Why the Huge Focus on Social Media ROI?

Everywhere you seem to turn these days within the social media landscape, there’s talk about ROI.

What are the metrics that should be used? What KPIs should be considered when measuring ROI?

While it is important to get a good handle on the returns of an investment – be it time, money or people – there seems to be an obsession about social media ROI. Maybe it’s because metrics are a key ingredient of social media when you consider the focus on the number of comments, tweets, RTs, updates, Likes, views, followers, etc.

Since social media can be measured in different ways, it is measured in many ways. In some respects, it’s like baseball, which involves so many statistics that it spawns endless approaches and way to measure just about any team or player.

The strange part about the obsession with social media ROI is how so much marketing spending isn’t measure or can’t be measured – something that was highlighted in a recent comment.

For example, what’s the ROI on a brochure? What about a billboard? How about an ad in a newspaper?

It is possible to measure how many brochures are printed and how many are distributed but you can’t measure how many people read a brochure. In the same way, you can measure how many automobiles pass a particular billboard you can’t measure how many drivers actually look at the billboard.

Despite the inability to accurate measure the effectiveness of a billboard or brochures, billions of dollars are still spent on them by companies as part of their sales and marketing activities.

Another reason for the fascination with social media ROI may be because it’s relatively new. As companies experiment with social media as opposed to spending on other marketing activities, the ability to measure social media ROI could make it easier to justify spending more if the results are encouraging.

This can be particularly powerful within an organization that is reluctant to changes it ways, even though the market dynamics and the competitive landscape may make social media a no-brainer.

Perhaps we’re overly concerned about social media ROI because it is so new. And while it would be wrong to dismiss social media ROI, we may need to be stressed and focused on it.




3 Comments on “Why the Huge Focus on Social Media ROI?”

  1. What is the ROI of your website?

    In the late 90’s I ran the ebusiness practice for IBM in Northern California. We met with CEOs and CIOs throughout the silicon valley and the bay area regarding their web strategy. The two questions that were continually asked were ‘Why do I need a website?’ and ‘What is the ROI?’. These are the exact same questions being asked today regarding Social Media.

    So, what is the ROI of your website? That’s right, nobody knows. But you use it for marketing, sales, customer services, and if you are good, product innovations and community development.

    If you don’t want to go through the equivalent of a ‘server consolidation project’ (circa 2002-2004), then get a good Social Media plan in place now.

    1. Paul,

      Thanks for the insight. You raise a good point about how many people questioned the need for a Web site. The same now goes for social media. That said, it does make me think the focus on ROI is a distraction more than anything. cheers, Mark

  2. It is a popular question because our clients see a new medium that they do not always understand. Digital media can, and should, be measured. Unfortunately so many “social media experts” say that measurement isn’t important.

    I disagree.

    I often turn the question around as Paul did above and ask “what is the ROI of your website” and get blank looks. But the fact is we should be able to measure that to some degree.

    We should be able to measure the effect that social media or a website has on decreasing customer service call volume.

    We should be able to measure sales on a website where e-commerce is part of it. We should be able to measure against specific goals of contact rate, downloads, or other metrics that drive business or potential business.

    Most companies attach a value to that. And thus it should be measured. Just because offline media isn’t measured doesn’t mean that we should use that as an excuse for not focusing on ROI and measurement with digital media.

    As for measuring social media there are some important metrics we can look at. CPM is one, for an awareness campaign. Customer service inquiries could be another. Share, views, followers / fans are all important to understand your audience size and demo. And conversions once these people reach your funnel should help you understand what channels are the most successful (online or off) that drive higher sales volume, more inquiries, qualified inquiries or any other metric that is important to you.

    And as far as ROI goes, like any business it can be boiled down to a simple equation — income divided by cost.

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