What is the ROI of Social Media?

by Caz Makepeace on January 5, 2012

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This is the question that gets asked a lot in the blogging/social media circuits. Many brands and companies don’t want to invest in bloggers as they can’t quantify the ROI.

I was asked this question at a panel I spoke on recently on blogger brand relationship for the Switched on Media Bloggers Relations Forum in Sydney.

Bloggers Relation Forum

I’d like to extend upon what I replied based on what I have read recently at Copyblogger, watched on Gary Vaynerchuck’s Thank You Economy speech and from what I know to be true from my own experiences.

What is the ROI of traditional media?

The humbug is always about there being no ROI of social media, but before we start to evaluate that, I think it is only fitting that we talk about the ROI of traditional media. After all this is what we are comparing it to.

There is no ROI of traditional media. (I’ll explain more of this later in the post, stick with me for now)

Don’t lie to me and tell me there is. It’s just the buzz word that is used to try and justify marketing expenditure, which most of the time is spent on ineffective and out-dated marketing methods that nobody is paying attention to.

You say you can’t quantify investment into blogging / social media, I say you can more so than TV or print.

Because unless you have a special code that you ask every person to submit when they purchase a product to say they watched XYZ commercial or read ABC advertisement which made them buy, then you will never ever know who is engaged in your traditional advertising or who is acting upon it.

Or, unless each one of us has been secretly micro chipped, which I have had cause to wonder lately about this funny implant in my arm.

“Oh, but our circulation numbers are….”

“Our TV audience members are….”

Someone wrote somewhere in a blog comment recently that advertisers have a very clear indication of how many people see an ad on TV or look at a print advertising, as companies spend thousands of dollars on complex systems that can give the accurate information.

I nearly lost my pelvic floor at the absurdity of this statement and how much money is being wasted on stupid things that don’t work.

Seriously.

How on earth do they know that at that exact time the commercial is played, I have not jumped up to answer the phone, sent out five tweets, interacted with someone on Facebook, channel surfed, used TiVo to record my program and fast forwarded the damn ads, gone outside for a cigarette, jumped on the toilet, poured myself another drink, or switched over to another channel because the Kyle and Jackie O show on TV sucked?

Maybe there was a blackout even, or the President came on to give a surprise speech blacking out all TV shows (yes, happens in America).

Where’s the ROI on your advertising money then? In the black hole.

And if you’re anything like me, when I do watch TV I’m looking at not one but three screens, I have my smart phone in one hand and my laptop on the coffee table.

And of course, what If I did pay attention, but just happened to forget what the ad offer was about, how can I ever find it again? There’s no Google search function on the TV (gosh Caz don’t give the monopolizers any ideas).

In fact, tell me in the comments, what do you do when the TV commercials come on?

Same goes for radio.

And for print?

Oh you mean all that noise that I glance right over, the noise of someone yet again trying to push something on to me. Blah I just turn to the Sudoku page and throw the rest out.

How can you ever know how many people are paying attention to the ads, let alone acting upon it?

You can’t. Period. It’s just guessing. Guessing based on information of how many people watch the TV program or buy the magazine. And yet still companies are willing to spend millions on this form of advertising.

In fact, it is widely documented that the exorbitant fees that are paid for a 30 second TV commercial for the Superbowl aren’t really a good investment of advertising dollars. After all, aren’t we supposed to see something seven times before taking action?

I’ll admit, I’ll pay attention to those ads because they are funny, especially the Bud commercials, but there is no way in hell I would ever go and buy a Bud – their beer is crap.

So maybe for branding purposes this would work, and yes traditional advertising still has its place in some aspects. But, as I have said before in my new manifesto, imagine the branding you could do with one blogger for a whole year for less than a 30 second commercial on TV.

The ROI of blogging and Social Media

Blogging is a bit like reality TV or any TV program really. You tune in every day to the same shows because you like the story; you love the characters, real or made up; you get addicted to their lives; and part of you wishes you could be like them.

So much so that if you saw Kim Kardashian walk in with a new Coach handbag, you would be really inclined to go buy it. Or if Ashton Kutcher is walking around drinking Pepsi on Three and a Half Men you might just decide to switch over from drinking coke.

You like and trust these people. They aren’t trying to sell you something, they are just doing their thing and you are watching and following and being quietly influenced.

No pushing required more of a pull.

