“How do you measure the Return on Investment of social media?”
Sound like a familiar question? Yep, us too. In fact, I’ve often thought it would be easier to measure the ROI of answering that one question than to measure the ROI of social media itself.
Because it’s so difficult? Nope. ROI is one of the easiest calculations in the world. Just divide the financial return you’ve received from social media by the amount you’ve invested in it. And there’s the rub. I’d wager that half of those investing in social media right now can’t quantity the financial return, and the half that can probably don’t know how much they’re investing (hard and soft costs). That’s before you even consider those who can’t do either. And that’s why every conversation I’ve ever been party to about the ROI of social media ends up talking about measuring fans and followers, web traffic and conversions, or influence and reach.
That’s not to say these are bad things to be measuring – right now they may well be the best metrics to track progress against objectives. But let’s not get these confused with ROI.
To help, here are five reasons to stop asking what the ROI of social media is.
1. ROI has to be quantified financially
In case it’s not already clear, you cannot measure the ROI of social media unless you know how much it costs you and how much you get back. Very few organisations are able or ready to do this, without investing more in measurement than they’re already investing in social media, which would seem to defeat the point somewhat.
2. The Risk of Not Investing (RONI) is more important
Think about email and telephones. The risk or damage of not having these – or them not working – is far more important to most organisations than the amount of money they might make or save as a result of investing in them. But who sits down to calculate the ROI of the phone system? The same is arguably true of social media right now.
3. ROI is not the same as Benefit
This is my favourite. Whenever I see the ROI question being asked, it invariably transpires that what the questioner really wants to know is what the benefits of social media are. This is fine – as long as they can be quantified; this helps others in an organisation see why it might be worth paying attention. But make no mistake; if you cannot measure a benefit financially, it’s not ROI.
4. ROI is not generic, even if the calculation is
There is about as much point asking a group of social media gurus what the ROI of social media is as there is my asking you what the ROI is of the iPad I’m typing this blog post on. Why? Because the return is personal to me. The answer to the social media ROI question is as specific to an organisation as any other ROI calculation.
5. Measure progress, not money
For most organisations (but admittedly not all) who are still relatively early in their journey towards building any kind of sustainable in-house social media capability, clear objectives, a focused strategy and appropriate metrics are more important than a (dare I say it) pointless attempt to define future success with a spurious financial calculation. Personally I would much rather see the time better spent working out what an organisation wants to achieve from social media, how they intend to do it, and how they can easily see whether it has been achieved – a genuine ‘Return on Social’ not just ROI.