5 from South By: The Social Media ROI question

March 16, 2012

Measurement, Social media

What is the ROI of social media? Is that even the question we should be asking? (Image credit: Stelio Landrakis http://www.flickr.com/photos/landrakis_junior/4536939347/)


Most South By Southwest panels are standing room only and this one was no different.  The moderator asked questions about the next big thing in social media, the panelists provided their two cents and the attendees nodded their heads. It was a good discussion, one worth rolling out of bed early on a Sunday morning for, even though most could have used the sleep. And then the question came.

“We’ve got time for one more question,” the moderator said, peeking around at the audience with an “or we could just wrap this thing up early and go get some coffee” look. But a hand shot up in the back of the room: “Can you tell us how each of you are answering the social media ROI question these days?”

Silence. Followed by laughter. And the panelists were laughing the loudest. “Well, that about wraps this session up,” one of the speakers said.

The next day there was another session designed to focus specifically on the ROI of social media. Now, I was not able to attend this session, so I am only sharing what I heard via Twitter. And it wasn’t really negative feedback as much as confusion. Sentiment like: “Good discussion, but the panelists didn’t really answer the ROI question.” And these speakers were some of the most respected communications minds in the country. At SXSW no less. If they can’t answer this question, who can?

Or maybe, just maybe, it’s the wrong question. Kind of like the PR Defined campaign that PRSA International just ran to crowdsource a PR definition was well-intentioned, but the wrong campaign mission. Is a definition really what PR needs? Or would a conversation about how communications is evolving do more to change the perception of our industry? Likewise, do we need to find the “holy grail” answer to social media ROI? Or is that just the question executives ask because they’re used to looking at earnings reports and financial documents? Maybe as counselors, we need to read between the lines and reposition the question so we can actually provide an answer that doesn’t sound like a whole lot of words with a whole little insight.

What if instead of asking what the ROI of social media is, we were to ask the following question: How is social media helping us achieve our objectives? That question falls back in line with the question we should be asking about any communications effort we undertake. How are they helping us achieve our objectives?

Now to embrace this approach means we actually have to take the time to develop strategic plans and create measurable objectives BEFORE we begin campaign execution. But on the flip side, the next time your boss asks you about the ROI of social media, you’ll actually be able to give a response about the impact all your communication efforts, social media included, are having on your company’s communications and business objectives. And you won’t only be able to answer the question by saying things like “well, look at Zappos,” or “Dell made millions selling computers on Twitter.”

See, the things is that everyone can enjoy a laugh about measuring social media at an early-morning SXSW panel.  It’s an informal conversation amongst friends. But if you’re hearing that same laugh when you try to answer your boss’ social media ROI question, I promise it won’t be nearly as funny.

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thebrandbuilder 33 pts

"What if instead of asking what the ROI of social media is, we were to ask the following question: How is social media helping us achieve our objectives?"


That's 100% true, but how does that approach answer the question when ROI is one of those objectives? For most companies, it is, just like "how do we use SM to boost loyalty, to acquire net new customers, to improve our consumer insights program, to recruit better, to improve customer service... etc." In fact, most of those other objectives, if you follow their purpose all the way to the ultimate outcome (growth, more sales, etc.), will end up finding their way back to ROI. Why? Because no company wants to invest $1 into a program that won't generate at least $1.01 in revenue or cost savings. Do you really want to try and sell a $500,000 social media program & campaign that will only generate $30,000 in net new revenue?


Someone always keeps score. Maybe not the CMO, but someone.  Between you, me and your readers, all this wheel-spinning around ROI is just one big #fail. It's so simple, it hurts my brain to see so many people still struggle with it, particularly the "experts." Someone please explain to me why this is so difficult. 


We know how to measure the cost of an activity. We know how to measure the impact of an activity on consumer behaviors (including transaction behavior). We know what the ROI equation is. These are the only three things we need to determine the ROI of ANY and EVERY social media activity or program. So... seriously, what is the problem?



JGoldsborough 247 pts moderator

 thebrandbuilder You make solid points and if you have an example to share that might help me and others visualize even better. And of course, we could all read your book :). I know it's on my list -- not just saying that.


A couple things: 1) The term ROI miffs people. It is the most overused, misunderstood term in corporate America today. So as communicators, we should work to help people understand bottom line impact or awareness drivers in whatever terms they can best understand. 2) Most people understand measurable objectives. So if one of our measurable objectives is to spend XX to drive XX number of users from our social channels to the e-commerce section of our website and then track how many of them purchased XX products, then great. For some reason, IMO, people seem to understand that line of thinking better than they do the term ROI.


One of the biggest problems with these panels and presentations about ROI of social media, is that those speaking never give actual examples of how they have presented the ROI of social to an executive or leadership team for a specific campaign. Not sure why, but I have never seen it done. That frustrates people. The point of this post is not to say don't think about the money in these decisions. It is to say let's reframe how we talk about the money, because the way we're talking about it right now isn't getting through to people.

My latest conversation: 5 from South By: Ambient social networking, a Highlight of SXSW

jeffespo 195 pts

While I have heard that panel was a joke when a certain frenchman was missing, I would say that Dell, Disney and Pepsi were wide open with their struggles and also what they were measuring in the Marketing Shift from Waterfall to Agile panel. Any time you have a bunch of consultants on a panel on ROI it is not too much of a shock to see that no one wants to get away from the hippie smoke circle-jerk that is content is king.


