Measuring the ROI of Social Media

set realistic expectations

If you’re not measuring the ROI of your social media campaigns (and digital marketing in general) using the right tools and metrics, you’re likely wasting your time and money. With the many recent updates to Google Analytics, enhanced metrics available on social media platforms, and changing possibilities for marketing your brand online, I think it’s time for an update on how to measure the ROI of social media and what to do to use insights gleaned to improve your market performance.

set realistic expectations
Image courtesy of Digital Examiner

As you can see in this graphic, a disturbing number of businesses (almost 50%) DON’T EVEN KNOW WHAT THEY’RE ROI IS. If you don’t measure ROI or assess the right metrics, how can you expect to improve your performance? It just astonishes me. And, only a handful of those companies surveyed are happy with the return they get from the money invested in digital marketing. But, do they know what they’re doing wrong and what they’re doing right? That’s the only way to ensure you’re getting value for your marketing investment.

What is ROI and how do you assess it?

ROI stands for return on investment and in social media we’re looking at metrics to evaluate your increased sales (lift in marketing parlance) as a function of the expenses needed to drive those sales. But, that’s really hard to do since there really isn’t a direct link between social media and sales. Instead, most forms of social media and digital marketing (except for e-commerce) are used to create awareness, build a community of followers, inform prospective buyers, build interest, and create positive attitudes in the hopes of convincing potential buyers to make a purchase and to encourage customers to take positive actions such as writing reviews, posting content supporting the brand like images using the product, or making additional purchases.

Obviously, the concept of ROI predates digital marketing but we didn’t talk much about it in marketing because our numbers were squishy, basically top-of-the-funnel metrics like awareness. Direct marketing, then digital marketing changed all that because metrics are readily available across much of the sales funnel. In contrast, most businesses today find themselves drowning in data and don’t have the ability to analyze it to provide insights they can use to improve market performance.

This encompasses a core concept within marketing that sales is a process and measuring success starts with identifying factors contributing to your success along the entire length of the process. Putting it into a graphic looks something like this (this is abbreviated AIDA and comprises the conversion or sales funnel):

content marketing plan

But, factors contributing to your success go beyond making a sale, as you hope that customers take actions after their purchase that also support future sales. In addition to those actions mentioned above, the pinnacle is for customers to become evangelists that support your brand not only through recommendations but also by sharing their love of your brand to convince new consumers to buy and to help them get the most from their purchase, such as answering questions, posting how-to videos, and defending the brand against negative attacks.

Firms use everything from vanity metrics like # of fans/ followers to hard returns, such as increased revenue and conversions. Others build metrics around processes leading to sales — such as positive word of mouth (mentions), message virility, and site traffic. The opportunities to capture key metrics all along the process exist in digital marketing in a way that was never possible in traditional advertising like TV and radio. If you’re not measuring all these key metrics (called key performance indicators or KPIs) on an ongoing basis, you’re leaving money on the table.

what are kpis
Image courtesy of Crazy Egg

But, things are getting better as more firms hire marketers trained in digital marketing and older marketers who were married to traditional media are being replaced at the operational level. Here are some things that are getting better and you can view all the trends in the infographic at the bottom of this post.

Social media and ROI

According to Forbes, 90% of company representatives agree that companies must use social media (digital marketing) or their company will fall behind and 62% agree that firms that don’t use social media will fail in the long run. They also argue that most businesses, especially small businesses, feel their social media is not effective.

1. Marketers are beginning to understand that ROI extends beyond sales goals

Sure, making sales is the name of the game. It keeps the lights on and the investors happy. But, a singular focus on sales often ignores the potential to make EVEN MORE sales in the future. Prospective customers need to move from awareness of a product, to beliefs about the suitability of the product, and on to a decision to buy the product. In social media, that means some additional steps that amplify your message such as liking and engagement. Focusing only on the end state — buying — ignores the bigger potential possible when you focus on the whole hierarchy of effects.

Yet, when we look at WHAT CMOs are measuring, we find they’re still measuring too many elements high up in the hierarchy rather than lower in the hierarchy — those things that more directly translate into sales. Measuring things like the number of fans or visits to your website are not as meaningful as measuring positive mentions or other signals that consumers are engaging with you.

Moreover, only about half of CMOs understand the importance of social media engagement on SEO (search engine optimization) which helps new users find your website at a time when Google continues increasing the importance of this engagement on your business’s rank in search results.

Meanwhile, moving lower in the hierarchy of effects of evangelism, few CMOs measure reduced call volume when a major benefit of using social media is you save money on customer service when customers can get help from other customers on social media rather than having to call in for help.

2. Blogs still have the greatest contribution to ROI of any other social media

I’m glad CMOs agree about the importance of a blog for creating ROI in social media. Probably, blogs have the greatest impact on driving traffic to your website both through links in other social networks and their impact on SEO.

Unfortunately, nearly 50% of CMOs are either not using blogs or not measuring them properly so they’re not aware of the contribution of a blog to ROI in social media (from the infographic).

