Quantifying the return on investment (ROI) of social media marketing efforts can be challenging, particularly for organic social media. This is because the overall strategy and content output are not directly tied to specific CTAs or attribution links. Even for paid social media, excluding D2C and eCommerce, measuring the value generated by paid ads can be a daunting task.
Social Media ROI
Social media ROI is a measurement that demonstrates the value produced by your social media investments. This metric is commonly evaluated in monetary terms, but when it is challenging to directly link it to revenue, non-monetary metrics can be used initially to quantify ROI.
If your objective is to increase brand awareness and influence through a paid campaign on social media, you can measure ROI by tracking the growth in follower count or post-impressions. The specific metrics used to quantify social media ROI for your business should be based on your objectives.
Why is it critical to quantify and measure ROI on social media
Your business should prioritize measuring social media ROI due to multiple reasons.
Showcase the worth of your brand’s social media marketing endeavors.
Demonstrate the effectiveness of your social media marketing strategies by providing evidence that they are generating the desired outcomes.
In order to enhance your strategy, analyze the sections that yield the most success, allowing you to further capitalize on those aspects while addressing any shortcomings.
Provide support and inform the allotment of funds for social media.
Calculating social media ROI
The simplest formula for social media ROI is as follows, when thinking in a step-by-step manner.
The percentage of social media ROI is equal to the profit divided by the investment, multiplied by 100.
Profit refers to the monetary amount that you have accumulated as a result of your endeavors in social media marketing.
Investment: The complete expense of your endeavors in social media marketing.
Calculating ROI for social media campaigns and initiatives that can be directly linked to revenue, such as paid ads for eCommerce products, is straightforward. However, the process becomes more complex when considering the investments made in social media that provide intangible value.
When developing your ROI metrics, ensure that they are aligned with the objective and goal of your activities to demonstrate value. Consider whether brand awareness, lead capture, or sales is your primary focus on social media.
There are a variety of social media goals available for selection. The specific goal you choose will ultimately depend on your main objective, which may include:
- New followers
- Click-through rates
- Conversions
- Completed lead generation forms
- Downloaded files (e.g. eBook, whitepaper)
There are common metrics that can be used to measure social media ROI.
Engagement is a significant and widely used metric on social media, indicating people’s level of interaction with your content and brand. According to Altimeter research, more than a third of content executives rely on engagement as a performance gauge. Various types of engagement metrics encompass clicks, shares, likes, and brand mentions.
The metric known as reach focuses on the visibility and interaction that individuals on social media have with you. It considers the size of your audience and the number of shares, determining how widely your social media content is spread and viewed. Measuring reach can be more challenging compared to engagement as it solely focuses on the amount of people who saw your post, but it is crucial to monitor.
When it comes to generating leads, social media is an important factor to consider. It is crucial to identify the channels that generate leads and the type of content that attracts them. To measure the return on investment, it is essential to establish a connection between your campaigns and the actions that result from them. Having knowledge of the number of leads obtained is valuable as it demonstrates the effectiveness of your performance.
It is crucial to determine the level of conversion achieved by your social media content and posts, especially when you have dedicated significant effort to create them. An effective way to accomplish this is by incorporating UTM parameters into the links, enabling you to monitor clicks based on campaign and platform.
In cases where it is difficult to directly determine the impact on revenue, ROI can initially be measured using non-monetary metrics (such as audience growth or newsletter sign-ups). Although you can express your ROI in terms of these metrics, the ultimate goal is still to assign a monetary value to your investment in social media.
Tracking ROI for social media
Once you have decided on a goal or goals for your social media activities, it is important to establish a mechanism for monitoring your return on investment (ROI).
- The easiest way to do this is to set a goal in Google Analytics. You can do this by setting up goals and event tracking. Read through our Google Analytics Goals Guide to understand all that’s involved and what you need to do.
- If you want to track other metrics – likes, shares and brand mentions – use a platform like Buffer or Ahrefs.
- If you’re new to Google Analytics watch this video to get a step-by-step guide on how to use it.
Ensure you are familiar with the changes in Google Analytics 4 in order to account for them in your campaigns, as it has replaced Universal Analytics which is commonly used by marketers.
Assigning money values to determine ROI
To proceed, you need to determine the monetary worth for calculating your social media ROI. The most effective approach is to utilize past data, allowing you to ascertain the Lifetime Value (LV) of each customer. For instance, if the average LV amounts to $100, it implies that 1 out of every 10 individuals who see your content become customers. Therefore, the conversion of a visitor holds a value of $10 ($100 divided by 10).
If you do not have historical data, estimating is another method to calculate monetary values. Although it is not the most reliable approach, it is a good starting point. You can determine a realistic value by examining the average purchase made through your website or the PPC budget allocated for social ad conversions. Utilizing a paid media budget forecasting tool can assist you in determining costs.
Calculating social media spend or investment
In order to determine your social media ROI, you must have knowledge of the expenses incurred for the creation and execution of campaigns. These expenses may include:
- Your time or the time of your marketing team – it takes time and effort to set up campaigns, so account for the time spent on social media
- Tools or software – account for any software or tools you need to buy and pay for regularly
- Social ad spend – If you run paid social media campaigns, take your weekly or monthly budget into account
- Content creation – Social media requires content so account for any money required to create it
- External agencies – Do you use a copywriter or video content creator? Include the investment you make in your calculations
What is needed to attribute and quantify social media ROI
Here are the tools that you can use, which are equally important as the right method of calculating social media ROI.
Facebook Ads using Facebook Pixel offer important insights into traffic, attribution, and conversion data for paid advertisements.
Google Analytics allows you to establish and personalize an attribution system that aligns with your strategy through the use of UTM parameters.
In order to obtain an accurate measurement of your social media return on investment (ROI), it is necessary to understand the fluctuations in the return on investment of Facebook ads on a daily basis, taking into account different regions and industries.
The importance of benchmarking ROI for paid social
Monitoring your social media return on investment (ROI) within the market context is crucial as it allows you to identify and respond to significant trends related to metrics such as cost-per-click (CPC) and click-through rate (CTR).
It is crucial to monitor the fluctuations in your paid ROI in relation to the market in order to create and maintain a strong social media marketing strategy. The constantly changing social media landscape, including algorithm changes, seasonal campaigns, and new competitors, can all have an impact on your revenue.
Key statistics about social media ROI
Are you curious about how other marketers track revenue? Here are four social media ROI statistics that will provide context for your measurement efforts.
In 2023, it is anticipated that the United States will spend a total of $207.1 billion solely on paid social advertising.
Determining the appropriate metrics to use is the main challenge for 46% of marketers when measuring social media ROI.
According to a 2021 Adweek survey on consumer behavior, 49% of TikTok users have bought a product after coming across its review, promotion, or advertisement on TikTok.
Social media is considered the primary influence channel for shopping by 83% of Gen Z.
Social media optimization (SMO) and improving social media ROI
To enhance your ROI on social media, begin with social media optimization (SMO). This entails allocating funds to areas that yield the most favorable outcomes. The following steps outline how to maximize the efficiency of your social media budget.
When choosing content to promote, avoid relying on intuition. Instead, make decisions based on data and utilize your preferred social media management platform to selectively invest in posts that have the greatest potential to generate results.
To ensure optimal performance for all your organic and non-paid social media activity, it is important to publish content at the times when your audiences are online and are most likely to respond.
In order to make well-informed decisions about the content you promote and invest in, it is important to consider the competition and stay updated on their activities.