Campaigns have different measures of success, it is just about tying your measurements to that. 

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JGoldsborough 247 pts moderator

 jeffespo "Campaigns have different measures of success, it is just about tying your measurements to that."



My latest conversation: 5 from South By: Ambient social networking, a Highlight of SXSW

margieclayman 558 pts

Hi Justin,


Found this via Mr. Brown.


I like the general direction of your post - it would be great if we could move on from the ROI discussion where social media is concerned. The horse is so dead we're ready to make glue out of it.


BUT...we can't ignore it until people understand it. And I think we're still far from it. Yes, the other stuff matters, but businesses still need to make more money than they are shoveling out. If you are paying personnel to carry out your social media marketing, or if you are spending your own time on the clock working on social media "stuff," you are investing money. You are sending money out. If you are not making that money back, it's a losing proposition. It doesn't matter how many great communities you build, how good you are at networking, or how much "positive buzz" there is about your company. You need to make money. You need to make more than what you are spending. If you do not, you will go broke.


Anything beyond that can be built only once this solid foundation is understood. Good feeling and strong networks won't matter a jot if you're bankrupt. 

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JGoldsborough 247 pts moderator

 margieclayman Hi, Margie. Thanks for stopping by. I don't disagree with your premise at all. One point we all need to consider is that MAYBE 5% of the communicators out there understand what ROI means. It is the most overused and least understood corporate buzzword I can think of.


That said, what many communicators (and people for that matter) do understand is setting a measurable objective and trying to reach it. Most of us have to do this as part of our performance planning exercises to receive merit increases and promotions at our jobs. Therefore, I'm not saying we shouldn't try and show how social media impacts the bottom line. What I'm saying is the way we address this issue -- by asking "How do you measure the ROI of social media?" -- is falling on deaf ears. People don't understand the question or the answer. So we're communicators...let's rephrase things in a context people understand to get to the point you are raising -- that our social media efforts, like all of our communications efforts, need to be helping us make money or need to be re-evaluated.

My latest conversation: 5 from South By: Ambient social networking, a Highlight of SXSW

DannyBrown 2991 pts

Love the fact that you mention the Dell and Zappos examples, mate. How often have they been trotted out, yet have little to zero relevance for the majority of businesses out there.


We get so wrapped up in what we feel should be the details, we miss the real details that actually matter. Go figure.


Great stuff, sir!

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JGoldsborough 247 pts moderator

 DannyBrown Thanks, appreciate it. The Dell, Southwest and Zappos examples are great. But they hold little water unless we can relate parts of them back to our current situation. And some of the time, they won't relate at all per your point. Cheers!

My latest conversation: 5 from South By: Ambient social networking, a Highlight of SXSW

MattLaCasse 140 pts

For any communications plan to be successful, it has to tie itself to the overall goals of the organization. I do think that we need to show how social media strategies are impacting the bottom line. That's not always directly attributable to this tweet or that post, so it's connecting the dots more than anything else. I struggle at doing that in an easy-to-follow manner, or even coherently. Thus my vow to become knowledgable in social media ROI earlier this week. A fantastic read, as always, Dr. Goldsborough. 

JGoldsborough 247 pts moderator

 MattLaCasse Thank you , sir. I think people hear ROI these days and their brain shuts down. The term is misused in so many ways, that I bet 8 out of 10 people couldn't tell you what it means. But measurable objectives are crystal clear. If we set measurable objectives designed to help achieve communications and business goals and then perform well against those objectives (using social as one of our performance channels) then we start to tell a story people can understand.


True that we should always try and show how our efforts affect the bottom line. But it's not bottom line or bust, if we put some marks in the sand before we start our programs.

MattLaCasse 140 pts

 JGoldsborough Agreed. My struggle is setting those measurable goals. I'm just not very good at the measurement stuff, but it's something I'm committed to getting better at.

KenMueller 1948 pts

Very well put, Justin. We really need to step back and make sure we're asking the right questions. Quite honestly, I've read hundreds of blog posts and articles on the ROI of social media, and have never really seen one that shows us HOW to do that. Even the folks that trumpet that we need to do measure it, and that it can be measured, have never really showed how they do it.

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JGoldsborough 247 pts moderator

 KenMueller That's because it's different for every brand and there is no general rule for measuring ROI. The other problem is that when we talk ROI, without the context of the program and tactics, we aren't telling the whole story -- see AVE and all that stuff. What's funny is I know veteran communicators who are still trying to grasp the technology behind social media. But they are some of the best at basic measurements to track the value because they have always been believers in strategic planning and setting objectives. The number of clients/companies that run major campaigns without measurable objectives set is scary.

Conversation from Twitter


@DannyBrown @jgoldsborough I'll never understand why this question is so hard to answer, when it's not hard to answer.


@RichBecker @jgoldsborough Because continuing the question keeps the pockets of flakes lined? ;)


@dannybrown Thanks for the RT, sir. How you been?


Agreed :) #JustReadIt RT @andrew_shippr: Great read RT @JGoldsborough: 5 From South By: The Social Media ROI question http://t.co/2tImJgk5