The REAL Social Media ROI – Quantifiable and Measurable (Sometimes)

February 3rd, 2010 5 Comments

After writing my last post about the ROI – the return on inaction –  of social media, one of the commentators challenged me to actually quantify the social media return on investment. This give and take is one of the challenges and benefits of social media. Companies can’t just stand behind pronouncements – they are challenged and forced to strengthen their claims.

The interesting thing about the question of “What is the ROI of Social Media” is that we can track this in ways that weren’t trackable with traditional marketing. Despite the fact that many people have difficulty giving real numbers to the ROI of social media, it’s actually far EASIER to track than traditional media.

If someone watches an ad on a TV screen or in a newspaper and then goes visits my store, how do you know that they came because of your ad? Maybe a comment card if they choose to respond. Maybe they’ll tell you. Maybe they won’t.

But, if you’ve set up your site correctly, and someone comes to your website (today’s equivalent of the corner store) because they read your blog, saw your tweet, or even clicked on the link that accompanied the online version of your news article on Time.com or the Wall Street Journal online, you can look in your web analytics and tell. If 100 people came to your site because of a link from Robert Scoble on Twitter, or a news article, or because they were looking up “really cool widgets in Florida” and you sell cool widgets in Florida, your web analytics will show this search. You “just” have to know how to monitor it. But your ROI was that 100 visitors who now know about your brand. And might buy your products or hire you. Or tell their friends about you or let a stranger know on Twitter.

For example, my wine blog analytics are below. Here, I can discover that I had a spike in readership because influencer Gary Vaynerchuk linked to me on ONE Twitter post. The ROI of one link on Twitter from an influencer is this traffic spike and the building of my personal brand. Just like companies claim that such and such magazine did an article on them, I now can say that Vaynerchuk linked to me and I can see that it drove traffic (even if only temporarily). If I had an online portal and earned revenue through page views, my income would have increased because of one link on Twitter. By the way, I have to be honest. The post Gary V linked to? That’s what I was hoping for when I wrote it.

In this case I blog as a hobby – very few people make money on ad revenue from their blog –  but because of it, I’m known of as an expert in Israeli wine and was quoted in a magazine for the restaurant trade and have been invited to trade shows. And occasionally — and this is why established brands still need to be paying attention – the established brand that’s not online doesn’t get mentioned. Or the established brand that’s not online’s credibility depends on the younger upstart’s view – even if they’ve been building their own brand for longer than the Millenial’s been alive. And a thousand (or more) more people a month know about Israeli wine and have made purchasing decisions based on what I’ve written. Yet there are plenty of people who know more about the subject than me. But they aren’t blogging.

If you sell something online then you can track if they found you from a  Facebook page. If you are a major B2B brand with no online commerce option, you can tell who found out about your company/brand because of web analytics. As an example, in the past few days, we had several visitors who came to The Cline Group – after just launching the site this month – because they went to Google and searched “the cline group” and others came because they looked for “inbound principles.”

But that leads back to the question of ROI.

Why does The Cline Group have a blog? Well, one of the reasons is because we are a business and, yes, we want to get paid to provide our communications and marketing services. If we get one new client a day, month, or year because of something that we wrote on our blog, well, that’s our business ROI. If we get one client at $3,000 a month or $100 an hour because they loved what we have been writing – over time, that’s our quantifiable ROI. More importantly, though, if we are seen as reputable in our community because (for example) 1,000 people read what we have to say every week, than that’s valuable for our business.

If someone comes to your hotel because they Googled “four star virginia hotel” and stayed for 4 nights at $120 a night and found your website, than the ROI of that one Google search (and the SEO and web design investment that you spent) is $480. If you got just 10 customers a month because of this, than your ROI is $4800 a month.

It’s worth noting another use case. What if you can find that 30 people found your site, saw it hadn’t been updated since 2006, couldn’t find your room rates and weren’t able to book elsewhere so they went to the hotel down the street – even though your hotel was better but your web site didn’t reflect that? That’s also lost ROI. Even there, by the way, Analytics can help track how many people went to your website and were immediately turned off and bounced away.

If you have an event, and you sell tickets to that event for $50/ticket, and you get 500 buyers because of your active Facebook presence, 300 because you reached out to people interested in the subject of your event on Twitter, and you got 10 corporate sponsors at $500 than your ROI for this one event is $45,000. Not bad for free tools and a whole lotta marketing knowledge.  So, in this case the ROI of social media is $45,000?

Not exactly. Because, let’s say that because of your last event, 500 of the 800 people signed up for your e-mail newsletter, found out about your next event, and 100 bought $75 tickets (because they enjoyed themselves so much last time). And, let’s say 1 of your previous sponsors really enjoyed themselves that this time they pledge $1,000. Then your ROI for the second event – because of work you did on your last event, as well as keeping up the relationships with the previous attendees – is $8500. And what if the other attendees couldn’t attend this time, but shared your post about it on Facebook and Twitter with their friends and their friends bought tickets because of a Twitter link – and positive experience from someone they trusted.

What do you think?

Hmm… so who said there’s no ROI in social media?

ROI photo licensed under Creative Commons –http://www.flickr.com/photos/cambodia4kidsorg/ / CC BY 2.0
Hotel photo licensed under Creative Commons – http://www.flickr.com/photos/wili/ / CC BY 2.0
Audience photo licensed under Creative Commons – http://www.flickr.com/photos/megapolis/ / CC BY 2.0

5 Comments

  1. I like this – thanks for sharing.

    Some might contend though that ROI is about seeing lots and lots of conversions, not just traffic. And if I find your page from Facebook 3 months ago but buy today, the correlation isn't as direct anymore. A company can't make an argument that his Facebook involvement last year helped him get sales today. With social media, they might not be looking to buy immediately, but they may be curious.

    My good friend Samir Balwani proposed a really great suggestion via a cookie (or standards). I think that would help a lot of companies make the case that there's ROI for this. But ROI is kind of hard to measure since the touchpoints and direct areas of penetration for sales/investment don't usually immediately follow social media discovery.

  2. Avi Hein says:

    Tamar – Thanks for commenting. That's a very good point – it's very hard to measure that someone saw your brand 3 months ago and chose to buy today … and I guess one of the challenges where you can't get 100% accuracy.

  3. Avi,

    There are tools out there that allow you to track these types of visits. I see them really coming to full swing by early next year.

    Good job on breaking down how the ROI gets murky. It’s about the interaction with your company, you, or your brand that matters in social media sometimes.

    As you outlined, having a strong social strategy completes the circle more often than it does not.

  4. Avi,

    There are tools out there that allow you to track these types of visits. I see them really coming to full swing by early next year.

    Good job on breaking down how the ROI gets murky. It’s about the interaction with your company, you, or your brand that matters in social media sometimes.

    As you outlined, having a strong social strategy completes the circle more often than it does not.

  5. Yup – I really like the cookie idea or some way of setting some standards. With people being so open as-is, I can understand the privacy concerns but I'd much rather see targeted messaging to my wants and needs instead of unnecessary junk!

Leave a Reply