There’s No ROI on Social Media

ROI

First, a confession. The headline is designed to capture your attention so I’m guilty as charged for suggesting an idea that many people may find preposterous.

In fact, the headline isn’t true or accurate but it does play on the raging debate happening over whether there is return on investment (ROI) from social media activity, and how ROI is or can be measured.

This discussion isn’t surprising because new ways that companies spend money should be analyzed and measured, otherwise there is difficult to know whether it’s money well spent, or money that should be spent on other things.

The challenge when it comes to measuring social media ROI is it’s still early days for social media. As a result, there is a lot of experimenting (and spending) by companies that want to get experience and insight into what works and what doesn’t. At the same time, they are trying to create ROI models that can be used for measurement purposes.

A good example is The Gap, which recently launched a new campaign, “Born to Fit” that features the extensive use of online ads and social media, in particular a Facebook Page.

In a blog post, Jacob Morgan included this intriguing quote from Julie Channing, senior account director for AKQA, the agency handling The Gap’s campaign:

“The Gap had set no numerical benchmarks to determine success in the campaign, but rather would look at how much consumers interact with the brand to gauge ROI.”

Morgan contends the problem is that without benchmarks, it’s difficult to “measure ANY type of success, let alone ROI”. Morgan makes a good point because how is consumer interaction with a brand measured? He also questions how AKQA will be able to explain to its client how well the campaign did without defined metrics.

For anyone focused on social media ROI, The Gap’s approach may be frustrating and, perhaps, disappointing given The Gap is a major advertiser defining how it operates within the emerging social media landscape. At the same time, it also shows that social media ROI is still work in progress, and that the “rules” have yet to be established.

Of course, it should also be pointed out that marketing within social media is a different creature than traditional media.

In social media, there are well-defined metrics that can be used to track ROI such as Web site traffic, click- throughs, and higher sales. At the same time, social feature features “soft” metrics that are more difficult to measure: better customer service, engagement, interaction, a stronger brand and more loyal customers.

The focus (obsession?) with social media ROI is healthy and much-needed because it’s part of the process in which social media will become a viable option for many marketers and advertisers. The more attention paid to ROI, the faster, in theory, the parameters will be defined and established.

What do you think? Are there ways to effectively measure social media ROI right now, or it is still work in progress?

More: Jacob Morgan has been spending a lot of time focused on social media ROI: here’s a collection of recent posts he’s done.

7 Comments on “There’s No ROI on Social Media”

  1. Joseph,

    Thanks for the links to Dave’s post and your comment. All the talk about ROI is a good thing to get a better idea of social media ROI really means, and how it should be measured.

    cheers, Mark

  2. Regarding your question, “Are there ways to effectively measure social media ROI right now, or it is still work in progress?”

    I thought it might be worth sharing that, in fact, those in the training/learning industry have struggled with this question long before “social media” was a gleam in Web 1.0’s eye. And, in 1994, Dr. Donald Kirkpatrick published a 4-level model for evaluating the effectiveness of training.

    Long story short, Kirkpatrick’s Level 4 is generally thought to correlate to economic/financial results–ROI for training programs. Same questions we’re asking today about social media ROI.

    The thing is, the same approach–and business metrics–used in evaluating *training programs* across each of the 4 levels in Kirkpatrick’s model could be an excellent proxy for evaluating social media ROI across a similar spectrum from “soft” to “hard” measures.

    I wrote a post about this: “The Problem With the Social Media ROI Question: http://bit.ly/PldAj

    If you visit, feel free to comment. I’d appreciate feedback to help refine my own thinking on all this.

    Thanks for your post.

  3. There are a few fundamental truths that are, I think, missing from your analysis.
    1. Measurement is not about justifying your existence. There is definitely no ROI in justification exercises. Measurement is about continuously improving your program, and you say there is no ROI in continuous improvement.
    2. Whether its old media, new media or somewhere in the middle media you still have to understand the impact you are having on your audiences. That’s what measurement does. And yes, sometimes you need to use old-fashioned tools to measure that impact — like surveys.
    3. You become what you measure. If you don’t measure the “return” and only measure activity, you will never achieve your goals.

  4. Katie,

    Thanks for the additional insight. It is interesting to see how the approach to social media ROI is evolving, changing and taking on new angles as it becomes a bigger part of how companies operate.

    Mark

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