Social Media’s ROI

We’re working on some new ways to measure and report on social media ROI. However, Julianne needed some quick numbers, so I had a look and came up with some that seem interesting, if not definitive.

How to measure the value of social media is a common concern, and in a way, it’s a bad question. First, your social media presence has more in common with things like a clean office, a good reputation, or workers who present your company well at networking events than with things like display ads in the phone book. What’s the cost/benefit ratio of greeting customers or patients at the door versus ignoring them? You would probably never even ask that.

Second, while it can be hard to put a firm number on the ROI of your social media, you sure have a lot more data to work with than with traditional advertising. When  a newspaper gives you circulation numbers, they are not telling you how many people will see your ad, or how many will even open the paper to the page containing your ad. They can’t. They can’t even tell you how many people leave the newspaper on their porch or immediately shred it for kitty litter. Social media’s effects are a lot more measurable than that.

They are not, however, perfectly measurable. We can count the number of people who click through to a website from a tweet or how many retweet it, but not how many tell someone about it or how many decide to call your office because they like what they see on Twitter.

The numbers I mentioned?

First, we calculated the cost of a tweet. We don’t know what it costs you if you do it yourself; you’ll need to calculate how long it takes you to find good content or interesting news, how long it takes you to log in at Twitter, and how long it takes you to craft the perfect 140 characters or less to make it appeal to your readers. Multiply that times your cost to the company (don’t forget your benefits) and add the cost of any tools you use (and the opportunity cost of any distraction time). If you have us do it for you as part of a social media management package, it costs you about $3.00. If you can’t figure out your DIY cost, try taking that as your cost — if it cost you more, you’d already have hired us, right?

Then we looked at the reach for tweets. This is a measurement of how many Twitter streams your tweet showed up in. Just as someone might open the newspaper to the right page and not happen to see your ad, someone might be following you (or those who retweet you) and not happen to see your tweet. However, people follow you because they’re interested in what you have to say; they take the newspaper just because they live in the town. Reach is at least as useful a number as circulation.

Obviously, this number varies a lot. It depends not only on the number of followers a given account has, but on the number of people who retweet. In the month of December, our ten top-reach tweets showed reaches ranging from 3,200 to 68,100 people. How much did those eyeballs cost the clients?

• A $3.00 tweet that reaches 68,100 people cost that client .004 cents per person reached.
• A $3.00 tweet reaching 17,200 people cost that client .017 cents per person reached.
• A $3.00 tweet reaching 7,600 people cost that client .03 cents per person reached.
• A $3.00 tweet reaching 3,200 people cost that client .09 cents per person reached.

In other words, each of those tweets cost much less than a penny per person reached. In fact, at $3.00 a tweet, your reach has to be less than 300 to bring your price per person reached to one cent.

There are plenty of tweets with that kind of reach, because everyone starts at zero. And there are also tweets with a larger reach — one of our smaller clients reached over 280,100 with one tweet in November. As your Twitter account’s reach naturally grows over time, your cost per person reached will inevitably become smaller — not the case with traditional ads.  Check your tweets for a week and average the number of people reached. Divide your cost per tweet by the average number of people reached by your tweets to get your Twitter account’s cost-per-impression:

cost of a tweet/average number reached = average cost per impression

Now compare that with the cost per person reached of other forms of advertising you use. We looked around for estimates and found that most estimates of traditional broadcasting range from about $1.00 to $5.00 per person (theoretically) reached. The estimates vary enormously because prices vary enormously, but you probably have “CPM” figures or circulation figures to work with for the traditional ads you’ve used or considered.

Bear in mind that the average American now spends as much time (about three hours a day) with social media as with the TV, and way more time on social media platforms than with newspapers, billboards, or direct mail pieces.

It’s clear — even if you didn’t actually do the math — that social media’s price per person reached is highly competitive with traditional advertising. In order to hit $5.00 per person reached by a tweet, you’d have to have something like a person who earns $50.00 an hour spending an hour on a tweet which reaches only 10 people. If you have costs and reach like that, you’re doing it wrong.