Tony Gallegos aka The Mortgage Cicerone's RSS Feed
 |
Why Calculating Social Media Marketing ROI is Fuzzy Math and Sometimes Plain Stupid |
Today someone asked me a question regarding the appropriate or best method to calculate return-on-investment for social media marketing activities. Truth be said, it is something I have often thought and pondered. Subsequently, the more I investigated, the more I found the answer became fuzzy at best.
During my research, I came upon a very insightful AgentGenius.com post by Ben Martin regarding the tricky and slippery slope of calculating Rate of Return in Social Media.
For anyone who has asked themselves the same question, I recommend you read Ben’s post:
Measuring Return on Investment in Social Media Marketing is fuzzy math
Taking this conversation one step further and providing further illumination on the fuzziness (is that a double negative?) of social media ROI, Alex Bogusky, Chairman of Crispin Porter & Bogusky explains:
“You can’t buy or measure attention in the traditional means anymore. Having a huge budget doesn’t mean anything in social media…The old media paradigm was PAY to play. Now you get back what you authentically put in. You’ve got to be willing to PLAY to play.”
This further led me to the question; why try measuring social media like a traditional marketing channel? Because, in essence, an effective social media campaign should touch every facet of business and it should be viewed more as an extension of good business ethics. Which, if done properly, will harvest sales down the line?
Social Media Measurement is Both Art and Science
In many ways, the key issue with determining social media ROI is that it attempts to assign numeric quantities to human interactions and conversations, which in reality is often not quantifiable.
To illustrate this point to our quantitative measurement and metric geeks; in many cases, what you are attempting to do is assign a multiple choice scoring (quantitative) to an essay question that is qualitative in nature. It just does not always work that way.
While I believe ROI calculation is possible over the long haul, new emergent calculation methodologies must be expanded upon. These expanded methodologies must also include a synthesization of the critical qualitative and quantitative elements necessary for the accurate calculation of social media ROI. Quite frankly, I don’t believe we have reached that point and until then, social media ROI is and will remain fuzzy.
In closing, below is a hyperlink to an awesome video highlighting this very point.
Written by:
Tony Gallegos aka The Mortgage CiceroneSunday, November 29th, 2009
November 30th, 2009 at 6:00 pm
Tony,
Good article but as many similar articles, it is not fully accurately describe the state of Social Media ROI.
Social Media ROI does not have to be fuzzy. Go to dagholmboe.wordpress.com and download a spreadsheet which helps you calculator the social media ROI in black and white.
There is some estimation required (the “art”) and then there is the actual calculations (the “science”).
The work behind the Social Media ROI calculator is based on work by Charlene Li (forester) and Bill Johnston (ForumOne). In essence, the calculator uses the cost of an offline campaign as its “return”. The idea is that you would not pay more (”cost”) than the value (”return”) you would get, thus in we can estimate the “return” to be no less than the “cost” we put in. Hopefully, your return is many time the cost you put in and thereby increase your ROI. The “investment” is easy (= technology + social media campaign). So based on the return and the investment, you can quickly calculate your ROI ratio.
Try it out and if you have any questions, please don’t hesitate to contact me. There are over 1,000 downloads so far.
Best,
Dag.