Social Media ROI, it is one of the most talked about topics in the world of interactive marketing. How should agencies report the ROI of Social Media? Is it one formula, or many? In some cases marketers are saying to clients that it should be a return on influence. In more extreme cases people are saying not to calculate ROI at all.

If you have been told that you can not measure the ROI of Social Media marketing then you have been told a lie. Calculating your return on investment from social media channels is no different that any other marketing channel.

ROI, or return on investment, is simply a performance calculation. To calculate ROI, the return of an investment is divided by the cost of the investment and the result is expressed as a percentage or a ratio.

Calculating the ROI of Social Media

Perhaps, the problem marketers have seen is that the ROI of social media may not look great on paper. Channels like Facebook and Twitter remain free, but there is still a cost to develop content, monitor conversations and to respond appropriately.

All measurement should begin with objectives which you can then measure against. In fact, I have already written about evaluating your Facebook content strategy. As an alternative to calculating Social Media ROI in its purest sense, I would like to suggest evaluating your social media program based off of impressions.

You may be asking yourself why would I suggest calculating a CPM to evaluate your social media efforts?

Marketers have purchased media on a CPM (cost per thousand) basis for years, while calculating reach and frequency within that same model. And while I am not a fan of ad equivalency, it is one way that public relations have used CPM to compare earned and paid placements.

So if marketers and their clients are used to looking at a CPM, why not use it as another way to compare your social media efforts to your other marketing programs?

This is easy to calculate with the analytics from Facebook Insights. You are given the total impressions per post on Facebook and from there you can calculate a total number of impressions per month.

Calculating the CPM of Social Media

Reach and frequency can also be calculated, to a certain extent. On Facebook your reach is usually the size of your community (Fans). There is some sharing happening with your content, but I find it to be no more than 10% of the community size. And from there you can calculate a frequency.

Understanding how your community shares information will get you closer to a more accurate number of impressions. This is especially true on Twitter. If you assume everyone of your Twitter followers see your post you can calculate impressions as well.

From there you can calculate additional impressions by sizing the social graph of people who have retweeted your message. Again, a reach and frequency can be calculated from there.

While this shouldn’t be seen as a clear replacement for Social Media ROI, it does tell marketers (and their clients) how much each brand impressions costs. This should have just as much value as calculating a true ROI.

Until social media matures further marketers, and businesses alike, should realize it is a rolling calculation. And by that I mean everyone should realize there is a cost to develop a community. And while it may be high right now, you would be short sighted to abandon a social media program because the cost should come down and the return should increase over time.

This is just one method at evaluating the return on your investment with social media, as well as comparing it to other paid and earned media. How do you calculate Social Media ROI? Share your thoughts below.

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