Alexandre Tellier

Measuring ROI in social media: essential or useless?

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Marketers often disagree on the best way to measure return on investment when it comes to social media. We do not even agree on the necessity of such a measure. Then again, setting objectives and measuring their achievement is one of the cornerstones of marketing management as it is taught in our business schools. So, why the debate? The following article, which I will summarize and comment, takes a look at both sides of the question.

Fisher, Tia (2009). « ROI in Social Media: a Look at the Arguments », Database Marketing & Customer Strategy Management, 16(3), 189-195.

The author starts by mentioning that the debate around ROI in social media is and has been at the center of discussion for a while. I can only agree with her. We have written about this on our blog multiple times in the past (for those of you who read French, we recommend you have a look at this post on performance measurement in social media and this one on social media strategy). Despite the debate, most will agree that setting objectives is essential when venturing into social media, if only to direct actions.

Arguments for

Traditional measurement methods used in marketing can perhaps not be used as is in a social media setting, but they can be adapted. Quantitative performance measurement of social media initiatives using stable and defined metrics is essential. This allows for comparison of different social media initiatives. The ability to compare is important for advertisers who look to optimize their ads’ performance on social media. With that in mind, the IAB (Interactive Advertising Bureau) defined metrics specifically adapted for interactive media. Here is a few examples:

Social media: number of unique visitors, cost per unique visitor, number of repeat visits

Blogs: site relevance, author credibility

Widgets and social media applications: number of installations, number of active users

Arguments against

Most of the arguments against the measure of ROI in social media revolve around the same idea: traditional ROI measurement is not adapted to social media, which focuses on people, not dollars. The author also mentions that a consumer is worth much more than what he can potentially spend on his first transaction. It is best to consider all of his future spending as well as his influence, be it online or offline. This long term consideration is often overlooked by traditional ROI metrics.

Social media’s potential to avoid revenue loss is also not considered in traditional metrics. By being watchful and active, marketers can identify unsatisfied and vocal customers before their complaints reach critical levels. This is hard to measure, but certainly has a monetary value.

Furthermore, most of the things we would like to measure regarding social media can hardly be measured quantitatively. The author refers to Jeremy Owyang for some important attributes to be measured:

  • Intensity of activity, applicable to traditional websites as well as blogs
  • Sentiment (positive, neutral or negative)
  • Velocity, or the speed at which content is shared
  • Duration of visitor attention (ex: visit duration of a blog)
  • Participation (ex: comments)

In the end, for some marketers, currents metrics are too imperfect to be useful. The idea is why measure if the measurement is wrong and can lead to bad decision making?

So, what is the solution?

In my opinion, the solution is in the combined use of quantitative and qualitative metrics that will support comparability without overlooking the specificities of social media.

The author suggests the following attributes:

  • Attention, through time spent on website
  • Interaction, through clicks and/or comments
  • Conversation index, through the ration of comments and shares on number of blog posts
  • Sentiment through qualitative evaluation of opinion
  • Content through qualitative analysis of what is being said

In any case, the qualitative analysis of some of those attributes can require a lot of work. I believe it is worth the hassle, especially for businesses betting on social media to reach and convert clients. After all, for many of those businesses, a successful social media presence translates in a healthy pipeline of potential clients.