I’ve heard a lot of rhetoric in the social media world within the past few weeks. Many people whose opinions I greatly respect are (rightly so) protesting against blind investment into social media. It seems that too many decision-makers are investing in social media for abstract reasons such as increasing brand awareness, driving customer engagement, or measuring sentiment. The one thing that often gets left out, though, is the one thing that really matters: profit. If you can’t calculate the ROI of social media, why would you invest in it?
What is “Social Media” Anyway?
First, let’s talk about this thing called, “social media.” What really perplexes me is why people view “social media” as 1) a single platform and 2) a platform that is so different than everything else. Let me explain…
First, “social media” is not a single source for potential customers–it is a generalized term for an infinite amount of sources. When we talk about making investment decisions with our marketing budgets, why do we even use the term, “social media?” The term implies that our target customers are just as likely to be using Facebook as they are Twitter, or Pinterest as they are LinkedIn. It doesn’t make any sense. Why do we lump these platforms together and stamp them with the meaningless label, “social media budget?”
Secondly, when we are making decisions about how to allocate our budgets, why do we distinguish Facebook from television, or trade publications from Twitter? Here’s an example: let’s say our target customers spend a lot of time on Twitter, as well as flipping through trade publications. However, they don’t watch TV and they aren’t on Facebook. If we separate our budgets for “traditional media” and “social media,” how can we possibly reach our target customers on the platforms they are actually using?
A platform is a platform. When making investment decisions with our marketing budgets, let’s stop talking about new and traditional media. Media is media. Let’s allow the merit of each platform to stand on its own.
Effectiveness and Ease of Measurement
Now, to the ROI question. Why should we invest time or money in Facebook, Twitter, or Pinterest, if we cannot calculate the return on the investment? Well, there’s a sneaky little trick embedded in this question–just because we cannot calculate the effectiveness of something, that doesn’t mean it isn’t working. The ease of measuring the effectiveness of a platform is not the same as the effectiveness itself. Is it easy to measure the effectiveness of social media investment? No. But, maybe we’re asking the wrong question…
The real question is, “Is it easy to measure the effectiveness of any ad spending?” The answer to that question has always been a resounding, “No!” Why then are we so preoccupied with the ROI of social media advertising? What makes it so different than any other kind of advertising? Have we ever been able to confidently measure the ROI of ad spending on television, magazines, or billboards? No, of course not. It has always been the case that we know half of our ad dollars are wasted but we just don’t know which half.
I think that’s why social media advocates are so reluctant to use revenue as a metric for calculating effectiveness. Yes, we obviously want sales from our advertising investments. But, it is impossible to determine which sales came from which investment activities. Even if customers actually tell you, you cannot be sure they weren’t influenced by a platform that they are not consciously aware of (i.e., they saw the Facebook update but forgot about the commercial they saw on TV that prompted them to “like” your page).
Proponents of social media have something to prove. Traditional media, such as television, radio, and print, are the tried-and-true methods of advertising (even though they were never really tried-and-true). Social media has yet to earn implicit trust from business decision-makers. So social media advocates simply claim that profit isn’t what we should be worried about. We should be worried about things like sentiment–how customers are feeling about our brand based on their social media activity. With the ease of tracking “Likes,” “comments,” “retweets,” etc., abstract concepts like this are easy to measure.
In a recent article discussing the benefit of content marketing for B2B Companies, Steve Olenski shares the results of a recent survey (shown above). According to the B2B companies surveyed, the effectiveness of social media (cited in the article as the most frequently used type of “content marketing”) is more frequently determined by the traffic driven to the companies’ websites than by actual sales or sales leads.
So, what do I think? Should we use “sales” as the metric of social media advertising effectiveness…or something else? I think that, for any advertising investment, the only thing we really want to measure is revenue. We should not have to spend ad dollars to “enhance our brand.” Our brand image is going to be naturally enhanced when we deliver on what our advertising promises. But, when we’re actually spending money on something, we want to track sales. So, how do we do it?
A “social media” campaign or, as I prefer, a Twitter, Facebook, or Pinterest campaign, should be run the same as any other campaign. You start using the platform, you measure changes to your revenue stream, and decide based on correlation whether or not the investment is working. It’s as simple as that. Is it always going to be accurate? No. Is it going to be as accurate as measuring the effectiveness of any other “traditional media” advertising? Absolutely.
