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“How do I measure social media ROI?”

According to recent industry reports, that is one of the top five social media marketing questions. Last year 88% of marketers raised this question, and only 37% said they were able to measure it. For big brands, a whopping 78% of marketers said they had trouble measuring social media ROI.

With so much confusion, is there any hope of measuring social media ROI in your small business?
The short answer is yes, but the route there requires a few basic steps.

Let’s face it: tying social media marketing to real business outcomes is complicated. Some have even gone as far as giving up on measuring social media ROI altogether. They claim that social media is ultimately branding, which in their view is increasingly difficult to measure.

If social media’s direct impact is branding, then why not use traditional brand measures to gauge ROI of social media? Measuring branding impact is not a new problem. Brand-focused consumer goods companies have solved this dilemma for decades. Over the years, they’ve used a common currency and formulaic methods for tying brand exposure to business performance. Taking cues from them, we can devise a few steps for measuring social media ROI.

Step 1: Define the meaning of ROI

First of all, what do we mean by ROI? The common definition is “return on investment,” or the degree to which expenditures result in positive outcomes for the business. It’s what’s left over after you calculate all the costs of certain investments. A simple formula for ROI is:

ROI Formula

Marketers find this formula problematic because they get pressure from executives to show the direct impact of social media investments. Finance people want to show a direct line from social media costs to profit. This is a limited view. There are both direct and indirect measures of social media’s effectiveness that should be taken into consideration. These will become clearer after we take a step back to see what each of the ROI variables mean in the context of social media.

Step 2: Break down the components of ROI

Let’s break down the components of the ROI formula: Gain and Cost.


Gain can be measured in two ways: one that shows social media’s direct impact and the other showing its indirect impact. Directly, social media marketing affects exposure. How do we measure exposure? Earned media monitoring services like Critical Mention evaluate exposure based on what it would cost for the same amount of publicity if it were paid media.

For example, if you interviewed on a nightly news program for 2 minutes, the value of that exposure would be equivalent to the cost of running a 2 minute commercial on the same TV program. You can think of this as the estimated value of exposure, or EVE for short. For social media, the estimated value of exposure (EVE) would be equal to the cost of buying the same number of impressions on that social network. Since the impressions are earned and not paid, you gain the savings from not buying the same publicity.

The more traditional and indirect way of calculating gain is to measure the value of certain consumer actions taken because of your social media efforts. This one is tough because there usually is no direct correlation between social media and desired consumer actions. Traditional marketers solve this problem through marketing mix modeling, a complicated econometrics-based exercise that takes into account baseline performance, market conditions, and the marginal impact of certain marketing actions. Some management-consulting firms have taken this approach with their consumer goods and retail clients.

If you’d rather avoid getting bogged down in all the details of this methodology, take a historical view of your company’s performance without social media exposure, subtract the impact of other marketing tactics, then calculate the net impact of social media efforts. If that proves too difficult, you still have a relatively good measure of gain from the more direct way of calculating it from the social EVE.


Cost is whatever you invest in social media. This includes everything it takes to produce and promote your content. A common list of social media costs includes:

  • Labor
  • Training
  • Development
  • Social Technology
  • Agencies & Consultants
  • Paid Media
  • Business Overhead

Step 3: Gather metrics

Now that you have a solid understanding of what ROI is and the components that go into it, you’re ready to gather metrics to compute the ROI of your social media efforts.

Costs are pretty straightforward. First, brainstorm all the work and materials that go into generating and nurturing your social media presence (many are highlighted above). After you’ve gathered your list, figure the costs of each one and add them together.

To calculate the gain from your EVE, research how much it costs to buy the reach you earned in social media. For example, if you reached 100,000 impressions for free that would have ordinarily cost $1.50 per thousand impressions; your EVE at 100,000 impressions is $150.

For estimating the gain from certain consumer actions (e.g. signups, purchases, or downloads), refer to your internal analytics to better understand the conversion events that happened while social media was running.

Step 4: Plug them into the formula

Now that you have gathered all the metrics, it’s time to plug them into the formula to calculate ROI.

Let’s use an example.

We’ll assume the average cost of creating a piece of content and earning placement in social media is $100.

Therefore, Cost = $100.

Using the EVE as our Gain measure, we assume you received 100,000 impressions from social media exposure that normally would have cost $1.50 per thousand impressions. That’s an effective cost per thousand (eCPM) of $1.50. The total estimated value of exposure would therefore be $150:

Estimated value of exposure formula

Now that we have Gain and Cost, we can solve our ROI formula as follows:

ROI Calculation

Congratulations! You just earned a 50% return on your social media investment.

Step 5: Monitor performance

To keep management happy, monitor the impact of your social media efforts using the ROI formula and make adjustments as needed to maintain or increase positive returns on investment.

Step 6: Adjust tactics

If you find you have negative ROI, or if it begins to slip, adjust your social media marketing tactics to get better value for your efforts.

If you take the right steps, measuring social media ROI doesn’t have to be a mystery; and the best part is you get to prove your value along the way.

About the Author: Anthony Long is the head of SEO for Webs. He leads the organic search strategy and execution for both Webs and Pagemodo, with an emphasis on data-driven optimization that balances proven SEO tactics with emerging search trends.

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