Calculating Social Media’s ROI

Determining whether social media has been beneficial to a business is a difficult item to prove and calculate.  It is not quite so easy as asking someone how to calculate earnings per share (EPS); there are differing variables, outcomes and expectations for social media ROI, and these must be known before you can see if objectives have been met.

For some businesses ROI may be more intangible, than strictly monetary.  In that case, businesses could use and measure the variables of Awareness, Reach, Traffic, Engagement, and Intelligence (or the I-RATE model if the original author would allow me to reorder and name it) (Seiter, 2012).  Each variable has certain figures that can be measured and presented to show that progress has been made in each variable:

  1. Awareness: brand mentions, value proposition mentions, or positive reviews.
  2. Reach: fan or follower growth.
  3. Traffic: track traffic via services such as Google Analytics.
  4. Engagement: click-through rates, shares/retweets/favourites.
  5. Intelligence: look at the volume of positive and negative mentions or product improvements provided.

These measurements do not bring about monetary figures, but do give an indication of how well a social media campaign may be working; there must be a visible gain in all five variables in order to show a return on the investment.

For those who require a ROI that adds visible value to their business, there are a few different metrics that can be provided.  These types of measurements will of course differ on their intended audience.  For executives there could be revenue impact, market share, and satisfaction rates.  Customer Service professionals could be given resolution rates, percentage of customer satisfaction, cost savings per inquiry; customer acquisition growth, new vs. returning customers, and engagement rates could be provided to marketing professionals (Lovett, 2012).

And finally for those business professionals who need figures that equate to dollars and cents, there is a formula for calculating social media ROI (smROI).  smROI is equal to the net gains as a result of social media, but when that is broken down further the formula is as such:

smROI = (tangible related revenue + estimated intangible related revenue – cost of social media)/(cost of social media) (Connors, 2012).

There are two potential ways to look at social media costs, narrow and broad.  The narrow method is looking at the super fine details and getting lost in the trees, whereas the broad method focuses on the opportunity costs of not going forward with social media, or of cutting the funding of social media (Connors, 2012).  The way to succeed with social media would be to take this broad approach, as it allows for businesses to look at the big picture, and see how social media can fit into their strategy and mission and vision.


Connors, R. (2012, November 18). Finally unlocked – The social media roi formula. Retrieved December 5, 2012 from Mr Ryan Connors Blog:

Lovett, J. (2012, November 7). Using metrics to prove social media roi success. Retrieved December 5, 2012 from SlideShare:

Seiter, C. (2012, November 5). Why social media ROI can’t be measured – And why that’s ok. Retrieved December 6, 2012 from Marketing Land – Internet Marketing News, Strategies and Tips:


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s