Every day bloggers have people tuning into them. People who know, like and trust them. They engage and interact with these people and have normal conversations. As hard as I may try, I doubt, Kutcher will talk back to me.

Blogging and Social media is like that small town way of thinking and being, where we share over the back fence and leave our doors wide open because we like and trust those within our community.

We don’t like and trust the uninvited guy knocking on our door (usually at an inconvenient time), trying to sell us the latest carpet cleaning powder because he’s a stranger, and we don’t like his smarmy sales talk, where he tries to pretend he understands us, when really he is just trying to make a sale.

The push push push.

It’s far more comfortable to listen to my friend down the street tell me what cleaning products she uses and compare that with Marge next door.

Social media – the new media – is just like the small town.

Except our small town conversations now extend across state lines and international borders, and it is instant.

I don’t have to wait until I see Marge in three days’ time, I can ask Marge now. Social Media is bringing back the small town principles.

I cannot honestly say the last time I made a purchasing decision based upon traditional advertising. But, I do know our latest Canon purchase came from asking those within our facebook fanpage community for advice as to get Nikon or Canon – guess who won?

Our fanpgage community have also convinced us to buy a Mac. I would never have gotten the value of what makes them so great from an ad, instead it comes from other travel bloggers and bloggers using them and talking about how they are the BEST for the job.

I am about to purchase some Garnier cream based on Nikki Parkinson from Styling You’s recommendation as one of her products of the year. I can’t trust what an ad tells me in print, but I can trust Nikki. I know she is good at what she does. I’m more interested to hear what she can tell me than some air brushed model who I cannot understand or relate to.

We have readers contacting us daily through our travel blog for advice on places to go, things to do, and products to use. Because we live the travel lifestyle, they trust our recommendations.

And not only all this, I can somewhat quantify the ROI of my blogging and social media efforts. I can actually tell you how many people viewed my posts, how long they viewed them for, what actions they took before and after landing on my page and what they have clicked on. I even have stats that tell you their demographics, age brackets, how many kids they have, educational levels, and annual income.

I can tell you how many people shared my posts, how many interacted with me through comments – you can even read what they wrote, how they engaged with me on Facebook, what sort of posts and updates they like best, and lots of other handy little bits of information.

I can tell you what works and what doesn’t.

Social Media in Action by a Big Australian Brand

I received a Christmas card today in the mail from the twitter support team from Optus. We have dealt with them and received help via twitter with them before.

Twitter has helped us build a relationship.

Before we started that over Twitter, I tried to contact them through the old way, the telephone. It was disastrous as they treated me like another number sitting around watching their TV ads.

Social media saved the relationship and now we are friends with Optus again. They listened, they emphasized, they did whatever they could to help, they solved my problem.

I’d recommend them in a HEARTBEAT

Why? Small town principles. I like Optus.  They have treated me like a valued customer. They sent me a personal handwritten Christmas Card!!

There is your ROI on social media right there!

Let’s Get to the Real ROI facts

I loved what I read on Copyblogger’s article as it nips the argument straight in the bud.

ROI? There is no ROI in any sort of marketing.

Because marketing is an expense. It is not an investment.

Companies, you want an investment that returns?

Then lower your marketing expenses to increase your profit margins.

Social media will do that, blogging will do that.

And no, don’t expect that you can reduce your marketing expenditure to zero because social media is free and bloggers will work for nothing. You pay shit you get shit.

Blogging and social media involves an investment of time which deserves some of the company’s marketing dollars.

Lower your marketing expenditure.

It’s about relationship marketing, it’s about community, and it’s about meaningful conversations, inspiration and personal connection.

It’s a long term marriage. It is not a wedding or a nineteen year old kid trying to get to first base on his first date.

It’s a marathon, not a sprint.

Forget the buzz word. Forget trying to justify the large amounts of money being spent on things that you think you can quantify, but don’t work as well as you are told they will.

Like it or not, this is the evolution of how things are moving. No one wants the push anymore, it’s all about the pull.

The small window of opportunity is NOW because in five years time things will change again.

Be a pioneer and ride the wave now so you are not bursting at the lungs trying to drop in and keep up with the peaking crest later on.

What I really wanted to say on the blogger’s panel, but didn’t, is my favorrite quote from Gary Vaynerchuk’s talk…

“Stop wasting your money on dumb shit that doesn’t work and invest it into humans!”

There’s where you’ll get your good ROI.