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Why Social Media ROI is the Easiest Metric to Measure

Here’s a conversation on social media ROI that takes place inside small, medium, large… Even Fortune 500 businesses every single day:

Marketing Professional: “We need to leverage social media in our marketing efforts!”

Decision Maker: “What’s the social media ROI?”

Marketing Professional: “Ummm… Well… We can increase our Facebook “Likes” and get more Twitter  Followers and Pinterest is hot right now so we can get more of our images Pinned…”

Decision Maker: “Great… What’s the social media ROI?”

Marketing Professional: “Yes… Well… Ummm… More “Likes” on Facebook means more people see our message and read our story and then eventually buy our products.”

Decision Maker: “Yes… I get it… What’s the social media ROI?”

Marketing Professional: “Social media ROI is tough to measure really…”

Decision Maker: “Yeah… OK… So where are we with that newspaper ad you’ve been working on?”

Sound familiar?

Something you’ve experienced personally?

Yeah me too…

Then I realized something about social media (really all digital marketing) that completely changed the way I viewed social media ROI (Return on Investment)…

Social Media ROI

What I realized is simple… Social media is no different than any other form of marketing, prospecting or sales activity that you currently execute within your business.

The only return on investment from social media that matters to your business is REVENUE! Click to Tweet

social media roi

Dollar bills…

Money…

Black numbers on the income statement…

In the words of my generation… STRAIGHT CASH HOMEY!

“Likes” on Facebook are great… And I would agree that growing the number of “Likes” you have on Facebook is important to expanding reach and building new relationships.

But there is no correlation as to how many “Likes” equals how much revenue to your business.

“Likes” would be an ROI metric if you could say something like:

For every 100 Facebook “Likes” our business receives a check for $5,000.

If that were a reality than our business would stop producing whatever product or service it is that we produce and instead our primary business function would be “Like” accumulation…

Sounds silly right?

But that’s what happens when you focus metrics such as number of “Likes” to ROI… You sound silly.

Don’t Make Social Media ROI Harder Than it Is

Gary Vaynerchuk famously said in response to the social media ROI question:

 What’s the ROI of your Mom?

And as edgy and cool a statement as that may be I’ve never agreed with it.  What he was really trying to say was “Just Launch.”  Gary was making the point that you shouldn’t allow the ROI question to keep you from engaging in social media (Which I definitely agree with…)

But “Your Mom” is not tangible… Your Mom doesn’t pay the bills… So I think Gary’s statement, “What’s the ROI of your Mom?” lacks real punch.

However…

Gary is a real-deal Content Warrior with the desire and ability to attract attention at will… So I understand the method behind the words.

Which is why I was very pleasantly surprised to here him change his message slightly (understatement…maybe) in a recent keynote speech to Inc. 500:

Why do I like social media? It’s not the, we’re all Kumbaya… I like social media because it sells shit…

Yes, Gary! Yes!

That’s a little more like it…

The Rub

You are most likely not in the Social Media business.

Many of you are insurance professionals and small business owners… Some others are marketing professionals from larger businesses… There are a few straight bloggers and copywriters… And even some hardcore Internet marketers… None of you are in the social media business.

You use social tools

But social media isn’t your business.

Social media is how you deliver value, build relationships and ultimately in the words of Gary V, “Sell your shit!”

Don’t make social media ROI hard…

How much money and time did you spend on Facebook?

How revenue was generated that can be attributed to Facebook?

Boom… There’s your return on investment.

Thank you and Good luck,

I am Ryan Hanley and this is Content Warfare.

SPEAK YOUR MIND: Am I missing something? Am I completely off base with my depiction of measuring social media ROI?  How do you track social media ROI?

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About Ryan Hanley

Ryan Hanley is founder of Hanley Media Lab, an advanced content marketing agency helping companies grow their audience, to grow their business. He is also the creator of one of iTunes top content marketing podcasts, Content Warfare TV.

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  • http://www.stevebaines.biz Steve Baines

    In order to figure out the ROI of anything, you gotta first figure out what your “R” is – the investment is Social Media, but what is the “R”? Are you looking to build brand awareness, engage your current and potential customers, learn about your target demographic, etc… etc… There are many “R”s and one is “to sell shit” and “straight cash homey” but until you identify which “R” or “R”s matter, you’ll have a hard time justifying the “I”.

    • http://www.ryanhanley.com Ryan Hanley

      Steve,

      That is an excellent way to put it… I would venture to say that most small businesses get involved with social media and have no idea what their trying to get out of it.