Here are some metrics you might assess from your Google Analytics as a way to determine the success of your blog in driving visitors toward sales. Note the impact of segmenting your data in deriving maximum insights.

think see do care
Image courtesy of Occam’s Razor

3. Setting up an analytics program

First, and foremost, commit to assessing your ROI every day, maybe multiple times a day. And, with the huge volume of data available, it isn’t easy to analyze it in a way that provides insights to guide your strategy. Here are the steps:

  1. Determine key metrics, KPIs and where you might find these metrics, such as Google Analytics and social media insights
  2. Build a dashboard, I use Cognos (an IBM product). Interactive dashboards work best to provide the best insights as they allow you to parse the data in different ways such as by various time periods and segments. Avinash Kaushik, of Google Analytics fame, recommends 10 metrics for each dashboard although I think you can go with a few more. What you want to avoid is having so many metrics on your dashboard that you can’t glean the meaning behind the data.
  3. Ensure your dashboard is effectively linked to your data so it always contains the most up-to-date data.
  4. Spend time at least every day analyzing your data. I find trend analysis especially valuable in developing insights. Also, using data visualizations allows you to process vast amounts of data quickly, easily, and accurately. Below is an interactive dashboard displaying the percentage of women in various fields. The colors represent the growth/ shrinkage in the percentage of women while the size indicates the relative proportion of female participation in the overall workforce. You can quickly see fields where women are making a move into and out of the field as well as fields where the proportion remains largely unchanged.getting analytics wrong

4. The future of measuring ROI

Social media is still a young discipline and, too often practiced by those unskilled in marketing. To many, the growth of social media offered incentives for technical individuals or writers to hang up a shingle as a social media guru and underprice their services to CMOs who didn’t know the right questions to ask. Then, companies didn’t see the ROI of social media the way they hoped — a surprising number of these social media gurus don’t even provide clients with metrics or with the wrong metrics (those not even mentioned here).

I think that’s rapidly changing. Every day I see more professionalism among social media consultants. And, it’s not just me. Major watchers like Forester report the days of just anyone claiming to be a social media guru are OVER.

If you’re a CMO or marketing director or a business owner looking for ROI from your social media investment, be sure to check out the references of the consultant or agency you hire.

  • Get some education about what types of measurement are possible
  • Know the right questions to ask
  • and, if they don’t discuss strategy and metrics — run

How are you measuring the ROI of social media? Do you measure up against your peers? Does the ROI of social media meet your expectations? Do your metrics help make better business decisions?

Advanced tracking in ROI

We call this type of analysis descriptive since we’re actually just describing what’s going on. Don’t get me wrong, this type of analysis is very powerful. However, we can go further in analyzing data by using tools to improve our tracking ability and other types of analysis such as predictive and prescriptive analytics. We’ll discuss these next.

To enhance our analytics capabilities:

1. Set objectives. Do you want your social media marketing to generate more traffic to your website? More leads? More sales? Or are you simply interested in creating more awareness and positive sentiment associated with your brand? Your objectives determine what you should measure and define what you’re talking about when you look at the ROI of social media.

2. Embed coding to track results. It’s not only important to know the ROI of social media but to know what’s working and what isn’t. Use embedded codes to allow tracking of online ads, calls to action, placements, etc. so you know which efforts generate the best ROI. For instance, to determine which Facebook ads generate a higher conversion rate, you can embed a tracking code that identifies the campaign and social platform to follow clicks from your ads through to your conversion page. Without these codes, all you know is that a click came from a particular platform.

Google Analytics through its GA 4 upgrade, now provides event tracking that allows a more nuanced interpretation of how well you’re reaching your goals across social, ads, your website, and the app store.

3. Build predictive models. Most of the metrics assessed by CMOs, according to the infographic, are descriptive metrics meaning they tell you how much, when, how often, etc. What you REALLY need to assess the ROI of social media, are predictive models that tell you WHY folks take certain actions online.

Certainly, you can look at the most popular posts from your website, Facebook, or Twitter, or images from Pinterest and Instagram and group them according to type. That would tell you that certain types of posts do best on each social platform. That might tell you that images of your shoes on a model do better than images of the shoes alone, for instance.

Truly predictive models go beyond such simplistic observations. Predictive models include data mining, observations, and survey techniques designed to determine factors that correlate with ROI in social media. An example of a predictive model is one built by Fishbein and Ajzen (depicted below) which describes buying behavior as a function of consumer attitudes and societal norms. This model is particularly appropriate for social media because these 2 factors are pretty obvious on social platforms.

BI {{=}} (AB)W_1 + (SN)W_2\,\!


  • BI = behavioral intention
  • (AB) = one’s attitude toward performing the behavior
  • W = empirically derived weights
  • SN = one’s subjective norm related to performing the behavior

Building predictive models to estimate ROI

Step 1 – Determine which algorithm to use — ie. our pals Fishbein or build your own with your data. Airlines do this to predict a price that will sell the most seats on a plane given factors such as the popularity of a particular route, historical data, percentage of the seats already sold, seasonal factors, and more.

Step 2 – Collect empirical data to determine the weights (which vary greatly with context).

Step 3 – Analyze, commonly with software that fits a line to the data — called linear regression.

Step 4 – Interpret the analysis to determine which course of action yields the highest ROI.


Determining the ROI of your digital strategies is critical for improving your market performance. Read this post to get you started then check out other posts on this site that dig into the hows of actually doing data analytics.

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