Social media ROI: is David Meerman Scott right and can't you define it?

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Permalink Reply by Mario De Vos on January 20, 2010 at 2:54pm

By the way: for those who speak Dutch: the post was on MarketingFacts, you can read it here.

For those who speak English: you can listen to what David Meerman Scott says here.

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Permalink Reply by Jonas Klit Nielsen on January 20, 2010 at 4:16pm

Hi Mario, this is truly an interesting subject and probably one of the most discussed in the world of social media 'experts', 'Gurus', 'Ninjas' and what else people call them self.
In my humble opinion, it is very hard to measure ROI on social media right now. ROI is a pure financial instrument, a long story short - how many $ do i invest, and how many $ do I get in return. A lot of the activities on social media is brandbuilding, customer relationship, involvement, engagement etc. All that often are measured on other KPI´s than ROI.
On of the people I get inspired of listening too on this subject is Oliver Blanchard, to my knowledge he is one of the people that are working most intense on this subject, and he have drawn some pretty good conclusions so far. If you haven´t heard of him, you can check out his blog here http://thebrandbuilder.wordpress.com/ or see his fun presentation of ROI here

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Permalink Reply by David Alston on January 20, 2010 at 4:41pm

There are definitely two ways to look at this. I haven't rea the article (not too good with Dutch unfortunately) but from one angle David is right. The 'social' nature of social media means that relationships are often formed in all directions (those you interact with and those you indirectly touch). The many to many nature of it makes it nearly impossible to measure the ROI of the entire effort in a strict sense.

However you can also come at it from a different angle and say, that unlike the billboard, social media is much more trackable in terms of calculating ROI. Because social media is digital in nature, all of the "breadcrumbs" of interactions and where those interactions lead over time and what impact they had (did that 'follow' on Twitter lead to a website visit and did that visit lead to a demo request and did that demo request lead to a trial and then to a sale?) can be tracked to help determine an ROI. Is it all perfectly linear? No. Does it mean we should throw it all about because it's not all linear and neatly tied up with a bow? No, I personally don't think so.

Many of the traditional marketing measurements appear to be based on linear actions and many folks just take them for granted without really questioning whether they actually calculate the entire impact of a campaign or effort. I also find that many of the traditional measurements only look at a segment of the entire life cycle of awareness-to-sale, which again, would be incomplete.

It all comes down to setting up ways to track things in social media based on the objectives you have at the start. It's hard work but like all things that require an effort, the results are much sweeter in the end.

Mario, just my two cents. Hopefully something to consider anyway.

Cheers. David

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Permalink Reply by Siegert Dierickx on January 21, 2010 at 7:58pm

Sure you can measure the ROI of social media. But it isn't easy. In fact it's quite challenging! And as David states: it's not perfectly linear.

Monitoring social media, and calculation the ROI, isn’t a straight or pure science, and there ain’t no silver bullet. Each business is different and each social media strategy has different objectives, so therefore the approach for calculating ROI will differ each time.
In fact the approach is quite similar to web analytics, but here all activity is performed on sites and channels you own and which you can easily track. With social media, of course the difficulty is that this covers more or less the entire world wide web, which prevents the measurement or monitoring to be linear.

All starts by defining the objectives of your social media strategy & individual social media campaigns (and I'm not talking about just creating a Facebook fan page and let it live it’s own life – because that ain’t social media and the ROI of it will be zero). Once the objectives are clear, it's crucial to define 2 or 3 KPIs against which you measure the success. Not more than 3 or else you will lose the focus.
The objectives and KPIs could focus on sales, in which case the ROI is quite easily measurable (definitely when the sales needs to be done online). If the objective isn't a sale but still is an action such as a subscription, registration to a community, share info, etc, you can attribute a monetary value to this action, and calculate ROI based on this. If the objective is to create brand awareness, it becomes very challenging, but still you could create an ROI model in which you attribute values to number of followers/influencers, positive/negative comments, number of conversations, etc. As said, this isn't a pure science, but you will create some benchmarks against which you can compare the evolution of the social media strategy and the impact of your campaigns.

Believe me when I say this isn’t easy. And it’s lots of (manual) work to monitor and measure (via different tools and expert insights). But it’s definitely worthwhile, and even mandatory, to do this. Otherwise your social ship sails without direction.

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Permalink Reply by Michael Kahn on January 21, 2010 at 9:27pm

I totally disagree with David. At Performics, a search and performance marketing agency based in Chicago, we have had experience buying micro-targeted ads on Facebook for major advertisers targeting very specific audience segments. For these campaigns, we are measuring actions taken (leads generated, products sold) on a ROI basis against goals. And these campaigns have performed comparable to search.

In addition, you can measure ROI on other types of social marketing campaigns. A marketer just needs to pinpoint the engagements they want to measure and the value of those engagements. For example, page views, time on site, sign ups all have value, can be measured and be tracked on a ROI basis.

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Permalink Reply by Steven Woods on January 24, 2010 at 11:30pm

I think the challenge here comes down to two separate things:

- figuring out the ability of social media to affect an aspect of the buying process (ie, awareness, discovery, perception challenges that affect selection/validation)

- figuring out the ROI of a change in that aspect of the buying process

You CAN measure the tactical effect of social media on traffic, awareness, etc, but it is very hard to truly measure its effect on buyer perceptions. Similarly, many marketers do not have a true "top down" framework in place to truly know the value of each stage in the buying process (see: http://digitalbodylanguage.blogspot.com/2009/06/analyzing-b2b-marke... for more)

So, we can come closer to a good measurement, but only when the full buying process (of which social media is one small part) is well understood.

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Permalink Reply by Eric Woning on February 3, 2010 at 10:21pm

@michael Kahn - please listen to this: http://bit.ly/9DG3PY
I think you are making the error Oliver Blanchard is warning for.

P.s. I don't completely agree with him though - in his strict definition you are never completely sure... because how much of what a customer does can be ascribed to x, y or z. Or in other words: if someone has search for you, spoken about you, seen an ad on tv and then buys you.... which value is ascribed to what.
It has to be measured in how far people who do x are inclined to do y - and ultimately this is not ROI. Because ROI is how much did we sink into this project and how much did we get on return... but as stated above: ascribing it to individual media is a hard thing to do.

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Permalink Reply by Hans on March 22, 2010 at 12:14pm

Hi,

Measuring social media is not that simple as social media is also working on long term. But you can perfectly track your users, so, if you can track, than you can measure ROI as well. But don't look at it as "I have to generate a positive ROI now"... no, think long term to be succesful.

A good case is for exemple coca-cola. (click to see the key take-aw...

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