Is Social Media ROI That Important Yet?

By Mark Evans - Monday, September 12th, 2011 at 7:30 am  

Here’s the thing about social media: the more money companies spend on it, the more that return on investment (ROI) is thrust into the spotlight. After all, it makes complete sense for businesses to get a handle on the effectiveness of their activities.

That is, at least, the theory because there appears to be growing signs that some companies don’t care about the ROI of social media. It’s not that they aren’t interesting in measuring bang for buck but, at this point, they seem content to be active within the social media realm than trying to quantify whether what their doing is working.

This against-the-grain approach to ROI struck me while reading a blog post by Rebecca Pollack Scherr about KFC’s social media activities.

Rick Maynard, manager of public affairs with KFC, said: “We don’t get a lot of pressure to justify [the return on investment]. It’s a very important customer-service element, and that’s enough for us.”

He added that KFC doesn’t spend “a lot of time figuring out the value of a Facebook follower. We see it as 3.5 million people who opted in and feel strongly about the brand, and we owe them the interaction and have a lot of fun doing it.”

Another blow to the importance of ROI came from Brad Shaw, Home Depot’s vice-president for corporate communications and external affairs, who told Fast Company’s Farhad Manjoo the company was ” trying different ways to help us better understand the ‘value’ of a Facebook like….but at this point, revenue is not the intent.”

In the same Fast Company article, Doug Clark, Audi of America’s general manager for social media and customer engagement, said the car maker had no idea how whether a social media campaign launched at last year’s Super Bowl had any impact on sales. “Today, the equation to measure that doesn’t exist,” he said.

While these are admittedly only three companies, they are major brands making large investments on social media. One would think that determining ROI would be important to justify whether the money being spent is having an impact other than attracting followers and Likes, tweets and updates.

Perhaps the cavalier attitude toward ROI has to do with the fact spending on social media is a drop in the bucket compared with other marketing and sales activities. It means social media is more of an experiment and learning process than an established corporate activity. As a result, ROI isn’t as important as participating and learning first-hand what works and what doesn’t.

The importance of measuring ROI can’t be dismissed because any corporate activity needs to be measured and assessed to see if warrants investment versus putting the money somewhere else. But for all the focus on ROI, the reality may be that it’s still early days for social media and, as a result, ROI isn’t a big priority yet.

At the same time, the ability to measure ROI is still in its infancy. Sure there are dozens of different ways to measure ROI but there is a long way to go before they become rock-hard and established.

For now, social media ROI attracts a lot of attention because companies wants to do know how they are doing beyond attracting attention and activity. But it does seem like there more talk than walk at least for time being.

Tags: , ,

6 Responses to “Is Social Media ROI That Important Yet?”

  1. Thanks for noticing this pattern and pointing us to these quotes.

    I think you’re right that the budget for social media campaigns are so low compared to other marketing activities that it doesn’t seem worth tracking.

    I hope though that these companies are also taking a smarter view of things. ROI can’t always be measured with an immediate sale. Also, ROI can’t always be measured in a straight line. Also, also, the ROI of one marketing activity can’t be measured apart from other activities.

    KFC has built a social media asset – permission to talk to millions of their customers at one time. That asset be used down the line for everything from quickly dispelling a myth, to introducing a new product.

  2. Mark Evans says:

    Hashim,

    You’re right about how there are lots of ways to measure the success of social media activity. Thanks for the comment. Mark

  3. Ron Ploof says:

    The companies mentioned in this post aren’t dismissing ROI, they are making investment decisions based on other factors beyond profit and loss (P&L). Most staunch ROI proponents only focus on one-half of a company’s financial health. They look at P&L while ignoring the corporate Balance Sheet.

    KFC’s 3.5 million Facebook fans won’t show up on a P&L. But those fans should be considered as a valuable corporate asset. How valuable? The New York Times carries $679 million of “Goodwill and Intangible Assets” on its 2010 balance sheet.

    The ROI of an asset can only be calculated if has a start and an end time. Think of an investor purchasing a stock. If that stock doubles in price, but the investor decides to hold rather than sell, what’s the ROI? There is none because the investment hasn’t been cashed-out yet. However, the investment shows up on the investor’s portfolio as having doubled in value.

    Companies like KFC, Home Depot, and Audi understand that their investments in social media are creating assets that can be used for generating distributions. Distributions can in fact be used to calculate an ROI. For example, If KFC runs a special promotion for its 3.5 million Facebook fans and gets a return out of that promotion, then the promotion is assigned an ROI. The value of the asset, on the other hand, remains intact, to be used again in some future promotion.

  4. […] Is social media ROI that important yet? There’s lots of talk about ROI but some major companies don’t seem too concerned about […]

  5. Actually, 4 years ago, I was thinking like you as stated in this old blog post I wrote late in 2008 and republished in 2009:
    http://visionarymarketing.wordpress.com/2009/02/10/blogging-roi/
    Nowadays though, I rather disagree that the numbers are so low. We are spending more and more, and that – whether we like it not – means that there must be a shift in our attitude. So, while we need to measure things, there is a requirement for us to:
    1. dissociate ROI from just sales (savings work too!)
    2. dissociate ROI and ROE (which is also a valid measure)
    3. know what we measure and what with
    4. take all this with a pinch of salt as the goalposts keep moving and we need to adjust constantly (the “Klout” index for instance keeps shifting.
    I will be keynoting on this subject in Amsterdam, and you can catch a glimpse of the slides at http://www.slideshare.net/ygourven/en-social-media-roi-istrategy-presentation
    My blog is being updated with more information on the iStrategy conference which is due to take place in Amsterdam next week.

  6. […] still rankig very high on the Marketing agenda as shown in this post on the Sysomos blog entitled “Is Social Media ROI That Important!”. Actually, 4 years ago, I was thinking like that too, as stated in this old blog post I wrote […]