How to measure ROI on social media has become a common question. The human race has created vaccines, solved Fermat’s Last Theorem, and discovered the elusive Higgs Boson. If social media ROI were indeed determinable, we’d have solved it over a not so busy weekend. Don't you think?

1. 3 Reasons Why There's
No Measuring ROI on
Social Media
Tags: Social Media, Business, ROI
Year: 2013

2. Reason 1
The burden of numbers!
Social media throws up many metrics –
likes, follows, comments, views, shares and too many
others to name here. The moment a medium has a
multiplicity of data points, there is the looming weight
of expectation of its ability to churn out one single
other (simple?) number…like ROI.

3. Reason 2
ROI has its roots in finance
ROI has its roots in project finance – where the return
was based on the cumulative cost of production – not
just on a thin slice of it. The simple reason was that it
is virtually impossible in most scenarios to isolate
cause and effect – to separate out a component of
“return” attributable to a single factor of “investment”,
especially on a variable cost component like
“marketing costs.” In fact, having a positive ROI on a
variable cost is a complicated way of saying you can
now print money.

4. Reason 3
Adding monetary value to a
social media fan.
In terms of social media today, we often hear
questions like “what is the monetary value of a fan?”
Ironic, considering that we still have not fully defined
the value of a TV commercial viewer. In fact, we
continue to „invest‟ in television and other mass media
advertising, notwithstanding the fact that we still don‟t
know which (proverbial) 50% of our budget is working.

5. But of course, ROTFL (Rolling On the Floor Laughing)
will not get you those much-needed budgets. So, here
are three alternative ways of thinking around the ROI
box….

6. Approach 1
Establish Correlation
Look at mass media – when brand and marketing
managers can show a positive correlation between
sales and brand preference, and then a correlation
between brand awareness and advertising, the budget
approvals keep rolling in.
Social Media exponents could try something similar –
establishing correlations between social media
engagement metrics and brand preference and sales.

7. Approach 2
Piggyback on “surely that
must exist” metrics
Measure a subset of your social media activity that
translates into a similar audio-visual brand experience
(like viewing You Tube video). If this can (and it can)
be ascertained, and if we know the value of an “audio
visual brand experience”, we can…insert drumroll
here…measure a subset of ROI. Complicated,
incomplete, but doable. And it‟s a way around the ROI
question.

8. Approach 3
Benchmarking
Research what the competition is doing and then analyze the consequences
of inadequate investments. A sure shot way to get approval on investment –
fast.
This approach holds an important insight – that of the value of
benchmarking. Peer pressure is often the strongest determinant of budgets.
For example: if you are an airline competing against Delta, Southwest and
JetBlue, who are all replying on Twitter in less than 10 minutes on an
average (which they are), that‟s probably your strongest rationale for
increased investment into a Twitter customer service team.
Keeping up with the Joneses was never so important. Now there‟s
something to ROFL about. :)