Measuring ROI of Search and Social

September 28, 2010

he burgeoning social media landscape is studded with success stories. Take Dell, for example. By the end of last year, the company had racked up $6.5 million in sales—direct from its Twitter accounts.

You can bet Dell can calculate the ROI of this effort. It knows exactly what it’s investing in the initiative: 100 employees are tweeting in 35 different channels to customers in over 12 countries. Brazil alone brought in an average $100,000 in sales per month in 2009.

Calculating the ROI of direct sales from social media is easy, but only so long as you remember that while many social media tools, such as Facebook and Twitter are free, time is money regardless of channel. Yet, many marketers have social media goals that are far softer than moving product. These can include increasing traffic, awareness, PR, customer relations and support, lead-building, conversions, SEO and even product development. In fact, most marketers admit to having no real defined social media goals.

How do you measure the ROI of that? A recent Econsultancy study, “The Value of Social Media,” asked marketers how well their organizations are at measuring ROI from social media activity. Over half (51 percent) admit to being “poor” or “very poor” at measuring social media ROI. A scant 15 percent rate themselves as “good” or “excellent.” Nearly all of them—94 percent—would like to know their social media ROI. They just don’t know how to get a handle on it. Despite that, 90 percent say social media activity will consume more of their time next year.

ROI Calculations Made Easier
Thanks to improved tracking technology, other digital marketing channels such as SEO are much easier to assign ROI to, as well as to compare to other marketing channels. Social media, still very much in its infancy, still lacks those technological and cross-channel underpinnings.

The ROI of search advertising campaigns is relatively easy to calculate. Almost by definition, search ad bids must be calculated on a break-even or cost-positive basis. Otherwise, why advertise?

Social media campaign ROI is more analogous to organic search engine optimization. Goals must be defined and measured against concrete benchmarks, e.g., cost per lead, average customer lifetime value, the conversion rate of a desired action, organic traffic and conversion sources.

Unless your social media campaign is based on direct sales—and many good ones aren’t—establishing and valuing key performance indicators (KPIs) is the first step toward calculating ROI, and determine where to go from here.

Bear in mind that the old saw, “everything online can be measured,” is true. Except when it isn’t. Just as every direct conversion from SEO will never be precisely measured, the same holds true for social media, even when the tools do improve. That’s still no excuse for not setting goals and constantly measuring and monitoring efforts against those benchmarks.

Article by: Rebecca Lieb vice president of Econsultancy’s U.S. operations.

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