ROI Isn’t About Proof; It’s About Assurance
So, because ROI is so hard (if not impossible) to calculate in advertising, does it still matter? Recently, Sam Fiorella–the social media guru setting the record for the lowest Klout score–wrote an article that, in part, inspired this rant. When I asked him about the difficulty in measurement, here’s what he had to say…
@douglasericeheh, tell that to the CFO or CMO that’s accountable to dollars invested in SoMe marketing. @mflem25
— Sam Fiorella (@samfiorella) October 16, 2012
It isn’t about the numbers themselves; it’s about the story those numbers are telling. Am I suggesting that we intentionally manipulate the data to tell a convincing story? No, of course not. I’m simply suggesting that we have a better chance of poaching unicorns than we do of accurately calculating the ROI of advertising investments.
However, just because we can’t accurately calculate the ROI, that doesn’t mean there aren’t substantial returns to be gained from the investment activities. So, in the end, if you feel that a platform is worth investing in, you better come up with some compelling data to get the buy-in from those making the investment decisions.
Advertising is advertising. Let’s stop talking about social media vs traditional media and get back to just talking about media. Where are our customers spending time? That’s what we’ve got to figure out. It’s not about new or old; it’s about right or wrong. Invest. Measure. Re-invest. Regardless of the platform, that’s the process. Let’s stick to it…
Actually, the legend is that it's impossible to measure the ROI of an advertising campaign :) I have to disagree with you on this one, Doug. ROI is essential, and factually, if you do not know how to calculate the ROI of what you are doing with your marketing, you are not doing yourself any good with the time and money you are using for those efforts. What if what you are doing costs a lot of money and you have no idea what's happening to those dollars? You might as well throw money out your car window on your way home, right?
There are ways to measure. They might be out-of-the-box tactics, but it is possible. And necessary.
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@margieclayman How can you possibly measure causality and not just correlation? If you run a local television spot, you can track the DIFFERENCE in sales or sales leads after a certain amount of time passes, but how do you know what portion of that difference is attributable to the TV spot and what portion is attributable to factors you had nothing to do with? The only way that I can see is to ASK customers but A) that sometimes isn't feasible, B) they may be inadvertently lying.
That is how marketing campaigns are tracked, right? Correlating changes in sales (or sales leads) with ad dollars spent. Is there some other way of directly linking sales to ad dollars or is it just a process of elimination (accounting for known variables and ASSUMING attribution to ad dollars once those variables are accounted for)?
Does al that make sense?
@douglaserice Without giving too much away cuz this is part of our secret sauce, it's about thinking outside the box and making your efforts trackable. There are countless ways to do this - we've only begun picking away a the iceberg. If you can bring people to your site and trace them with your CRM system, it becomes a much easier task to complete.
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This is one of the better articles that I've read about the struggle to measure ROI with content marketing and social media. And while I agree with everything you said, I think that as marketers, the pressure to find ways to hold ourselves accountable to the strategies we deploy is a good thing. You can't escape the fact that the world has changed. We have metrics that provide insights into online behaviours and sales patterns. Those same metrics don't exist with traditional media, necessarily. So the DESIRE for a more reliable and tangible ROI (I think) is the result of this changing landscape. And who knows - maybe in a year or two someone will come up with a solution that tracks the ROI much more strategically and reliably (certainly there are vendors claiming to do this now).
We hear it all the time from our clients - show me the money. How does online traction translate into revenue? We've chosen to focus more so on 'leads', and cost per lead. The rationale is that if the cost per lead is $20,000 WITHOUT social media, and after a comprehensive campaign, you find that the cost per lead is lower, while the correlation is certainly not scientific or without holes, it makes a point. More leads for less money. That's ultimately the goal. What do you think?
@Ruth - MarketingWise Thanks, Ruth. That's flattering. This what sort of a rant about the people who are protesting investment into social media due to its alleged lack of ROI. I just fail to see, from an ROI perspective, how a social media campaign differs from any other traditional ad campaign that's ever been conducted.
You're absolutely right, though, about marketers needing to hold themselves accountable...as well as the changing landscape leading to more stringent standards on ROI. I think the focus of any ad campaign should be increased sales or increased sales leads (depending on industry). Right on, that is the ultimate goal.