• by Drew Neisser , July 25, 2013

Few things would make me happier than an easy formula to prove, once and for all, the ROI of social media. I can just imagine the joy on my clients' faces when they review how all those new likes, post shares, friendly comments, retweets, YouTube thumbs-ups, customer service-related responses, Instagram tags and click-throughs add up to a definite value well in excess of the dollars invested to achieve all that freshly minted engagement.

Surely, given all the data points available, calculating ROI can't be that hard, right? For example, Syncapse -- a social media management and measurement service -- suggests that you can at least determine the value of a Facebook fan by looking at value-per-customer, loyalty rates, media value of social engagements, new customer acquisition costs and brand affinity. Unfortunately, this formula involves a number of debatable assumptions and does not account for the value of interactions with fans on other networks.

You might well ask at this point, “Drew, why is calculating the ROI of social media so hard?” There are many theories on this, and many boil down to the challenges of online attribution. Dumbing this down mainly for my benefit, consumers tend to make a lot of stops during their purchase journeys and typically, social media is not the first or last stop before buying. In fact, social is more often than not a stop after the purchase, when people want to share their new acquisition or seek assistance from the brand itself.

Okay -- so let's run with the notion that social media is more about customer retention than acquisition -- perhaps we can find an ROI there. After all, Syncapse's study reports, Facebook brand fans are 80% more likely to be brand users, 18% more satisfied with their brands than non-Fan users [and even] 11% more likely to continue using the brands than are non-Fan users.” Now we're getting somewhere, right? Seriously, why the heck would anyone like a brand page unless they had a direct interest or connection with that product?

Given all those wonderful statistics, real ROI seems within reach. Just prove that your fans and followers on Facebook, Twitter, Instagram, Pinterest, YouTube and everywhere else are customers, assign a value per customer, add in a value if they remain a customer longer and another value for referrals, and voila -- Social ROI! Piece of frickin' cake. But as Lux Narayan, CEO of Unmetric, notes on Forbes.com: "If social media ROI were indeed determinable, we'd have solved it over a not-so-busy weekend.

At this point, you might be fair in asking, “So what's a marketer to do -- just accept the value of social media on faith and keep investing time, resources and, in some cases, media dollars?” I could be flip and just say, “Yes,” but I’ll cede the floor to author and former CMO of Kodak Jeffrey Hayzlett and his famous quip, “What about your ROI (return on ignoring)? (return on ignoring)?” Hayzlett's point is that the social conversation is going on with or without you, and there's little upside in not being part of it. In fact, there's a real and potentially costly downside to not taking social seriously, especially if your competitors are listening and responding ahead of you. But of course, Hayzlett's “ROI” won't help much when it comes to budget allocation. 

Lest you think this particular debate is all for naught, let me offer up one more possibility that I'm calling “non-linear ROI.” The operating principle here is that every positive social interaction has value but that the value will not reveal itself in a linear, directly attributable fashion. Robert Moore, CEO of Internet Media Labs, concurs with this assessment, noting that many of his business relationships happen “as the result of seemingly ‘random’ intersections,” a turn of events he calls “the serendipity of social.” For a lot more on non-linear ROI, see my interview with Moore -- and please, if you've cracked this ROI thing, do call me post haste.