June 2012 The Amplification Model of Social Media Return Purchase Equivalency Calculator
The ChallengeROI = (gain from investment – cost of investment) / cost of investment• For clients that sell through channels and many others, directly measuring the “gain from investment” has proven problematic.• While we work on direct ROI calculations for clients individually, we are today publishing our “Amplification Model for Social Media Return.” – This model measures the volume of social media impressions and social media actions generated by marketing and provides a dollar figure for what it would cost to generate a similar level of activity through paid methods. – This calculates “Relative ROI,” which means the return on investment relative to where the money could otherwise be spent. It is, admittedly, not a measurement of Direct ROI, but it is an important component for those looking to validate spending where budgets are limited and where non-productive investments can be re-assigned.• In this case, we’re calculating “purchase equivalency,” the answer to, “How much would it cost us to buy this much exposure?” Given that, we use the formula: (value of exposure if purchased) / (cost of social media marketing)
What We Know• Social media is great at driving vast amounts of conversation. Conversation that gets seen.• One of the major reasons brands advertise is to generate positively sentimented impressions in front of an audience with a propensity to buy. – By this definition, social media marketing is every bit as valuable as advertising, as fans/followers and YouTube video watchers have all intentionally opted-in to brand messaging, making them a potentially high value target audience.• Study after study has shown that fans are more likely to buy from a brand than non-fans, and also more likely to recommend that brand to friends than non-fans.• Many (but certainly not all) social media campaigns have successfully driven traffic that converts at a high-level, often higher than those who visit a website through paid advertising.
Photo Credit: The Paradigm ShifterThe Amplification Model
1) Amplification ModelCalculates the value of the following:1) Facebook Organic Impressions2) Clicks on Facebook Links3) Twitter Impressions4) Clicks on Twitter Links5) Organic YouTube Views6) Blog Page Views7) Online Brand Mentions Using Data from: A) Cost Per Thousand (CPM) impressions for targeted online buys ($8 CPM) B) Average for cost-per-click advertising (varies by industry, used 50 cents for this model) C) Average cost per view for promoted YouTube videos ($0.20 per view) D) Parts of “Social Equivalent Ad Value Model” created by Tourism Ireland (http://scr.bi/KjPwEd)
1) Amplification Model: The FormulaFor a given time period, calculate:1) Organic Facebook Impressions (Sum of Daily Total Impressions – Sum of Daily Paid Impressions) x $10.00 CPM2) Clicks from Facebook Posts (use tracking links) x Average Cost of PPC Clicks3) ((Tweets x Followers) + (Retweets + @Mentions) x .12) x $10.00 CPM4) Clicks from Twitter (use tracking links) x Average Cost of PPC Clicks5) Organic YouTube Video Views x $0.20 Per View6) Blog Pageviews x Average Cost of PPC Clicks7) Online Brand Mentions x Average Cost of PPC ClicksFor each line, you will receive a dollar value. The sum of those values are the“purchase equivalency” for that time period.Divide the purchase equivalency by your spend on social media marketing to get aRelative ROI. What you’ve calculated is the cost of purchasing that same level ofactivity through traditional online media.
Amplification Model, Purchase Equivalency CalculatorFacebook Clicks number example Total Organic Page Impressions* CPM Value # clicks CPC Value Client Page A 15,276,282 $ 10.00 $ 152,762.82 44,803 $ 0.50 $ 22,401.50 Client Page B 66,030 $ 10.00 $ 660.30 73 $ 0.50 $ 36.50 15,342,312 44,876 22,438 $ 175,861.12 *Sum of Daily Total Impressions - Sum of Daily Paid ImpressionsTwitter Clicks number example Max Est Page Followers Tweets Retweets @Mentions Impressions+ View rate^ Impressions CPM Value # clicks CPC Value @ClientAccount 34,228 160 668 3,141 6,657,270 12% 798,872 $ 10.00 7,988.72 16,895 $ 0.50 8447.5 ^Rough estimated based on: http://adspace-pioneers.blogspot.com/2009/08/popping-twitter-reach-bubble-10-reach.html =+(Tweets*Followers*viewrate)+(RTs*310*viewrate)+(@mentions*310*viewrate) 310 Twitter followers based on: http://totalaccess.emarketer.com/Chart.aspx?R=116589&dsNav=Ntk:basic%7ctwitter+followers%7c1%7c,Ro:16,N:500 $ 16,436.22Organic YouTube Views Cost/Promoted Brand Total organic views View Value Client Account 326,632 $ 0.20 $ 65,326.40 $ 65,326.40 Used the Social Equivalent Ad Value Model for videos developed by Tourism Ireland: http://www.scribd.com/doc/85406652/A-new-simple-way-to-measure-social-media-Return-on-Investment-Social-Equivalent-Advertising-ValueBlog Pageviews Cost per Google Brand Pageviews click Value Client Blog 82,909 $ 0.50 $ 41,454.50 $ 41,454.50 Used the Social Equivalent Ad Value Model for videos developed by Tourism Ireland: http://www.scribd.com/doc/85406652/A-new-simple-way-to-measure-social-media-Return-on-Investment-Social-Equivalent-Advertising-ValueOnline Brand Mentions Cost per Google Brand Total brand mentions click Value Client Brand Mentions 120,411 $ 0.50 $ 60,205.50 $ 60,205.50 Used the Social Equivalent Ad Value Model for videos developed by Tourism Ireland: http://www.scribd.com/doc/85406652/A-new-simple-way-to-measure-social-media-Return-on-Investment-Social-Equivalent-Advertising-Value Total Impressions & Actions 16,732,907 Impressions 16,141,184 193,694,212.80 Monthly Value $ 359,283.74 Actions 591,723 7,100,676 Annualized 200,794,889 $ 4,311,404.93 Actions = brand mentions, organic YouTube views, blog page view, link clicks If client spends $150,000/month on social media ($3m annually) $ 1,800,000.00 ROI $ 2.40 of value for every $1 spent Download the Excel spreadsheet here: http://sdrv.ms/Q5NTvw
SummaryIn this model, the client would need to spend $2.40 in advertising (bannerads, pay-per-click, etc.) to get the same results from $1.00 of social mediamarketing.This model is certainly not perfect, but we offer it as a starting point in thehopes that our agency and others will find ways to improve it. Ultimately, wehope that it is one of 3-4 ROI models that can be applied to social mediamarketing depending on the situation and the objectives.