Calculating Social Media ROI, Part One
ROI is consistently the hot topic in social media. Everyone wants to know the magic formula, the mathematical equation that will produce (justify?) effective online efforts. Metrics in any program need to be focused on an end goal, and those end goals can normally be found in quarterly or yearly strategic business goals. This should come as no surprise; any marketing effort should be focused on driving a bottom line.
There are ways, however, to put some measurement into your online activity. Our Entertainment Group Practice Director, Wendy Hofstetter, came up with a way to get at this. This method takes the standard ROI analysis for a media buy (think banner ads), and applies it to social media efforts. You will be able to show how much your brand would need to spend in order to buy the equivalent amount of impressions you are generating in social media, and determine your ROI based on this amount.
Get Started
Let’s say you produce something you like to call Beer. Delicious! What a great product. We here at Room 214 support your decisions. You have multiple social media properties, including Facebook, Twitter, and YouTube. For each of these properties, you need to determine the number of impressions you are generating and a standard CPM you would pay online for advertising.
Facebook:
- Facebook gives you an overall impression-per-post and daily impressions.
- Your Beer page has 50,000 fans, with average daily impressions at 5,000.
Twitter:
- As Twitter does not provide insights, it’s best to determine your number based on number of fans. Here, we will estimate that 10% of fans see any given update.
- Your Beer Twitter page has 15,000 followers and makes 1 update a day.
YouTube:
- YouTube is simply addition of all video views.
- You have 24 videos about Beer uploaded this quarter, with a total of 200,000 views.
Doing the Math
Let’s determine a CPM for eyeballs (or as someone suggested to me today, a CPM for engagement). A simple online banner ad buy might come at a CPM $3.00. A behavioral-targeted campaign might come in at $15.00. Here, though, your eyeballs have already opted-in to hear from you. What is the cost of an impression like that? A conservative number could put you at $20.00. Assume you have a marketing manager spending 50% of his time managing your communities, at a yearly salary of $60,000.
Views: (5,000*365) + ((15,000*365)*.1) + 200,000 = 2,572,500 views
CPM: (2,572,500/1,000)*$20=$51,450
ROI: 51,450/30,000=1.715 (or 171.5%)
A Few Additional Thoughts
Based on the above calculations, you would need to spend over $51k to buy the same amount of impressions you’re generated by simply posting on your social media communities. And thus, you have a 171.5% ROI for your efforts. These numbers are representative of the fan-base for a medium-sized business. As managing communities takes time regardless of their size, the ROI is much higher with larger communities. I’d also like to note that there are plenty of factors NOT taken into account, like engagement, but I will dive into that in my next post.
BrandonSings:
Room_214:
Hello_BenHere:
MattAt214:
jo_rogel:
runquatro:
ElyseHeslin:
JamesOClark:
JasonCormier:
peterahall: