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moneyImagine an advertising and marketing platform that reaches billions around the world, and doesn’t cost you a penny.

Free to get involved, free to share and promote content, with a massive locked-in audience who will actively promote your content for you.

Unfortunately it doesn’t exist. Social media is many things but despite several statements to the contrary, free is not one of them.

Many companies planning a social media campaign are attracted by the seemingly low set up costs and ongoing overheads involved, but scrape away that optimistic surface and you’ll find there’s a need for real investment if you want your campaign to function properly.

All businesses need a return, but when it comes to marketing, and particularly social media engagement, direct ROI can be difficult to clearly identify.

Ironically, it’s one area where figures feature prominently. With all that raw data sloshing around, you’d think that tracking would be an easy task, but unfortunately traditional ROI is in many cases too simplistic to fully measure either the cost or value of social media campaigns.

In order to really identify which return you’re getting from your campaign, you need to identify your investment and goals, and examine each aspect of these individually in order to determine effect.

At its core, social media ROI is a fairly straightforward measurement technique:

If your total expenditure is less than the value you receive, then you have positive return. If however your created value is not equal to your investment, then you have negative ROI and the wheels fall off your business fairly quickly.

Simple.

Or at least it seems to be.

The complications arise when you realize that every business has its own definitions of value, and of total expenditure. In order to really measure your return you’ll need to really nail down your costs and create an ongoing measurement model that can be applied to all your social media campaigns.

First, you’ll need to define exactly what ‘total expenditure’ implies.

There’s certainly a common myth that social media campaigns are free to run. Well, it’s true that setting up a Facebook page and sending tweets won’t cost a penny, but hiring someone to do that for you? 

As with any campaign, you’ll need to run some fairly complicated breakdowns to ensure you aren’t caught out by hidden costs.

Here are four main areas you’ll need to consider:

  • Staff costs

Your costs need to include your marketer’s salaries. If you don’t have a dedicated social media campaign manager then you also need to work out the amount of time they are spending on that campaign.

How many man-hours a day does it actually take to manage, maintain and report your social media presence?

  • External fees

Do you outsource all or part of your social media campaign? You’ll need a detailed breakdown of billing. How much were you charged, and how was it calculated?

Agencies will have different rates for strategy, maintenance and time expended on execution. You’ll also need to work out if this is an ongoing cost and how that affects the value you’re receiving.

  • Advertising

There’s more to running successful campaigns than simply setting up and maintaining a presence on a social network.

You’ll also need to advertise that presence through both in-network and external ads (Certainly you can trim costs here by adding follow buttons to your email signatures, but remember to factor in the time your coders spend on small tasks like that).

This is the most obvious spend so hopefully you’ll already be tracking it closely, but there’s a need to recognize exactly how it factors into wider costs.

How much time is your web manager spending setting up targeted Facebook ads for example?

  • Other

There’s also a wealth of other social media specific software and equipment available. Many basic tools are available free, but if you need more in-depth tracking (and you do) then costs can quickly escalate.

You’ll be facing technical and creative costs and unlike many offline campaigns, these can run continuously.

These points should cover the basics, but it’s also worth considering the unique variables generated by your business and organizational structure. Some businesses will be able to benefit from sunk costs.

It’s certainly possible that you may have extra staff on hand and want to increase efficiency there by having them manage your social media day-o-day.

For larger groups there’s also the question of underspend. Does your budget have enough flexibility at the end of the year to facilitate extra social involvement?

These factors will vary from business to business, but before you begin hurling cash at social media its worth trimming costs by considering if you have content that can be repurposed, existing online brand assets or campaigns in other channels that would benefit from a social media boost.

By taking time at the start to properly examine cost, you’ll be in a far better position when it comes to calculating ROI and value.

Matt Owen

Published 23 July, 2010 by Matt Owen

Matt Owen was formerly Head of Social at Econsultancy. You can follow him on Twitter or hook up on LinkedIn.

203 more posts from this author

Comments (4)

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Bangalow Accommodation

I agree with "Staff costs" as being one of the biggest costs of Social Media - or the time sunk into delivering original thoughts and opinions - it takes time and effort - time you are not spending doing your actual job. Social Media is not "free" as some people may think. A strategy is also important so company branding is consistent across all platforms including SM. Excellent post.

over 6 years ago

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footprint 2.0

You have to ask yourself how much is everybody participating in the social aspect of your campaigns, another words are you in the conversation everyday and trying to be social. I believe this will help you as time goes on to determine an ROI, but you have to be social.

over 6 years ago

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Alex Maina, CEO at eBrand Kenya Ltd

The fact that most staff in my country are not trained on social media, then it is obvious that staff costs are high in the cost chain. without the right staff members, a social media campaign may just crash due to bad customer service.

over 6 years ago

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Erleen

Spot on for the staff costs, but I'd add too, the low cost of change for social media as an advantage that can help drive final ROI.  New ideas can be tried and adusted before print or TV campaigns, for example.  SM channels lend themselves to iterative and prototype development more than many other channels can.   

over 6 years ago

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