The Real ROI of Online Social Media

Jason Falls posted an article over on his blog Social Media Explorer a few days ago posing the question, “What is the ROI for Social Media?”

Jason’s overriding theme was presented early on in the article:

The problem with trying to determine ROI for social media is you are trying to put numeric quantities around human interactions and conversations, which are not quantifiable.

He sat down with Katie Delahaye Paine and had a conversation regarding this topic.

I believe that Jason summarized his arguments with the following:

This is why every session on measuring ROI in social media is a waste of time. None of the measurement experts are going to make that point and that point alone because without throwing page views and unique visitors and number of subscribers and sentiment and tone, they have nothing to offer.

I’m going to have to respectfully disagree with the entire premise of Jason’s post, mainly because I do not believe that the answer to this question can simply be “there really is no quantifiable ROI model”. That, to me, sounds like an excuse.

Sure, it’s hard to come up with a model – but that doesn’t mean it’s a waste of time. Indeed, there are many flaws in this statement.

• I’ve heard too many people say, “ROI is not the reason companies should participate in Social Media”. What? ROI is the only reason that any company does anything! These are not charities or governments. A business, by definition exists for only one reason – profit.
• Not enough people think about the money spent on social media as if it were coming out of their own pocket. If I asked you to drop $25,000 on something that had “no quantifiable ROI model” you would never go for it. If you would, please call me because I’ve got some GREAT ideas!
• If/when someone proposes a general model of social media return, it will surely be the biggest news in the advertising / marketing field in decades. We just need the Einstein of marketing to put the theory out there so we can change the world.
• Even the Internet didn’t have a good ROI story in the beginning. Indeed many companies went broke betting on it. Only after a lot of maturation did the ROI models appear and it start making sense.
• Just because social media may one day offer returns, it doesn’t mean it will be appropriate for everyone. So don’t listen to people who say ‘just do it’.

As a C-level executive I’m going to tell you that you will never get any (real) budget to run social media programs without a hard and fast ROI model. And I would propose that talking a company into spending money without any framework for measuring ROI is both unfair and misleading. You simply cannot say “invest in this and have faith.” Faith is something you practice in church, not business.

Now, Kathy made some good points during the discussion, the most valid being that measuring ROI is an entirely individual exercise requiring different metrics to be counted, aggregated and analyzed. But neither Kathy or Jason proposed an actual framework for measuring the monetization of social media spend. And I believe that is what people need.

Social media is fun. I know that, you know that, we all know that. But at the end of the day you aren’t going to get money to play around. You get money to produce results that specifically translate to the bottom line. Let me know if any of you build a model. I’d love to see it…