Fast Company seems to have an aversion to math or basic research. Their latest story, Does Social Media Have a Return on Investment, says that no one is able to calculate the ROI of social media, and that large brands like Audi and Home Depot are just fumbling around in the dark on determining the ROI of social media.
This is complete and utter crap.
People have been able to calculate the ROI of social media for a few years now. In fact, as Katie Paine (@kdpaine) pointed out in the comments section to this article:
This is ridiculous. Back in 2008, Wells Fargo and SAP were calculating solid ROI from social media campaigns. Social media agencies like Organic have been using sophisiticated data analytics for years to predict outcomes. You stumbled across a few creative types that are allergic to math and haven’t a clue what data is available who don’t care about measurement or ROI. And if they are using Klout, the really don’t care much about the accuracy either. Other marketers, the smart ones, are embracing all the data and analytics now available and providing solid ROI on a regular basis.
It’s not that hard to calculate the ROI, or to measure anything when it comes to social media. Here are the basic steps you can use to calculate even the most rudimentary ROI of a sales page:
- Set up Google Analytics on your website. Make sure you put the code on every page.
- Set up Google Webmaster Tools, and use their Campaign Code Creator.
- Append any URL you tweet out or put on Facebook with the Campaign Code Creator.
- Shorten every link you send with Bit.ly, including the campaign code, and send it out. Assign different campaign codes to different messages, tools, and campaigns.
- Track down the visits that filtered down into visits to the sales page. Total up the sales from those visits. Cross-reference them with the contact data that came from the sales form.
- Subtract the cost of your campaign from your sales total. That’s your ROI.
And that’s the writer’s method of dealing with ROI. There are entire suites of tools built to answer the ROI question, and professionals like Katie Paine have been doing it for years.
With thinking like this being erroneously spread by Fast Company and writer Farhad Manjoo, it’s no wonder businesses are afraid to spend money on social media. When uninformed media — who frankly should know better, or should have done some remedial research — start spreading bad information based on their own misunderstanding, it not only shows their ignorance of the industry, it spreads bad information to the rest of the business community.
Read that article this morning.
I gave Manjoo a little more of a break than you did here for parsing social media in general – including likes, comments, retweets – from more immediately measurable tactics like SEM, where ROI is obvious for the direct connection of revenue and expense on any campaign.
Regardless, your point is completely fair and the article – including some of the quotes (“revenue is not the intent”) – felt like a disservice to the value of social media marketing.
FastCompany is great read if your job doesn’t involve a balance sheet or a requirement to turn a profit.
Great post, Erik. Your tips are not only helpful, they’re simple – it doesn’t take much effort, even for a small organization, to implement them.