Viralogy

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“Social media” and “ROI” - it’s hard to find two bigger buzzwords among internet marketers over the past couple of years.* Yet the combination of the two of these fields create both a compelling, yet elusive industry. Literally dozens of social media analytics companies have popped up over the past few years. Radian6, Visible Technologies, Scout Labs, Meteor Solutions, Techrigy (Alterian) and 20 Decibels are just a few of the most well known professional social media analytics tools available. That’s not to mention the countless number of free measurement tools - a list that includes Social Mention, Twitalyzer, Monitter, Klout, Twendz, Twitter Grader, Trendistic, and more. The list goes on and on.
*I should know, two of the topics I write on most extensively for Viralogy are social media tactics and online ROI.

These companies continue to pop up because nobody has done (or can do) a perfect job of social media analysis. Social media analysis and ROI measurement is a difficult thing to measure, and there are some who say it’s immeasurable. A once-common retort is “how do you measure the ROI of your telephone”? The plain fact is that measuring social media ROI is not (nor will it ever be) an exact science. But it can be measured and analyzed. The important thing is to be wary of and avoid the frequent pitfalls that come about when measuring it.

ROI Background

First off, keep in mind that when we talk about measuring ROI, we’re talking about measuring a dollar value - ROI (return on investment) a monetary metric. We’re talking about measuring the revenue (return) of a product compared with the cost (investment). In simple terms, the return on investment is equivalent to: (the final value minus the initial value of the investment) divided by the initial value of the investment. Or, r = (Vf - Vi)/Vi . This number is returned as a percentage.

So, in order to measure a return, you need to know how much money you’re spending on a campaign, as well as how much you’re making on it. Sounds pretty simple. So what are the problems we run into?

Calculating Monetary Metrics

Unfortunately, most of the numbers social media tools (especially free ones) measure are not monetary metrics - they’re impact metrics. Clickthroughs, impressions, followers and pageviews are not tied to a monetary value. They can be, but first you have to assign a dollar value to it. Is a clickthrough worth $0.01? $0.50? $1? It all depends on your individual business. How about impressions? How much value is it to you to get an additional impression? If your tweet or Youtube video reaches 100,000 people, what is that value worth to you? One way to value a web impression is to think of it like a billboard ad - how much would you be willing to pay to put a billboard (or any old media - TV ad, radio ad) up per impression? Obviously the way that you measure it depends on what type of campaign you’re running.

Saying “we spent $2,000 on a campaign and got 100 retweets, 200 replies, 10,000 Youtube views and 25 comments” may be great to tell your friends and a few other marketers, but it doesn’t do much to justify the cost until you calculate the value of those individual variables. If you want ROI, you have to convert your variables into monetary values.

Last year, eMarketer put out a statistic that 84% of social media users still do not measure the ROI of their programs. My guess is that the number of users measuring their social media programs’ ROI is even smaller than 16%. Some people who believe that they are measuring ROI are still only measuring impact metrics, which are often very superficial in nature. If you’re just measuring impressions, subscribers and clickthroughs, you’re not measuring ROI.

Confounding Variables

The beauty of social media measurement is that it is extremely easy to gather data and track your social media campaigns (especially on Twitter). Of course there is (as is always the case with data analysis) an issue of correlation vs. causation. If you are measuring data for a short period of time, you will run into a number of confounding statistics. Just because you see a 10% bump in sales during the week-long period that you’re tracking doesn’t mean it’s necessarily due to your social campaign. Same thing goes for a 10% drop.

The only real way for you to measure a change in sales and to positively tie it to a social media campaign is to have every other value be constant (no other marketing campaigns, no changes in your products sold, no change in the time of year, etc). Suffice to say, that is unlikely to ever happen. Make sure you’re tracking the right causes for your increase or decrease in revenue. People have a tendency to ignore any factors other than the ones they’re hoping to measure.

An Outlier Problem

If one major influencer picks up your social media campaign and promotes it to their followers, you have a big outlier problem (not the worst problem to have, to be sure). Sure, you can measure and report on the results of that individual campaign, but moving forward, you’re going to have issues duplicating and predicting future success.

The problem is with data extrapolation. If one user with millions of followers retweets your post, it changes everything. It’s just like if a new post or viral video you’ve made lands on the Digg front page - an event that provides an exponential boost in traffic.

Though you can measure that one event, it will be extremely difficult to account for that when predicting future events. So if you’re running a contest that costs $5,000, it’s certainly something to keep in mind. If you consider each impression on Twitter to be worth one tenth of a cent ($0.001 - due the relatively small number of people that actually *read* each tweet), a retweet by @aplusk would put you immediately at break-even when your campaign might have otherwise lost thousands of dollars.

Real Time vs. Long Term

We’re really very good at calculating real-time metrics and analysis when it comes to social media. I can tell you how many new followers, retweets, mentions and clickthroughs I got in thepast week. Yet, when it comes to long-term tracking, marketerss are generally pretty bad at it. The trouble is, long-term analysis is the only way to measure change. You can’t measure change over time if you’re just looking at one data point.

If you really want to see how well a social media campaign is doing, make sure that you go back and look at it over time. Of course you should measure each campaign individually, but also measure your overall efforts over time. If you’re just setting up a social media account or profile, figure out what metrics matter most for analyzing your ROI, and make sure to set up times to take snapshots to monitor progress. Just tracking counting stats (followers, subscribers) is not enough.

Data Availability

Much more data is available for certain social media networks than for others. While you could build Twitter metrics until you’re blue in the face, you’re much more limited in gauging a social media campaign using a network like Youtube (subscriptions, views, comments).

The issue of data availability makes it very easy to value certain platforms much higher than others. If you tie every single metric to a monetary amount for Twitter, you will almost certainly double-count the value of certain metrics, and with a platform like Facebook, you won’t be able to track a great deal of the results of your campaign. Be sure to keep in mind which platform you’re using, and what metrics you may be ignoring or double-counting.

Conclusion

As far as we’ve come in terms of measuring marketing campaigns online, there are still plenty of issues we run into when measuring social media ROI. When faced with the idea of measuring ROI, many simply give up and claim it’s impossible. Many prefer to measure impact metrics. If you’re spending a significant amount of resources (time, money, energy) on social media campaigns, you owe it to yourself to measure your efforts in monetary terms.

By ignoring ROI entirely, you allow for the strong possibility that you’re wasting time that could be better spent elsewhere. There are hundreds of companies and marketers who embrace social media regardless of if it’s right for them or their customer. Ignorance may be bliss, but it’s still ignorant.