How Do Businesses Measure Social Media Success?
Run a Google search for “how to measure social media success” and you’ll find a slew of articles offering easy, bulleted solutions: 4 Ways to Measure Social Media Success; 7 Essential Equations; 4 Simple Steps; 5 Uncommon Ways; 3 Key Metrics—the list goes on. Despite what these authors would have you believe, quantifying the impact of your social media efforts is an ambiguous, imperfect and difficult process for today’s businesses. Any free app or “quick fix” recommended online is likely to offer a superficial look at social media performance, not the deep breakdown that many companies crave.
Maintaining a strong social presence is essential in today’s market. (I bet you’ve heard that before.) Today, 80% of the world’s online population uses social media, and they expect to see their favorite brands represented on Twitter, Facebook and the like. So let’s say your company has invested the time and resources to build its social presence and has achieved “success” (like Starbucks has on Facebook with more than 31 million Likes, and like Samsung has on Twitter with 2.5+ million followers).
But what do these numbers mean? How does your Facebook traffic correlate with sales? With revenue? Are companies really devoting resources to an activity that has few concrete effects on business success? Aren’t CFOs going mad over this? Let’s look at these issues from the top, with ROI.
Social Media ROI
Return on investment (ROI) is the classic measure for predicting the impact of one’s investments. Prior to any new software deployment, the prudent organization calculates the ROI for a given product to determine its long-term value. But calculating ROI for social media is a notoriously challenging process.
A recent report by the Altimeter Group offers valuable insight into the state of social media ROI. A few of their important takeaways are that:
- 41% of more than 1,000 companies/agencies using social media had “no return of investment figure for any of the money they had spent on social channels as of October 2011”
- The primary barriers to calculating ROI included: 1) an inability to tie social media to business outcomes, 2) a lack of analytics expertise and/or resources, and 3) poor tools
- The majority of companies viewed their organizations as being ineffective at connecting social media with revenue generation
Despite offering strategies for measuring social media success, the report paints a fairly dismal picture of the current environment. You can read it in its entirety at the Altimeter Group’s website.
Looking at the Math
For many, there’s an impulse to see social media in terms of numbers. Radian6, a social media monitoring company purchased by Salesforce.com in 2011, offers readers seven equations for measuring social media success. The equations cover a variety of metrics including the potential reach of social media, the value of a fan, the value of a Facebook Like, and social media ROI. They’re interesting to ponder, and for companies whose products are tied closely to Facebook, potentially useful, but the majority of businesses will find it hard to determine the correct values to plug into these simple equations.
For example, social media ROI is measured using the equation ROI = (Revenue – Cost) / Cost, x 100. This is perfectly fine if you know how much revenue your social efforts are generating, but as we learned in the Altimeter Group report, the crux for most businesses is that there’s a disconnect between social media and tangible business outcomes, making ROI an educated guess at best.
Conversely, if your Facebook page is directly responsible for driving leads and sales, the equation for determining the value of a “Like” could be a good way to inform your future activities in that space. A notable case study is that of online event registration service Eventbrite. Eventbrite’s service is closely integrated with Facebook (its top referrer), and as a result the company has a very full understanding of how Facebook activity affects its revenue.
Right now you might be saying, “Why focus so much on revenue and numbers? Social media is about the intangibles like engagement, enhancing brand profile, and trust.” This is true indeed. The benefits afforded by a successful social media extend beyond standard accounting metrics. Going back to the Altimeter Group study: “Survey respondents reported overwhelmingly that the primary business impact of social media was not revenue generation, but ‘insight that helped us meet customer experience goals.’”
Companies with the resources to effectively monitor and analyze social media can use the insights generated to guide decision-making. In this context, a company can achieve “social media success” if its efforts result in actionable customer data. An entire sub-segment of social software—social media monitoring/listening—has developed to further this cause.
If you’re struggling to quantify your social media efforts, you’re not alone. Social media is growing and evolving faster than corporate analysts can keep up with. If anything has become clear, it’s that putting too much focus on ROI is not the answer. Focus on engagement and building customer trust. If people are engaging you through social media, it means they’re curious about your brand, and that curiosity is a very good thing.Tags: social media, social media monitoring, Social Media Software, Social Networking