How To Measure Your Social Media ROI: Don't

When companies invest in new projects, one of the first questions asked is: what will be the return on investment? When a company invests in social media, they ask the same thing, the only difference is that the industry is still struggling to define how to measure ROI. At the upcoming Social Ad Summit we’ll have a panel dedicated to the topic but for those looking to sell social media services, I have a better answer to defining social media ROI: don’t.

Traditional Digital Marketing Is Measurable

If you want to start selling something, turning to social media is not the first channel to turn to. Yes, large companies have no option but to embrace social media to engage their audience but does a small business need social media as much? I’ll answer that question in a minute but if you want to instantly boost your customer base through online channels I would suggest that you invest in search advertising and conversion optimization.

You can also launch a Facebook advertising campaign that drives people to the same site but you’ll be using traditional conversion metrics even though the targeting model may be different. At the end of the day, all traditional digital marketing models have obvious metrics.

The Value Of Social Media Is Priceless

With social media, the model is completely skewed. Can you say that a $500 investment will result in 1,000 visitors to your site? Also what percentage of those will convert in comparison to traditional sources? It’s difficult to track that information and while it is possible, the complete value of social media cannot be measured.

If you are the one who has to submit a report to an executive to get the social media program approved, I feel bad for you. I feel especially bad if that individual doesn’t get social media. The value however is not tangible though. Just like any other intangible asset, social media strategy can not be given an assessed value. Advertisers are more than happy to do so however.

So called “social media agencies” will develop applications and sell attached advertising campaigns to provide buyers with an effective model for valuing interactions. If you spend $400,000 on 1 million users within an application and then the traffic grows to 2 million organically, the approximate cost is $0.20 per user. You can then divide out the CPM as needed.

The problem is that the end result of that campaign is not measurable unless you were intending to convert the user into a buyer.

Make A Minimal Investment And Determine The Results

For a large corporation that’s spending hundreds of millions of dollars on marketing, carving out a million dollar budget isn’t that outrageous but it requires executive approval. The reality is that social media marketing is not expensive. Even if you are a small business and don’t have a large budget to invest in social media, making a minor investment is well worth it.

The result is a community of brand advocates and a more effective way to reach those that are being critical of your company. For those trying to figure out a one-time budget for social media marketing, I suggest that you don’t. Invest in the long-term growth of your company, not in short-term results.