How to measure social media ROI

Marketing Strategy

Jul 27

What is Social Media ROI?

In its simplest form, social media ROI is what you/your business is getting back in time, effort and money from your social media marketing. Because ROI is normally a quantitative value, it's difficult to measure for a majority of campaigns. You need to know:

How much money is going into your social media marketing efforts?
How much money is your social media marketing bringing in?

This is why it's tough! For most businesses, social media is used as awareness and even if it leads to revenue, it's not linked to a specific campaign so how would you know which platform led to profit? This is especially difficult if most of your efforts are done organically. With paid, you can clearly see how much money you have spent and how much you are making back (because you have set a value for conversion). But how do you measure ROI for an organic Instagram account? Analytics of course! Before diving into the HOW, let's talk about the WHY.

Why is this important?

When it comes to social media, sometimes it seems as though most companies are using these platforms just because it's the thing to do....and you're right because that is usually what's happening. But social media doesn't come easy. So many hours are put into making sure your are "dominating" social media but the question remains, is it worth it? That is where measuring social media ROI comes into play! This allows you to know if your efforts are worth it and also have data/real numbers to justify the time you put into certain platforms.

Measuring social media ROI is not easy, mostly because when it comes to organic efforts, the money spent is subjective. Even if you know how much money you make back from each platform, it's difficult to calculate money spent if it's really just you working on your strategy. This blog post focuses on how to measure social media ROI and determine what numbers to put in for money spent!

Steps to calculating Social Media ROI

There are a few steps you can take to more accurately measure social media ROI:

1. Measure & track goals

This is the most obvious step, to measure goals and how much money you are making, but I wanted to take some time and dive into how to go about doing this, I might be a bit biased but assuming that you have a website you are making money from, the best tool to measure this is Google Analytics (GA). I tell my clients to use GA because it really is the best FREE tool to track website analytics. If you are still setting up GA, check out my earlier posts on getting started with analytics.

Once you are all set-up, you can see in the acquisitions part of the dashboards that you can track all traffic from social media traffic. The issue with this area is really that this number isn't always accurate. The biggest reason: some social media apps have concerns with opening links and essentially open them in a new tab with the URL pasted in the browser. What this means is that GA is tracking this session as "direct" traffic, not from social media because it looks like someone opened a new tab and pasted the URL. The best way to avoid all this is to tag and track all the links you post as campaigns (ex: links in bio of Instagram profile, links posted on Facebook, etc.). Check out this guide to tracking links using Google's campaign URL builder.

You can check out how your links are doing by going to Acquisitions > Campaigns > All campaigns. Here you can filter by social media source and then see what the conversion rate and revenue is for each platform!

2. Calculate expenses

After you see how much money each platform is bringing in, the next step is to calculate expenses. This is a really tricky step if you are using organic methods and are working on social media yourself. Here's a list of costs that should be included in expenses:

Man-hours
- This part is a bit tricky if you don't outsource this work but if you do all the social media work yourself, start tracking your time if you don't already! Make sure to track for each platform separately too so you can audit more accurately. Once you have the hours, either set your hourly rate or do some research to understand what other social media management freelancers would charge if you were to outsource.
Tools
- For tools, write down what tools you use for each platform that's paid. Make sure the expenses for this are tracked based on the timeline you are using. So, if for revenue you are tracking Instagram revenue and man-hours used for Instagram for a month, use the price of the tool for a month.
Ad costs
- This is a bit more straight-forward of course but make sure to include your ad spend into expenses just as you would add the ad revenue to the step above!

Once you have all these numbers, the next step is to plug it into the formula (see below)!

[(Revenue - Expenses) / Expenses ] X 100 = ROI

There's not really a number that's good, because it truly depends on your business and goals. This is where writing out quantitative goals is extremely helpful! You can use the steps above in 2 different ways:

To track ROI for your overall social media strategy, or
To segment and see how the platforms you use compete against each other and which platforms works better for your business.

The second reason can be extremely helpful because what if Instagram makes less money than Facebook, but your ROI for Facebook is much lower? This allows you see not only what makes you money but what makes you money relative to how much you also spend!

As you can see, tracking and measuring is near and dear to my heart so I am so excited to get this information out and I hope it's helped some of you!