The Misguided Social Media ROI Obsession

frisbee*

This is a post about a seemingly highly popular topic: social media ROI (Return on Investment). Some people downright obsess about it. To me this trend seems to be misguided. Let me tell you a story first.

12 years ago I used to play Frisbee in the park with an older guy who already owned a business.

I was working at an Internet agency back then. We did it after work of course so it was part of my leisure activities. We didn’t even plan on meeting in the park to play Frisbee. We just went to the park and took our Frisbees and whoever was there played.

Since then I moved to another city, I married and stopped playing Frisbee until lately when I started playing it with my dog. The guy I used to play with somehow remembered my name despite it being unpronounceable and hard to remember. Tad Chef is a short version I adopted just recently.

The ROI of Playing Frisbee in the Park

This man kept up with my career and a 12 years later finally approached me as a client because he got two major blows in Google Search results from both Panda and Penguin updates. So after more than a decade the Frisbee playing paid off finally you could argue.

This story is highly unlikely but it really happened.

During that time, in the “new economy” era so called “after work parties” were all the rage. People met on weekdays in the evenings in bars and clubs to network. I didn’t like that very much because it meant that you would prolong your work hours in a way.

You would meet after work to prepare for work again by networking with others from your company and beyond.

Instead I played Frisbee in the park all evening almost every day. Sometimes some of my favorite coworkers joined in too. It was not meant for networking though.

Work and Networking Today

Today it’s the other way around,

people network online during work hours. Some employers forbid it while other ones, the more progressive ones not only allow it but even invest time and money into social media.

People network globally and share things on the Web which are often work related but even in case they aren’t they strengthen virtual bonds that can help with work later. It doesn’t have to take a decade or more these days. Your online friends of today you have because of your funny pictures you share may spread the word about your latest business venture too.

Leaders of conservative businesses that have wasted money on TV and print ads for decades will often ask the typical question: What is the ROI of social media?

By that question they already suggest that it’s worthless and just “a waste of time”. Instead they want to know how much they earn from every dollar they spend on social media. By now there are many ways to measure social media Return On Investment, even Dollar and Cent wise.

On the other hand you won’t hear many questions on what the ROI of a logo is or of a website design or even web hosting.

Is it Self-Evident o Does it Need Proof?

Some things are taken for granted while others have to prove their right to exist in the business world. That’s OK. Social media is still pretty new to some, depending on how you count it’s been around for a decade. For me that’s pretty long for large companies it’s not.

Back in the days we also used to do window shopping instead of online shopping.

Before Amazon took over we had all those fancy new bookstores with sofas to sit on and even cafes inside to sit in and read. How do yo measure the ROI of that? Do you count the books people bought per sofa? Or do measure the number of books bought by people who sat on the sofas? Maybe you need a more complex formula.

You can set up a CCTV camera with included analytics that checks using face recognition who looks at which products in the store window and whether that person buys them compared it customers who don’t look at the store window at all.

Sales vs Awareness Channels

Before online marketing we had not only TV and print ads, we also had radio ads, we had sponsorship of sports events and even movies funded by large brands in exchange for product placement. Guess what, we still have all of these. Yet I rarely witness debates on the ROI of them. They have been accepted as ways to improve the

  1. brand recognition
  2. image
  3. product awareness

and the likes. Nobody expects stadium ads to sell products right away. Just imagine a Coca Cola vendor standing in front of every Coke sign. No. There are some soft drink vendors there too and they sell Coke of course. It’s not just about the people who drink right there. Simplistic approaches are not used for old school types of marketing though.

There is a move from these immeasurable marketing tactics to new modern ones, social media among them. Why? It’s because on social media you can measure what happens.

Measuring Social Media Impact on Sales

It’s difficult to measure social media influenced sales though. We have so called conversion tracking but to be able to really track conversions from social media we would have to implement it flawlessly taking the whole funnel into account.

Nowadays we still mostly measure either the first or last “touch”.

We know by now that it’s not the way people buy. Usually people will notice something first on social media via friends or recommendations by weak ties that is acquaintances or even strangers interested in the same topic. Then they will probably see an ad for the product. They may check it out in brick and mortar store and finally a year later buy it from an online store.

People then search Google for the exact product name and buy it right away.

In case they clicked on your Google Adwords ad you might even measure it and assume that PPC is the most effective marketing channel. It’s not. Without social media your customer wouldn’t have even thought of buying your product in the first place.

Social Media is not a sales channel most of the time, it’s an awareness channel. Of course you can build up an audience and offer discounts or special offers for regulars who keep track of your messages but most of the time social media is about simply socializing.

What’s the ROI of Answering the Phone

Social media is like advanced window shopping. What is the ROI of window shopping?

Most people probably don’t know still they do have store windows and products on display. Also when someone enters your real life store and ask you something you do reply, don’t you? Or do you assume that this person won’t buy anything so there is no ROI in  replying?

On social media people talk about your product and brand all the time. In case you never reply you will probably have zero ROI on social media.

Without investment there is no return or even worse you lose money because disgruntled customers are the only people to speak about you in public. You have to invest in social media now even in case it doesn’t yield profits for years to come because it’s the mode of communication now. It’s like refusing to use a phone because there is no ROI in it. Some business pundits even refer to social media as the social media phone.

Ironically many businesses consider using the phone to be self-evident so that they don’t measure the ROI

of the phone at all and lose leads and sales because many people not only the older ones still prefer to call you up. There are many call tracking tools you can use these days.

Key Take-Aways:

  1. Social Media is not made for sales it’s about awareness
  2. There is ROI in social media but it’s less direct and obvious
  3. Social Media ROI is difficult to measure and easy to overlook
  4. Other marketing techniques don’t have to prove their ROI
  5. Obsessing about social media ROI leads to negligence

When you only focus on the ROI of your social media campaign you will lose out on the indirect and long-term benefits of engagement, branding, social CRM and customer service. Measure ROI when possible but don’t solely obsess about it.

More on Social Media ROI Elsewhere

  1. There is No ROI in Social Media Marketing | Copyblogger
  2. Why ROR is becoming more important than ROI
  3. What’s the ROI of Corporate Blogging?
  4. SEO ROI Beats PPC & Social Media For Generating Leads | LinchpinSEO Chicago
  5. The ROI of social media is survival – Mickey Mellen
  6. Social Media ROI: How To Define a Strategic Plan – Search Engine Watch
  7. 3 accurate metrics for ROI on social media campaigns

* Creative Commons image by Amodiovalerio Verde

4 responses to “The Misguided Social Media ROI Obsession

  1. How did I miss I this? Awesome post, Tad! Your Frisbee story is a great metaphor. I had never considered that even asking the ROI question already suggests a skepticism about social media’s potential. Are we setting ourselves up for failure by trying so hard to reconcile every action and every penny? Lots to think about here.

    1. Yeah, I just noticed that nobody ever asks for web design ROI etc. so that I started to wonder why social media gets singled out. Thank you for the kind feedback and share love!

    2. Yeah, I just noticed that nobody ever asks for web design ROI etc. so that I started to wonder why social media gets singled out. Thank you for the kind feedback and share love!

  2. How did I miss I this? Awesome post, Tad! Your Frisbee story is a great metaphor. I had never considered that even asking the ROI question already suggests a skepticism about social media’s potential. Are we setting ourselves up for failure by trying so hard to reconcile every action and every penny? Lots to think about here.

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