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August 6, 2010updated 19 Aug 2016 10:05am

What’s the ROI of social networking?

It's time to ask if your organisation's social networking activities are a waste of time and money.

By

In April 2006 I wrote an article on the return on investment (ROI) of blogs, in which I offered a couple of equations that could form the basis of a blog ROI calculator. Those thoughts on how to measure blog ROI garnered quite a bit of interest, including from the CTO at Amazon, Werner Vogels, who was wondering whether to get his staff blogging, and Charlene Li at Forrester, who went on to write an excellent paper on the subject called simply The ROI of Blogging, in early 2007.

Anyhow my equations can also be used to calculate an ROI for social networking: essentially boiling it down to the cost of doing the networking (for example an employee spends an hour a day sending tweets so that’s an hour of their salary) divided by the tangible benefit deriving from those tweets or other social networking activities. That latter bit is the hard part, because it’s often hard to calculate. But you could use an approximation, for example if you know it drives two strong leads per day, and you know the average cost of a single lead gathered by other means.

So the simple equation is something like this:

adl x algc
———-
abt x ehw

Where adl is the average number of daily leads you think your Tweeting or Facebook activity generates, and algc is average lead gen cost (for your company). Abt is average blogging time/tweeting time/Facebook time spent per day in hours, and ehw is executive’s hourly wage.

In other words, if it costs your marketing department on average $100 to get one decent lead, and you know that 25 people a day leave their details somewhere on your site after reading a Tweet, plus one member of staff earning $90,000 a year spends an hour and a half tweeting/Facebooking:

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25 x 100
————
1.5 x $432.69

which is

2,500
—–
649

or an index value of 3.85. Anything above 1 is positive ROI.

I’ll be the first to admit that it’s not always easy finding the figures necessary to complete the equation. But it does perhaps at least act as a starting point. I’m also sure people will say what they said last time I wrote about blog ROI: that there’s reputational value driven by such activities that are difficult or impossible to quantify. That’s true, but it’s also the case that such equations do not take into account any negative reputational effects caused by someone’s annoying tweet or whatever, either.

Twitter logo

When I met up with Kelly Dempski, Director of Research at Accenture Technology Labs recently, I asked him what he thought about the ROI of blogging and social networking. "It’s still difficult to put a solid ROI number on blogs – Twitter or blog ROI is very hard to measure," Dempski said. "But at least the ‘I’ is usually relatively small. So the best approach might be to do small things but do the right thing. It’s a bit of a soft answer but I don’t think we know just yet what is guaranteed to work."

Does anyone have any experience of trying to work out the ROI of their own social networking activity?

Useful related reading:

Is It Worth It? An ROI Calculator for Social Network Campaign

The ROI of Social Networking

Social Networking in the Enterprise: What’s the ROI? (deals mostly with internal, corporate social networks)

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