      Everyone tells them they need to be there so they go there and once they’re there have no idea why…

      Appreciate you stopping by buddy!

      Ryan H.

  • http://ryzeonline.com Jason “J-Ryze” Fonceca

    Straight cash money!

    :) Love it :)

    As for the Gary V line, I always took it to mean : “Your Mom created you and invested insane amounts into you, but in your adult life, she’s not exactly funnelling dollars your way directly — so… cut her? No measurable ROI, so just stop interacting with her?”

    Same could be said for social media.

    Measuring shit gets old, fast.

    I wanna live like celebs who have too much money coming in to think about. I wanna live like Kim Kardashian, who tweets what she wants, when she wants with utter confidence in her “ROI”.

    I know what I want, and it’s as good as done. Thanks for the smart heads up on SM ROI.

    • http://www.ryanhanley.com Ryan Hanley

      Truth be told ROI is whatever you want it to be…

      My concern when talking to smallbiz owners trying to gain traction Online is chasing superficial statistics that don’t yield results. They get frustrated and then give up…

      Great thoughts brother… Keep killin it!

      Hanley

      • http://ryzeonline.com Jason “J-Ryze” Fonceca

        “ROI is what you want it to be.” – Ryan Hanley

        lol :)

        I love it, and I totally hear you re: superficial non-results.

        Great stuff, bro.

  • http://www.bzzagent.com BzzAgent

    Enjoyed your blog post, Ryan. Agree on your view that it’s the revenue that matters. Only one method, the analysis of sales revenue generated relative to the program investment, delivers ROI in the way it is meant to be measured – in financial terms. Check out BzzAgent’s take on social ROI [Infographic]: http://www.bzzagent.com/blog/post/infographic-social-media-roi-solar-system/

    • http://www.ryanhanley.com Ryan Hanley

      ROI in financial terms… Who would of thunk-it? I thought we were all going to get rich off fans and followers…

      Thanks for the thoughts!!

  • http://www.jackiepurnell.com Jackie

    If you look at the fundamental principals of business, its an exchange of goods or services to make a profit…yep that’s profit with a capital P. What ever tactics or strategies you use should always be geared to justify those ends. Social media falls into that bucket.

    I do think that ROI has been waaayy overused and applied to markets and measurements that are near on impossible to guage though. Lets face it ROI was specifically coined from the financial markets with fixed variables.

    • http://www.ryanhanley.com Ryan Hanley

      Jackie,

      I couldn’t agree more… ROI is applied to incalculable actions and then justified through rationalization.

      Thank you!!!

  • http://www.mikelesczinski.com Mike Lesczinski

    “The only return on investment from social media that matters to your business is REVENUE!”

    False.

    • http://www.ryanhanley.com Ryan Hanley

      “False.”

      False.

      • http://www.mikelesczinski.com Mike Lesczinski

        You seriously believe that? You can’t think of one other metric beyond revenue that could make it worthwhile for a company to join social? I’m disappointed. I know from an educational side, our college uses it for far more than “generating revenue.” Which is good, because trying to find the dollar value of a tweet is pretty futile.

        • http://www.ryanhanley.com Ryan Hanley

          You use it to deliver value, expand brand reach, build relationships, help students, share information… All excellent uses of Social Media and Digital Marketing…

          All things that you MUST do.

          But if not one of those individuals who are touched by your brand Online come back and purchase a place in one of your courses then you aren’t a business you’re a martyr.

          Gaining “Likes” and subscribers and building an audience and brand awareness are powerful results of good quality social media presence.

          But at some point your business needs to make money.

          Otherwise you’re just building an audience to build an audience which is an Ego driven activity not a business driven activity.

          You educate… Social Media can do amazing things for educators. But you can’t turn the lights on if you don’t have money.

          That is the point I’m making in this article. Too many organizations are chasing numbers such as Facebook “likes” and counting them as Return on Investment. But a “Like” doesn’t pay the Bills…

          Does that make sense?

          • http://www.mikelesczinski.com Mike Lesczinski

            Organizations that chase numbers such as Facebook “likes” have no idea what they are doing. But telling them “The only return on investment from social media that matters to your business is REVENUE!” won’t help them either.

            When enslaved people in the Middle East were using social to coordinate their efforts during the Arab Spring, they weren’t judging their success by monetary metrics. When an agency tweets out field reports during a natural disaster, they don’t judge ROI by revenue.

