The 5 big lies of social media ROI

Think ROI is sales-based, easy to compartmentalize, or meaningless? We bust these and other myths.


The quest for return on investment is an old problem. John Wanamaker once famously complained, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

Social media marketing was supposed to fix the ROI problem by making interactions with brands easy to track. In practice, it has just given companies more data than they know what to do with. Don’t blame social media for what are essentially business problems. The confusion over social media ROI happens when we design faulty campaigns, ask the wrong questions, and obsess over meaningless data points.

Social media can deliver business value, but you can’t create a social presence and then try to figure out its value after the fact. You have to build ROI into the core of everything you do online. The trouble is that there’s a lot of misinformation about ROI out there. Here are five big misconceptions you need to do away with if you’re going to get to the heart of the matter.

1. ROI doesn’t matter. Some people will argue that because we don’t know what the exact ROI of a phone book ad is, that lets social media marketers off the hook. The problem with that reasoning is that once you decide ROI doesn’t matter, it opens the door to all kinds of magical thinking. That doesn’t mean you should ignore social media if you can’t generate ROI immediately. Even if you’re never able to establish a hard ROI ratio, the very act of pursuing ROI brings rigor to your marketing as you continually test, refine, and retest your efforts based on solid benchmarks and clearly defined business goals.

2. Social media is free. Social media is time intensive, and your time is valuable. As your presence grows you may need to pay for tools or additional staff, but at minimum you need to account for the value of the time you commit.

3. ROI is all about sales. If you want to understand the full benefit of your social media efforts, you need to look at cost savings throughout the organization. If you lower your cost per lead, improve the efficiency of your customer service, or attract qualified new hires using social tools, you’re generating ROI.

4. ROI can be measured in something other than money. Fans aren’t ROI. Neither are retweets or blog comments or any form of social sharing or participation, if only because not all comments are equal. A single social media interaction with a client might create a sale or save you money, but many more will not. So it doesn’t make sense to measure all such interactions as equal indicators of success. ROI can only be measured in currency earned.

5. Finding ROI just requires a little back-of-the-envelope math. You can’t just assign a dollar value to each fan and then add them all together. The process of calculating the costs and benefits of social media vary depending on your tactics and goals.

Want to dive deeper into the world of social media ROI? This post was adapted from the white paper “The SmartBrief Guide to Social Media Return on Investment.” Sign up for SmartBrief on Social Media and receive the entire guide to social media ROI for free.

Jesse Stanchak is the editor of SmartBlog on Social Media, where a version of this article originally ran.

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