Social Media ROI explained in 140 Seconds

by Patrizia Squarcini on March 11th, 2010

I made this presentation at the London Twitter Developers Nest 7 in 140 seconds. The idea is that there is too much confused and overly complicated talk about Social Media ROI. Social Media ROI is no different than ROI from other activities. I hope this presentation explains ROI in a simple way and how you can tie social media activity to ROI.

If you’d like more complete coverage of the Twitter Developers Nest #7, head on over to Mobile Industry Review where Ewan Macleod gives complete coverage. And be sure to check out his fantastic presentation on the mobile industry which you’ll find in the same article.

Another big thanks to PayPal X for providing the beer and pizza and I should also give credit to Olivier Blanchard and his Basics Of Social Media Roi which inspired me to attempt this. Finally, don’t forget to check out Twitter Developers Nest London

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8 Comments on “Social Media ROI explained in 140 Seconds”

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Chiaroscuro March 12th, 2010

Really like the idea of overlaying socialmedia actions to sales data.

I have a question though: what if you have a relatively small budget compared to overall company sales? Pseudo-random fluctuations on sales could cancel out your positive socialmedia campaign effects.. if you want to show the change to be statistically significant, then you would need a pretty big socialmedia budget. Plus, you would have to isolate it from different campaigns that are being run at the same time.

Maybe we should reason on Comparative ROI. If the organization already accepts some specific digital actions as a value to the organization, then we could show how comparatively better we are performing with socialmedia.

Todd Chaffee March 12th, 2010

Chiaroscuro, thanks for the comment. I am not a finance expert but I think ROI is almost always comparative anyway. Companies are concerned about ROI because they want to decide how much to continue investing in one project vs. another. Many bigger companies are already comparing traditional marketing against digital against social media. Not necessarily to completely cancel one or the other, but to determine how to balance the mix. 100% TV advertising and 0% social is probably not the best strategy these days. For a big brand 100% social and dropping traditional marketing is probably a bad idea too. So how do you determine what the percentages should be? That’s where ROI comes in.

In any case, you seem to be implying that budget size is directly related to effectiveness which is not always the case. Look at the great IKEA campaign which involved giving free items to users that tagged themselves in a photo of IKEA furniture. Tiny budget and highly effective. Word spread like wildfire. If you wanted to measure ROI in that case a digitally generated promo code could track sales at the cash register coming directly from that campaign. Right down to the item they clicked on in the photo.

I think that also answers your question about isolating different campaigns. Promo codes, landing pages, and micro sites are a good start. It just has to be planned in advance and ones of my hopes with this presentation is that it will help social media folks to start thinking about ROI at the beginning of a projects rather than at the end so they can include the hooks needed for isolation and measurement.

Ivan Vaghi March 12th, 2010

Makes sense. The idea is to have ROI-Tracking driven campaigns. You do things that you can measure.

Roger Wilson March 16th, 2010

Todd, Your quick distillation reminded me of the days when event event and sports sponsorship was coming into its own. Practioners were able to profitably move retail sales in specific regions when the only variable in the mix that was altered was a sponsorship which had a specific regional reach. Marketers may benefit from focusing a social media campaigns on specific regions.

Todd Chaffee March 17th, 2010

Hi Roger,

Thanks for the comment. One of the benefits of social media is the ability to do highly targeted regional advertising. Using Facebook ads for example, you can have your ad display only to males in a relationship aged between 35 and 55 that live in New Brunswick NJ.

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