Before you spend time trying to calculate social media ROI, ask yourself one very important question:
What purpose does the ROI serve?
The reason you want to ask this question first is to determine what to include in the ROI.
Without a clear answer to this question, you risk entering into an Alice In Wonderland world that becomes more and more complicated as your journey progresses.
You might begin with a simple formula. Say, new Facebook fan acquisition in return for your Facebook investment. Very simple formula.
And then your boss asks, “What’s the value of a Facebook fan?”, opening up another rabbit hole. You take your total number of fans and divided that into the total amount of donations collected through Facebook (assuming you can even figure out what that number is).
This opens up about six more rabbit holes:
- How many of our Facebook fans donated in response to a direct mail piece, but were influenced by the Facebook community?
- How many donations came from Facebook from users who were influenced by a Page connection even though they weren’t a connection themselves?
- What about Facebook fans who donate at an event they were invited to via Facebook?
- What about Facebook fans who don’t donate money but volunteer their time?
- What’s the lifetime value of a connection’s influence on Facebook?
- Should we place a higher value on a fan that has 1,500 friends as opposed to a fan that has 30 friends?
Don’t get me wrong, definitely try to calculate the value of a Facebook fan. Just know that the number will be a moving target. It will also vary depending on your organizational goals.
But let’s get back to our question:
What will you do with the results?
If your reason for calculating social media ROI is to justify using social media in the first place, don’t waste your time. There are way too many factors that determine success or failure.
For example, if the people who are updating Facebook and Twitter have no interest or passion for your cause, it will be a failure. And how can you calculate passion with a spreadsheet anyhow?
The return you get from using social media has more to do with how you use it rather than the medium itself. Trying to justify using it is no different from trying to justify using a telephone to create better relationships with your donors.
ROI as a learning tool
If you’re doing an ROI analysis with the goal of improving your use of social media, the calculation is much easier. Simply agree on a few variables, like email acquisition or Facebook fan growth – something simple, but quantifiable – and commit to those measurements during a single event. This way you spend more time getting results and less time snaking your way around rabbit holes.
Cause the last thing you want to spend time on is an ROI analysis of your ROI.
But what do you think?
What’s the best way to approach social media ROI?
And how would you improve this ROI calculator (feel free to edit)?