The ROI of Social Media

You are often asked to show the ROI of social media. How many rolls of toilet paper is this going to sell?

When was the last time someone asked for the ROI of running a television commercial?

I've been told this is what all mediums go through at the start of their lifecycle. It happened with TV when people would only advertise in newspapers and radio and it will happen with Digital.

I forgot who told me this, probably Ben.


nat said...

Jules, are you saying that you can't give a ROI on social media (or tvc)?

Just because it is difficult to measure, it doesn't mean measurements or projections should not be taken (the risk of those measurements should then be factored into the cost/benefit).

Suppose you were running a factory and your ops manager said new materials for production were going to cost $100,000. "How many Widgets will that make?" - a response of "I don't know" just wouldn't cut it.

Ben Shepherd said...

"When was the last time someone asked for the ROI of running a television commercial? "

All the time Jules. The idea that marketers don't look so closely at ROI on non digital mediums such as TV/magazines is a myth.

Its just that digital has a very close minded view of ROI generally.

Anonymous said...

Marketers often try to be empiricists, statistics are their eyes and ears.

Even in production we get ROIstered about our TVCs, usually as feedback from a past TVC dictating the direction the pending TVC will take. From one client I get Neilsens data and any sales fluctuations coinciding with an ad. I kind of like the feedback, but sometimes feel like a puppydog chasing its tail...

Julian Cole said...

Nat, with Marketing we are talking about a social science not an exact science.

Your example of a widget maker is an example of economics; which is an exact science, we can use formula to work out an exact answer. We know all the variables at play.

With marketing we do not have control of all these factors at play. We are dealing with an unpredictable variable- being PEOPLE and our crazy brains. There are a number of factors that contribute to someone buying a product; a number of them are controlled by the marketer and some are not.

When you do not know all the variables at play, how are you seriously going to get an exact number for ROI?

Ben, Its just that digital has a very close minded view of ROI generally, care to elaborate?

I am not advocating coming back with nothing when looking at metrics, I am just trying to make the point that sometimes. We should report on the hard numbers that we know for a fact (how many people are viewing the content, engaging with the content). We may make assumptions about ROI but we will never be certain.

Kimota said...

Problem is, every time someone says that social media shouldn't be about ROI, what the businessman hears is that social media is a loss leader. It's far, far harder to sell a loss leader to a business, no matter how valuable we say the brand recognition may be.

Unknown said...

I think what you're trying to say (correct me if i'm wrong) is the social media & social web marketing is not about sales, it's about relationships.

Putting a price tag or ROI on a relationship is currently a bit airy fairy and not an exact science.

It's something we are all working towards but in the meantime the question is whether or not it is fair to hold social media to the same accountabilities as Brand or Direct Response marketing pushes...

My response would be 'no'.

Ben Shepherd said...

Ben, Its just that digital has a very close minded view of ROI generally, care to elaborate?

Just because digital is measureable via technology many misinterpret that as it is the superior ROI medium. ROI is more than what can measured in a linear sense ... and ROI is generally the sum of many parts not isolated to one area (ie search often takes credit as this amazing ROI medium, not understanding the investment that has been made in creating demand)

As an industry generally we need to be committed to demonstrating and refining ROI and Jules I think your comments could be misconstrued by some that maybe for social media this is too hard basket. I'm not disputing that your point that many variables play a role but yeah, we can't fall back on that.

Julian Cole said...

Kimota, agreed, we have to work towards hard measures but I think it is just a reflection of the stage we are at with social media marketing.

Ben, I think you are on the money. I am not trying to advocate not measuring the effectiveness of campaigns. I think we should also be aiming to refine ROI measures and report the numbers we already have access too.

Zoe, you are correct; I think for a lot of social media it is hard to put a $ value to relationships formed. But I think there is a number of other valuable measures that we can report back to clients on.

Kate Richardson said...

Jules pop into a media agency for a day and before you can say TARP you'll be asked for the ROI on a TV campaign.

Ben Shepherd said...

"Jules pop into a media agency for a day"

Kate is absolutely right ... but media agencies are horrible places generally populated by cynics like me so I'd avoid stepping foot in one if you can mate ;)

Unknown said...

Have to agree with you on that one Ben...GET ME OUT!

Matt Moore said...

Kate - yes but - the conversation generally is not "do TV ads have an effect?", it's "HOW MUCH of an effect will YOUR TV ad have?"

So: most of the data on the impact of TV spots is circumstantial. You can show correlations between sales & TARPs but the TV spot is rarely the only part of the campaign. To my knowledge TARP is not actually a hard $ number, it's more like # of website visits by a demographic segment. N.B. I am not saying that TV spots don't work.

Most ROI justifications are bollocks.

But the thing is that people believe in TV ads - so TV ROI gets an easy ride.

"Where's your ROI?" is just a fancy way of saying "I don't believe what you're suggesting will work".

People have to believe in social media and I suspect the hype, BS and aversion of hard data isn't helping.

Data is our friend.

Matt Moore said...

I also think it's important to point out there is a difference between "measurement" in general and "ROI" in particular.

To maybe reflect what Ben said in a different way - marketers now have more measurements at their disposal than ever before. Most do not have the skills & experience to use that data to make optimal decisions for their brands so they rely on received wisdom & habit.

It's not the size of your dataset, it's what you do with it that counts.

Ben Shepherd said...

amen matt - so true

Adam Ferrier said...

Jules ROI is a crucial measure all companies are (should be) obsessed with. Kate's right all channels, not just social media are pushed on ROI measures of some kind. However, as others allude to many are close to meaningless (especially media agencies talking about 3+ and TARPS - why 3+?). To get reasonable ROI measures it's best to have sight across all communications touch points - not just one particular channel / style of media.