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What’s the ROI of Social Media?

by Robin Grant in News on 16 May 2009 at 18:14

It’s a question we get asked a lot, and despite the temptation to reply with Scott Monty’s (the head of social media for Ford) famed response – “What’s the ROI of putting your pants on in the morning?”, we usually say something more considered. We talk about how, despite the fact that we can measure the outcomes of the work that we do (and that we’re getting pretty good at it) and that we work with our clients to set meaningful KPIs at the beginning of engagements, it is still really hard to map those back to business metrics like ROI.

This is why we’re working closely with the rest of the IAB’s Social Media Council to get our research into the effectiveness of social media at a campaign level off the ground (you would not believe how hard it is to devise appropriate and affordable research methodologies to do so), and also one of the reasons we’re active participants at MeasurementCamp.

However, those that tell you can’t measure anything are wrong. If you’d like to know more, Jon ‘yongfook’ Cockle has a great presentation and accompanying blog post that outlines an approach to measurement that pretty much mirrors our own:

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  • Great presentation!

    I particularly like slide 6 - if companies simply move into social media to improve their bottom line they will fail. It's as simple as that.

    Only companies that truly understand the importance and power of social media will actually be able to gain anything meaningful from it.

    Whilst it is important to track results, and it would be great if it could be linked to ROI, it should not be the main issue.

    When discussing social media one of my key points is that companies should use it internally first, before using it for external communications. This will enhance the level of understanding and will drive home the importance of the investment of time and that you will only benefit if you give back. Too often companies still see social media simply as another channel for their marketing messages - and it's not.

    Engaging your customers and building relationships should come before ROI and bottom line. So by all means, measure your success of engagement and relationship building, but stop worrying about making money.
  • Some thoughts to share:

    1) ROI should stand for 'Return On Involvement' as that is usually the result of any action in the SM space.
    2) Social Media is not a campaign - it is a tool for mediating relationships.
    3) Social Media is what it is called - but - 'Customer Engagement' is what it delivers.
    4) Future Purchasing Intent is the result of positive customer engagement.
    5) Brand Equity measures may be more useful in determining share price in future in conjunction with speed of cashflow.

    I cannot agree with Daan wholeheartedly - although the arguments presented are interesting - 'stop worrying about making money' is just not helpful.
  • "Know which needles to push" and "define your success metrics" - all about knowing what you are trying to achieve. In that sense, Social Media is the same as all other business channels and opportunities. Failure to have a clearly defined goal can never allow efforts to somehow result in success.
  • richardstacy
    You can definitely measure things in social media. The big question, however, is are these necessarily the right things to measure? This is especially so when trying to them leap the chasm between metrics and ROI.

    I have a suspicion that the approach to measurement outlined in Cockle's presentation is all well and good - but perhaps overly focused on specific activities or campaigns, rather than an understanding of the inputs / outputs of the system as a whole - as I have outlined here http://tinyurl.com/cey3s8.
  • Hi :-) Robin,

    yes, the question:

    What’s the ROI of Social Media?

    I get asked too in every workshop.

    From my point of view in the early stage of doing a social media campaign it's really hard to measure the success, because like in most other activities in Online Marketing it takes time to see results and the bad news is that if you do Social Media Marketing or too SEO in a clean and ethical way it event takes loger to see results but therefore the results will be more sustainable.

    I think there is already something like a black Black Hat Social Media Marketing and it works in the same way than Black Hat SEO mostly works, it works fast and you get results fast but after paying the bill the customer will check that the results aren't of long continuance.

    Bad SEOs can mostly be identified by there unrealistic promises and I think in Social Media Marketing it's similar.

    I hold my self back with promises and I will never not measure my own work other people can do this better and if they will not see enough value in my work it's waste of time to go on. So what I mean is that it doesn't make sense that the same people who do the work measure the success of the work, this just brings mistrust.

    :-) hi and I have realized that other people even see more value in my work then I myself do, so why I should lose time with measuring things that I am not even sure that it can be measured in right way, better I give more efforts in doing a good Social Media and SEO Job ;-).

    Thank's Robin for the intresting post.

    Stay tuned
    Ortwin Oberhauser
    feel free to follow me on Twitter
    http://twitter.com/Oberhauser
    @Oberhauser
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