            And in my personal job, one way in which we use social is to monitor for students having trouble. When someone is identified, we reach out to them privately to offer help – not to ensure the credit revenue, but because as a nonprofit institution of higher education, it’s our mission to educate working adults. We are judged by student feedback, persistence and grad rates among other metrics. We are not judged by our quarterly revenue reports and thus concern ourselves with different social engagement metrics.

            Not every business is the same. And I’m sure you have nonprofit readers, so I wanted to make that point.

            The only ROI that matters in social is that with which you can tie to your underlying business goals. Determining the right metrics can help guide you but despite the claims of some of the other commenters, there is no magic formula because their are too many unknown variables.

            To claim differently is what Hayek called the “Pretense of Knowledge.”

            • http://www.mikelesczinski.com Mike Lesczinski

              *there are too many unknown variables. (amateur hour.)

              • http://www.ryanhanley.com Ryan Hanley

                Mike,

                I do this everyday for a small business. I know exactly what it’s like and what can and can’t be done…

                This isn’t something that I read on Mashable. When I say on my Marketing Blog that Social Media ROI is the easiest metric to measure I mean that…

                Google Analytics is free… But you don’t even need that.

                When they call you about business you ask them where they got your name…

                The Internet… OK… Put a check mark next to Internet Lead.

                They fill out your contact form… OK… Put a check mark next to Internet Lead.

                They send you a Facebook Message… OK… Put a check mark next to Internet Lead.

                Small business needs revenue to keep the lights on. That is why it’s the most important metric and it’s also why is the easiest to measure.

                If you measure NOTHING else… It should be Revenue.

                It’s NOT the only thing you should track… But you can only track one thing it should be Revenue.

              • http://www.ryanhanley.com Ryan Hanley

                Keep tellin’ yourself that Professor…

            • http://www.ryanhanley.com Ryan Hanley

              Michael,

              I know you’re an academic… But seriously… What part of this blog is geared towards Arab revolutionaries in the middle east?

              We’re talking small business here.

              I get your point but it’s a PR point not a Marketing point and we’re talking about Marketing not PR.

              There is a very distinct difference with different goals.

              Obviously the student outreach team using social media has a different goal then the Marketing team with your University…

              But if the Marketing team doesn’t bring in Revenue then the Outreach team is n’t going to be helping students succeed.

              I get that you’re trying to make a point but most small businesses don’t have teams of people working their social space…

              They are trying to deliver value, build relationships and ultimately add customers… That’s the point.

              If I was leading a rebellion then my goals would be different… Obviously.

              • http://www.mikelesczinski.com Mike Lesczinski

                Ryan,

                You were the one who had the post titled “ROI is easiest metric to measure.” It isn’t. And yes, you are dealing with small businesses, most which don’t have marketing teams or enough revenue to purchase advanced software like Radian6 to actually dive into the analytics. So for them, it might not be great advice to tell them the only thing that matters is “REVENUE”!

              • http://www.mikelesczinski.com Mike Lesczinski

                “How much money and time did you spend on Facebook? How revenue was generated that can be attributed to Facebook? Boom… There’s your return on investment.”

                So I talk Ryan Hanley up to a friend, explaining he is a kick-ass insurance rep who can provide great coverage at reasonable rates. I tell them to contact you through your Facebook page (I’m too lazy to look up your number). Who gets credit for that? I probably had much more to do with that sale than your Facebook presence, which is why measuring ROI is so difficult.

                For another example, a small business pizza shop launches a Facebook page as a customer service tool. They do a great job and a receive great feedback from their customers. But it’s really difficult to judge how much of that customer service conducted in a public forum led to direct sales. Plus their revenues are down this year.

                Should they just cancel their account? After all, it’s “straight cash homey” that matters. No mention of the fact that their revenues might be impacted by other variables such as the economy, rising health care costs, regulations, etc.

                Advanced software and analysis might help separate out some of the noise, but certainly not all and most small businesses could never afford it. Most have one, maybe two employees actively using Facebook to try to calm irate customers who are upset their pizza delivery is late.

                Revenue is obviously important, but it shouldn’t be the only metric to consider when determining social success. And it certainly isn’t easy to measure if you actually want an accurate number.

              • http://www.mikelesczinski.com Mike Lesczinski

                Also, one last point of clarification. I am an adjunct, but in no way, shape or form does that make me an academic. I’m from the streets!

  • http://www.ameenafalchetto.com Ameena Falchetto

    Loved this and the quote from Gary V on the ROI on your mom!

