct relationship between social media activity and sales, sometimes other metrics point to the connection” such as exposure, branding, customer satisfaction, recommendations, even employee recruiting. The conclusion seems to be that ROI may or may not be measurable, depending on a company’s specific circumstances — or at least that not all of the benefits of social media can be captured in precise sales and ROI figures.

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  1. Hey there Tom,

    Thanks for including me here, and great overview of what is unquestionably one of the most important questions any business using social media needs to ask.

    I’m definitely in the camp that you can measure, although you make a great point about second-tier influence.

    I actually wrote a kind of follow-up post to that original piece, with a look at measuring metrics, and if they convert to leads, in case you’re interested:

    http://dannybrown.me/2010/05/12/metrics-of-social-media/

    Cheers again, great conversation starter!

  2. Hi Danny –

    I appreciate your wisdom on this topic, both in the piece I linked in the post above and the follow-up linked in your comment.

    Just a couple more thoughts: first, many of the metrics in your Metrics of Social Media post (e.g. blog mentions, hashtag uses, Facebook fans/likes, YouTube channel subscribers) are indisputably valuable and worth measuring — but they aren’t ROI metrics.

    Second, as is so often the case where one’s perspective on an issue affects one’s outlook, “where you stand depends on where you sit.” Several of the measures you note may be valuable to retailers or e-commerce sites, but don’t apply to the b2b world, high-value consumer sales or many types of services.

    Still, thought-provoking as always. Thanks for your insights!

  3. Tom,

    Thanks for the great post and handy compilation of ROI attitudes and arguments. This post will become a favorite that I’ll refer to when clients request proof of social media ROI.

  4. Tom, great compilation providing the reader with views from various perspectives. I particular like your third argument social media being another communication channel which makes it a matter of HOW rather than IF. The IF seems to still be on many companies’ minds but the HOW is where the big challenges lie and what we will be busy with for years, building best practices, develop lessons learned and last but not least truly integrate into overall strategies and engagement with customers.

  5. Kristian – you nailed it. One can still find a fax number listed on nearly every corporate website, even though a sales prospect today is probably thousands of times more likely to try to connect with a company through Facebook or Twitter than they are to send a fax. Yes, measurement is important, but the “if” is now water under the bridge. The value of metrics is in helping companies shape the “how” of their efforts.

  6. Wow Tom, lots of great info here!
    I am personally on the maybe ground of ROI. I think it depends on what you’re trying to accomplish. I agree with what you said that if your goal is get people to make purchases through links on Twitter it’s very easy to calculate something like ROI.
    However, a lot of companies are getting into social media to build relationships and improve their customer service, which isn’t going to have an immediate ROI, or sometimes even one you can show.
    The question of ROI has become a very tricky one to answer these days, and I think that everyone is going to have their idea on how to show it. It just depends on what is trying to be accomplished.

    Cheers,

    Sheldon, community manager for Sysomos

  7. Thanks Tom and others for broadening the perspective in this much discussed and immature ROI subject.

    We belong to the YES (=why not) camp. You can measure social media better than a billboard campaign. The minimum that can be measured is the #impressions – the problem is that social media gives brand owners so much more. Many of these benefits can be measured – we are researching a scorecard model. The core question is strategic; what are the objectives? E.g if social media is used to substitute some functions in HR or Customer Service, the savings (opportunity cost) is a valid metrics.

    We see it all boiling down to objectives, strategy and analytics.

    thanks,
    Markku, CEO Betalabs

  8. Markku – thanks for the thoughtful comment. All valid points, but my concern is with an over-reliance on hard ROI. Different companies will be able to measure that with different degrees of precision depending on their unique situation. But if that is the only measure considered, then other activities which are worthwhile (in terms of exposure and brand-building for example) but more difficult to measure may be avoided, dropped or under-utilized. The scorecard model sounds very interesting.

  9. Measurement in any type of public relations has become harder to measure, so to speak. Measuring the value of social media can be hard to justify. Indeed social media brings a value, influence, which is not easily measured but when you have it, you know it, and when you don’t, you wish you did. That’s a line to share with those who counter the possibilities of social media. Thanks for all the great information here too!
    Cheers,
    Tracy

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  11. Thanks for this great compilation regarding ROI. very informative, really helped me a lot.
    Small Business Consulting Services

  12. Hi Tom,

    Terrific analysis, Tom! The mark of a truly intelligent person is being able to prove out both sides of an argument both for and against, and you’ve done so quite admirably here.

    FWIW, I’ve done my best over the years to quantify social media ROI by tying it back to real world business metrics wherever possible. Whether someone has 5 or 5000 followers is irrelevant to me. What I’m interested in knowing is how social media helped achieve tangible business goals.

    For example, if you use Twitter for customer service, you can quantify it by using traditional metrics such as Cost per Customer and First Contact Resolution (FCR). This has real world implications because the end result will demonstrate how/if the use of social media has resulted in significant cost savings. It may not be sexy (or grab headlines like “We have 1 billion Followers on Twitter!”), but it’s real results tied back to tangible business goals.

    Again, well done, Tom. My hat is off to you for the invaluable discussion you’ve started here.

    At your service,
    Michael

    — Michael E. Rubin, Social Media Strategist, Fifth Third Bank
    Disclaimer: I am a Fifth Third Bank employee, but this is my personal opinion.

  13. Thank you Michael, those are very kind words.

    The social media ROI questions presents a quandary for me, because I’m fundamentally a metrics guy. However, social media isn’t a direct response medium, and it often backfires on marketers who try to treat it that way.

    But it’s intuitively obvious that someone who “likes” you on social media is more likely to buy from you, and more likely to recommend you to others. And study after study back this up. I just haven’t seen the toolset put in place yet that can measure this entire decision flow with any precision. Maybe social CRM will be the answer, maybe it will be some type of more advanced analytics.

    For now, social media is too important to ignore, but precise ROI measurement remains elusive methinks.

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  15. Social is here to stay. I’m looking at google and its going everything it can to stay relevant with social. I believe they know something.

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