There’s No ROI on Social Media

ROI

First, a confession. The headline is designed to capture your attention so I’m guilty as charged for suggesting an idea that many people may find preposterous.

In fact, the headline isn’t true or accurate but it does play on the raging debate happening over whether there is return on investment (ROI) from social media activity, and how ROI is or can be measured.

This discussion isn’t surprising because new ways that companies spend money should be analyzed and measured, otherwise there is difficult to know whether it’s money well spent, or money that should be spent on other things.

The challenge when it comes to measuring social media ROI is it’s still early days for social media. As a result, there is a lot of experimenting (and spending) by companies that want to get experience and insight into what works and what doesn’t. At the same time, they are trying to create ROI models that can be used for measurement purposes.

A good example is The Gap, which recently launched a new campaign, “Born to Fit” that features the extensive use of online ads and social media, in particular a Facebook Page.

In a blog post, Jacob Morgan included this intriguing quote from Julie Channing, senior account director for AKQA, the agency handling The Gap’s campaign:

“The Gap had set no numerical benchmarks to determine success in the campaign, but rather would look at how much consumers interact with the brand to gauge ROI.”

Morgan contends the problem is that without benchmarks, it’s difficult to “measure ANY type of success, let alone ROI”. Morgan makes a good point because how is consumer interaction with a brand measured? He also questions how AKQA will be able to explain to its client how well the campaign did without defined metrics.

For anyone focused on social media ROI, The Gap’s approach may be frustrating and, perhaps, disappointing given The Gap is a major advertiser defining how it operates within the emerging social media landscape. At the same time, it also shows that social media ROI is still work in progress, and that the “rules” have yet to be established.

Of course, it should also be pointed out that marketing within social media is a different creature than traditional media.

In social media, there are well-defined metrics that can be used to track ROI such as Web site traffic, click- throughs, and higher sales. At the same time, social feature features “soft” metrics that are more difficult to measure: better customer service, engagement, interaction, a stronger brand and more loyal customers.

The focus (obsession?) with social media ROI is healthy and much-needed because it’s part of the process in which social media will become a viable option for many marketers and advertisers. The more attention paid to ROI, the faster, in theory, the parameters will be defined and established.

What do you think? Are there ways to effectively measure social media ROI right now, or it is still work in progress?

More: Jacob Morgan has been spending a lot of time focused on social media ROI: here’s a collection of recent posts he’s done.