    When ever I hear people talk about the complexities of ROI and how to measure it I always roll my eyes – the only metric that matters is how much cash you have in the bank. END OF.

    I recently asked a client how many hours a week she spent on social media and the asked her to calculate the amount of sales she’d received as a direct result of this activity. The results were to be expected – that time brought back nothing and upon digging deeper it was because she wasn’t networking, branching out etc …

    If you put a price on your social media time, and priced it at $100/hr you’d soon realise that you have to a hell of a lot more efficient!

    • http://www.ryanhanley.com Ryan Hanley

      Ameena,

      That is an excellent point!! So many small business refer to social media and digital marketing as “playing around” and truth be told the way they go about their Online marketing efforts that’s pretty close to what it is…

      I like the idea of applying an internal cost to your Online activities…

      Thanks so much for stopping by Ameena! It’s great to see you here.

      Ryan H.

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  • Chris Nadeau

    Great stuff Ryan and I love how you pulled this all together.

    I remember seeing/hearing Gary V’s comment about the ROI on your Mom and I took his statement like this.

    It is very difficult to measure some things in business, however, you do them because you know it’s the right thing to do.

    For example, when the phone rings…we pick it up and answer it. But do we know the ROI for that phone call? No, now we could try and figure it all out, but why bother…we know it’s the right thing to do. I can’t speak for Gary V. , but that is what I took away from the MOM statement.

    As Marcel Lebrun, CEO of Radian6 said ” social media is the social phone and you better be ready to answer it”

    • http://www.ryanhanley.com Ryan Hanley

      Chris,

      I couldn’t agree with you more… This is great stuff “As Marcel Lebrun, CEO of Radian6 said ” social media is the social phone and you better be ready to answer it”

      I appreciate you sharing that quote… It’s powerful and is a point many small businesses are missing.

      Thanks,

      Ryan H.

  • http://www.ryanhanley.com Ryan Hanley

    John,

    The epidemic permeating the social media space right now is Social Media Experts who think “Show” is “Dow” and are either too naive or too stupid to understand the difference.

    Really appreciate you stopping by and sharing your thoughts John!!

    Ryan H.

  • http://www.vitalchats.co.za/ Wade | Wellness

    Brilliant post Ryan. I believe online marketing and social media in particular is a bit like fishing, if you hang around long enough, you will catch the fish. Excuse the ignorance here but what does Mom stand for?

    • http://www.ryanhanley.com Ryan Hanley

      Right on Wade…

      Mom stands for the woman that gave birth to you. He was being very sarcastic.

      Thanks for stopping by!

  • http://www.actioncoach.com/gerrypeters Gerry

    Ryan,
    Great approach to simplify measuring ROI of Social Media. Just Do It! First, keep it simple so that it is measured. You must measure the lead, source, and conversion rate across all your marketing campaigns to determine comparative value. Many business owners don’t do this at all. It is no wonder that marketing is considered an expense instead of an investment.
    Thanks,

    • http://www.ryanhanley.com Ryan Hanley

      Gerry,

      You hit it with your last sentence… “…no wonder that marketing is considered an expense instead of an investment.” No one as any clue what type of ROI they are getting from their Marketing.

      Thank you!!

      Ryan H.

  • http://amazingbloggers.net/ Simmeon

    Hey Ryan,

    That was an interesting post, I did enjoy your thought process and break down.

    This cracked one me up “What’s the ROI of your Mom?”

    If only we earned money by the amount of Facebook likes” we got.

    • http://www.ryanhanley.com Ryan Hanley

      Simmeon,

      That’s for stopping by Bro!

      If only Facebook Likes were worth money right? Indirectly they are (if you build a solid relationship and nurture that relationship and deliver value) to a certain extent. But directly… It’s just a number.

      Thanks!

      Hanley

      • http://www.bhbco.com Jason Hoeppner

        One tough thing to put into the equation – and with any multiple-source marketing. How do you count/measure the ROI of areas that cumulatively get you that sale? Is it the source that made the customer make that call? Is it a measure of how far the brand or agency image has come due to the various social tools you are using? I know, I am complicating it!!!

        • http://www.ryanhanley.com Ryan Hanley

          Complicating yes… But these are important thoughts because they’re very legitimate.

          Personally I think you look at your entire Digital Marketing effort as ONE. I know that isn’t going to satisfy most agency owners… But I think if you focus on a tight group of activities looking at the entire effort as one function is OK.

          Thoughts?