What is Social Media ROI
Calculating social media ROI has been deemed as one of the tougher aspects of being a marketer. It’s not always the easiest to do because there are so many different meanings to what ROI may mean based on the type of conversion goals.
To simply put it—social media ROI is what you get back from all the time, effort, and resources you commit to social.
In order to track ROI, the key elements include:
- Identifying your monetary investment in social media
- Attaching a dollar amount to your social media goals.
How to Measure Social Media ROI
ROI = (return – investment) / investment
This straightforward formula has just the two parts: Return and Investment.
How to Calculate Your Return
“Return” is one of the trickier elements of social media ROI because (as mentioned earlier) it can mean so many different things.
First, you must determine: What do you want to achieve?
What is your overarching goal with social media? And how can you specify the right actions that meet this goal?
Second: How much are these actions worth to you?
Step 1: Specify a goal
There’s a ton of possibilities for choosing goals and tactics to track. Here’s a list of some ideas:
- New followers
- Clicks on a link in a status update
- Engagement (i.e. comments, shares)
- Online Purchases
- Filled out contact forms
- Email signups
- Downloads of a PDF file
- Time spent on an important webpage
- and so much more!
Step 2: Track your goal
Based on the resources you have, choose the goals you’re looking to achieve and track them.
Step 3: Assign a monetary value
Once you’ve chosen a goal and tracked the actions, it’s time to tackle the dollars-and-cents side of ROI. There are several different methods to choose from here:
- Lifetime value – How much do you earn on average from a customer? (There’s a quick calculator here and a helpful article here.)
- Lifetime value, multiplied by conversion rate – How much is each potential visit worth to you?
- Average sale – How much is the average purchase through your site?
- Pay-Per-Click (PPC) costs – How much would you end up paying if you were to use ads to achieve the same social media actions?
The PPC costs seem particularly interesting to me. Basically, you compare the amount you would pay in advertising for a new follower, click, impression, etc. and anticipate what you actually earn via your organic (not paid) social media sharing.
If it costs $0.50 to gain a single new fan to your Facebook page, then your organic gain of 50 fans is potentially worth $25.
Based on some experimentation and research that Buffer did, they found some benchmarks that might be helpful for comparison. (Best practice is to run a week-long campaign with social ads to get a baseline specific to your business.)
- Facebook like average – $0.50 per page like
- Facebook reach average – $0.59 per thousand impressions
- Facebook click average – $0.50 per click
- Promoted tweet – $3.50 per thousand impressions
- LinkedIn – $2.00 per click
How to Calculate Your Investment
- Your time or investment in a Social Media Strategist – Multiply labor-cost per hour by the number of hours committed over a given period (depending on whether you’re measuring social media ROI for the week the month, per campaign, etc.).
- Your social media tools – Add up the costs of all the tools and services you use for social media. Find the weekly or monthly costs using a bit of math (divide annual fees by 52 for the weekly cost, by 12 for the monthly cost).
- Advertising spends – The amount you spend on social media advertising—boosting Facebook posts, promoting tweets, etc.
All these costs added together will equal your investment.