Apr 13, 2012

Dear Gracie: The Social Media ROI Debate

Each week, Dear Gracie answers questions from ProfNet Connect readers with advice from our network of nearly 50,000 ProfNet experts. Has there been a question burning in your mind lately, something you’ve been wondering that none of your colleagues can answer? Please send it to grace.lavigne@prnewswire.com

Dear Gracie,

I’m curious to hear social media experts take on this ROI issue. How can we prove the value of social media without quantifiable proof? What can I say to clients who want to see evidence of their influence on social media?

Socially Stunted


Dear Socially Stunted,

Four ProfNet experts weigh in on this much debated topic:

Why Social Media ROI Cannot Be Clearly Defined

Traditionally, return on investment (ROI) is the ratio of money gained or lost, whether that’s in terms of profit, interest or something else.

“Normally, ROI is a simple numbers game,” says Ari Zoldan, CEO of Quantum Networks. If the investment has negative ROI, or if there are other opportunities to producer higher ROI, then the business stops investing. If the investment has positive ROI, then the business continues investing.

“So why doesn’t social media ROI follow that same formula?” ponders Zoldan.

“The reason is that social media ROI cannot be determined by a simple equation, because it is not measured in monetary profit, but rather in enhanced or broadened relationships with consumers.” And those types of “returns” can take months, or even years, to build and sustain, says Zoldan.

Furthermore, there is no clear endpoint in social media ROI, Zoldan continues. For example, if you own a company and are deciding whether or not to undertake an advertising campaign, you invest a certain amount, and once the money is used up, you decide whether or not the ROI makes the investment worth continuing. This strategy simply does not apply to social media ROI, because it’s not about creating profit in a literal sense, he says.

On the other hand, creating compelling social media content is similar in some ways to creating a billboard or having a placement in The Wall Street Journal, says Gina Bericchia, public affairs and media relations coordinator at The Ohio State University Wexner Medical Center. “It’s hard to draw the exact relationship between placing an ad and an increase of interactions with consumers, but we make the leap that one thing caused the other.”

Social media ROI is confusing because each type of professional is trying to apply it to a metric that they understand, explains Alex Nicholson, director of new media at Cone Communications, a PR and marketing agency in Boston. For example, for a PR person, ROI is based on engagement, but for an advertiser, ROI is based on clicks; and for a brand manager, ROI is based on sales. In other words, the “returns” are conflicting, says Nicholson.

The cherry on top of the social media ROI conundrum is that each social media platform offers different data on users, continues Nicholson. “Engagement and clicks look totally different from one platform to another.” For example, a tweet does not equal a ‘like.’

But there should be some way to measure whether or not a company is meeting its business goals, says Berrichia. “Brands that devote time to providing good customer service and using social media to meet their business goals will be the companies who are successful using these tools and successful in ROI,” she says. “In other words, you can’t just create a Facebook page because everyone else is doing it. You have to have a clear objective.”

Nicholson concurs that it’s essential to understand what success and failure looks ahead of time, even before determining the social media strategy. Establish what you need from the beginning, even if its just media coverage, and make sure the vehicles to track those goals are in place.

How to Measure the Impact of Social Media

“The ‘profit’ in social media ROI is enhanced relationships with users and consumers, and succeeding in branding yourself, your product or your company in an attractive way that will inspire users to figuratively — and hopefully literally at some point — ‘invest’ themselves in your site, wares, etc.” explains Zoldan.

Social media ROI is not a one-step, limited-time-only operation; it requires a great amount of effort and energy to get consumers to like — and “like” — you, says Zoldan. “There may be eventual, indirect profit down the road.”

To gauge success, consider how many followers you have acquired and how invested those followers are in your company’s online space, says Zoldan. Think about quality vs. quantity: having five followers who comment on every piece that’s posted is as equally bad as having 5,000 followers who only check in once every three months for five minutes. “The goal is to gain a large but also consistent following,” he says.

“Both numbers and anecdotal evidence are valid ways to establish a case for social business,” says Bericchia. If your client asks for hard-and-fast ROI numbers, talk about recent increases in engagement. Even if there hasn’t been a huge boost in number of followers, consider how many followers are talking about the brand.

Goals can be set in terms of audience growth, engagement levels, shares, clicks, Web traffic, coupon redemption, sales and more, suggests Nicholson. But ultimately, goals and measurement will be dictated by the nature of the business.

On Facebook specifically, “virality” helps measure the people who have created a story from your page’s post based on the number of people who have viewed it, adds Bericchia.

“Sentiment is important,” she continues. Monitor profiles to see if people are responding to their experience with the brand in a positive or negative way.

“Companies who experience the most success with social media will approach the market from a unique perspective,” says Zoldan. That is, they will “flavor” their brand in a way that is different from everything else in the virtual world.

There is no single “right way” to measure social media success, says Bericchia. Whether you’re measuring engagement or the number or products sold, it’s important to think about what the brand does well and use social media to maximize that.

For example, Bericchia continues, when someone says Zappos has a great social media presence, it’s really because they have exceptional customer service. “They maximize their opportunities by using social media to achieve their goal of providing outstanding customer service using innovative tools,” she explains.

“Companies that ‘get’ social media are doing it seamlessly as part of their marketing mix,” says Nicholson. “They know their consumer and they are activating in ways that feel natural and authentic to the brand across digital and traditional channels.”

Alternative POV: Why the Social Media ROI Conversation Is Pointless

Rob Frankel — branding expert, author and speaker, and founder of i-legions and PeerMailing.com — says in his blog post “The Business of Social Media” that social networks should be used for “socially oriented issues,” but not “business purposes.”

“Have we drifted so far from the purpose of business — making money — that entire campaigns can revolve around efforts which have no direct relationship to revenue generation?” he muses.

“For my money, social media is nice, but no big thing, really,” Frankel explains. “It’s just doing what people have always done, except now they can do it faster because of technology.” That is, before social media, people still found out about news and gossip.

“If raising awareness for your cause is your thing, social media might be the right tool for you,” says Frankel. Yes, social media links connects people, “but it’s a major mistake to assume linkage of people translates into actions of people,” he continues.

Spending a lot of time and resources on social media just to get a million “likes” on your brand’s Facebook page doesn’t add anything to the bottom line, and can therefore be a huge waste of money and effort, he says.

“It’s flattering to get 15 million views on YouTube, but until and unless you can convert those hits to sales, what’s the point?” he wonders. Concentrate on socially oriented issues on social media — not business issues.

What’s your take?


Written by Grace Lavigne, senior editor of ProfNet, a service that helps journalists connect with expert sources. Dear Gracie is published weekly on ProfNet Connect, a free social networking site for communicators. To read more from Grace, check out her blog on ProfNet Connect.

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