Why You Should Care About Social Media ROI

One of the most talked about, sought after, and debated areas of social media marketing is ROI. In case you've never heard of it,  ROI stands for "Return on Investment" and is a term long used by financial and marketing professionals, defined by Wikipedia as, "the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested." Basically, it's calculating the profit gained by investing in something. In social media that "something" would be dedicating marketing dollars to (or investing in) a social media strategy and figuring out whether that strategy actually helped make a profit.

It's been highly debated amongst interactive marketing professionals as to what actually constitutes social media ROI (is it clicks? comments? website visitors? conversions?) and whether executives are missing the point when it comes to social media, applying outdated standards to an entirely different marketing approach. While I'm not going to get into my detailed opinion on the subject, there are two major thoughts I have on social media and ROI:

1. If you're going to provide ROI on a project (where the investment in question is dollars), your end goal should always be financial impact.
2. Social media is not an effective short-term marketing strategy.

"R" stands for $$$

One of my favorite thought leaders on social media ROI is Olivier Blanchard, who produces great content on his blog http://thebrandbuilder.wordpress.com. He put out a great presentation last year on how to calculate social media ROI (see below) that really hits the mark in explaining what it means, why you need it, and how to actually find it. As you'll see in the presentation, although non-financial return (visitors, feedback, clickthroughs, etc) is very important in ROI calculation, if that's where the process ends, it's fallen short of truly measuring ROI. The return must always translate to actual dollars (not potential dollars, perceived value, or Monopoly money). An important distinction Olivier makes is that not all clients will be seeking financial impact with their social media strategy. Some are perfectly happy measuring brand awareness, feedback, brand monitoring, and other kinds of metrics. However, if they are asking for ROI, you better know how to find it!

Social media and the long haul

Whenever I talk about social media ROI, metrics, web analytics, strategy and everything else involved with social media marketing, it always solidifies my opinion that social media doesn't make for good short-term (1-2 month) strategy or an everyday intern's part-time responsibilities. It can be fun to interact with the audience, play around with new web apps, run contests, and enjoy real-time communication, but unless it's being measured and serves a purpose for the overall goals of the business (and its executives) it's a waste of time... and we all know time = money.

How do you know if your efforts are meaningful? Identify your goals or what you hope to get out of the time you're going to be investing in social media, devise a strategy on how to achieve those goals, make note of relevant baselines, track performance, and then take a look how your efforts succeeded or failed in meeting your goals. These are not tasks that can be undertaken and executed in a week or even a month. If you really want to see the value of social media (whether you're looking for ROI or non-financial impact), it's going to take a while to start seeing the big picture. But with a little authenticity, professionalism, creative thought, and dedication, social media marketing can be a great investment for any business. As in life, you just have to know what you're looking for and how to go after it.

Here is a great video from Olivier Blanchard speaking about social media ROI in his own words:

Are you measuring your social media ROI? If so how and are you satisfied? Let us know your thoughts in the comments.