As I’ve said elsewhere recently, there is no single easy answer to social media ROI measurement. Right now there are at least half a dozen august bodies trying to define a standard. Which, so far, has meant at least six different standards. (See The Paine of Measurement in this month’s issue.)
ROI Does Not Mean “Results”
To make matters much worse, the term ROI is very commonly misused to mean “whatever you get for your efforts.” One more time for the record: ROI is a standard accounting calculation meaning “percent return on a financial investment.”
The disheartening tendency to misdefine the term ROI causes confusion and miscommunication. Especially between the people who use it incorrectly and the board room. Who definitely do not use it incorrectly. (See, for instance, “The Dumbing-Down of "ROI:" Shel Holtz Makes Sense of It”.)
A recent study by Tom Watson, Professor of PR at The Media School at Bournemouth University in the UK, found that 66% of PR people he surveyed used the term regularly but only 14% used it in the context of financial objectives. (Download WatsonROIpaperIPRRC2011) In fact, among the PR professionals he surveyed, 64% didn't think there should be a standard definition of ROI! Even worse, about 10% said they used an AVE-based formula. Talk about menaces!
Those who try to dumb down social media ROI do themselves and the industry no favors. For a particularly egregious example, take Mia Iverson’s attempt to tackle social media ROI. Her “formula” for ROI calculation is not even remotely related to real ROI. And to put initials around it doesn’t change that fact. (Honestly, Mia, “SMROI?” It sounds like something you would eat around a campfire. I’d love to see your COO or CFO’s reaction.)
Mia uses tweets and likes for the “R” in ROI. She suggests that you take the “desired action” (the likes or click throughs) and divide by the total impressions. To quote: “...you can take your number of followers [impressions] and the number of click throughs [desired actions] and calculate your ROI accordingly. Problem solved.”
ROI is Not That Simple
My point here is not to dump on Mia or blame her or anyone else struggling to simplify metrics. My point is that it’s just not that easy. The elusive ROI Magic Formula is not going to be discovered by just picking up a couple of numbers that are lying around the Internet. As with anything else, it’s Garbage In, Garbage Out. If you aren’t willing to do some hard work up front, you will get garbage for metrics. I can’t say it better than Amber Naslund already has.
So, folks, calculations like Mia’s are like trying to get to the moon on a tricycle. Yes, it’s a lot easier to ride a tricycle, but it really doesn’t get you anywhere close. Next time someone tries to feed you a simple ROI calculation for social media, please congratulate them on being a Measurement Menace of the Month. —KDP
A really big thanks to Tom Humbarger for the Oreo cookie illustration.
Katie Delahaye Paine is CEO of KDPaine & Partners, a company that delivers custom research to measure brand image, public relationships, and engagement. Katie Paine is a dynamic and experienced speaker on public relations and social media measurement. Click here for the schedule of Katie’s upcoming speaking engagements.