Calculating the ROI of a Social Media Marketing Campaign

ROI or “Return on Investment” is a large topic of discussion in the world of Social Media advertising. No one seems to have a quantifiable answer and the answer is sometimes answered vaguely. I’ve heard everything  from “Well… it’s a long term strategy”, “It helps with your organic search”, “It’s really about brand reputation and management”, to “It’s really impossible to measure the results.”

The truth of the matter is, almost all of these things are correct. However, I disagree that it’s impossible to measure.

A social media campaign comes down to one thing: cheap traffic. Lots of cheap traffic if done correctly. You can take the ROI from there. The first point is to track your current traffic and figure out how much traffic equals an action (i.e. purchase, denotation, or subscription). Seems like a simple step, but I’m amazed at the amount of companies that have absolutely no tracking in place.

So say I’m a widget manufacture and it takes an average 200 visitors to purchase 1 widget on your website.  Our company writes an article “The ten best widgets for summer.” And submits it to all the major social bookmaking sites, and also shares the blog on specific widget oriented communities. The article becomes popular on sites like Digg and Reddit, and the widget communities are talking about the article. You get 100,000 new unique visitors to your website within 48 hours, 3% of those go to your online store. You get 3000 new visitors to your store, which equals 15 new sales for Widget X.
You spent 5 hours writing the article, and 2 hours promoting it. You achieved an significant ROI for 7 hours of work.

Now Maki at Doshdosh.com, points out that a social media campaign has more than just the initial traffic push . That there is primary and secondary traffic from this type of social media campaign. The first is the initial push of traffic directly from the campaign. The second is the referral traffic and links that come from it for months afterwards as people continue to discuss the article or look for it.  So the point is, a social media campaign is both a short term and long term strategy for generating traffic.

The same article also points out other benefits:

•    High Quality Links: Getting your blogs out on social news sites will net you a large number of links from other sources as other bloggers may talk about it.  These are things that cannot be easily bought, plus better links equals better search engine rankings.

• Community Supporters: The initial bounce rate will be high, but every time you do this, you’ll get a handful of users who will visit the site on a regular basis. You do this enough, and you have quantifiable method where you can build large amounts of traffic, for a relatively low cost compared to other methods.

Of course there’s a lot of different elements and tactics to a complete overall campaign, but the basics is this: generating traffic. Instead of looking at CPMs or PPCs, you look at traffic/hours of work= ROI.

Not every story will become popular on social news sites, and you may have a product or industry that will never become extremely popular on Digg and Reddit (although, personally, I can’t think of any business that can’t take advantage of social media). But social media allows you to target your niche and start building traffic immediately and much more effectively than banner ads or traditional media.

So why can’t marketers figure out the ROI on Social Media? Well some get too caught up in all the “gee whiz!” technology out there and overlook the main point: It’s not exclusively about brand reputation, building a community around your brand, or being on the cutting edge of the latest internet trends (although that’s part of it). It’s about building traffic, permanent traffic that leads to sales.