by Peter Brooks

Social Media Marketing ROI – The Business Value of Friends, Followers and Connections

Oct 02, 20145 mins
CIOIT LeadershipSocial Networking Apps

What is the ROI of social media digital marketing? The author performed extensive research on the topic to provide recommendations for CIOs and IT organizations on how to get involved with their companies' social media and digital marketing initiatives.

More than 95 percent of companies currently use social media marketing. Is there a financial benefit? I performed extensive research – including a review of over 100 articles, blogs, white papers, and e-books – to answer the question.

We performed a meta-analysis of all the research. Here are some results:

  • Social media is an opportunity for CIOs to show business leadership
  • Few companies – 15 percent to 20 percent– quantify social media ROI
  • Linking social media results to sales/revenue is hard but can be done
  • What other businesses are doing – top social media platforms
  • What is the quantified value of social media?
  • Fear not! There are success stories – Dell, VMWare, and Starwoods, for example
  • What to do?

 1. CIOs Need To Be Involved In Social Media Marketing

As a CIO, should you be involved in social media marketing, or more broadly, digital marketing?



Philosophically – Social media marketing is an emerging opportunity for a company to obtain strategic value from the use of technology. IT should lead these types of efforts!

Pragmatically – An IT organization can provide significant social media marketing value to a company:

  • Reduce technology sprawl and costs via consolidation
  • Lead or contribute to a cross-functional (sales, marketing, product development) social media focus and strategy
  • Understand compliance and privacy issues
  • Integrate social media data and analysis across channels
  • Measure results

 2. Only 15 Percent of Companies Quantify ROI (but Everyone Wants to)

The CMO Survey shows only 15 percent of companies quantify ROI. Social media vendor surveys state the rate is about 25 percent. Let’s go with the more objective source and lower percentage – 15 percent.

Impact of Social Media The CMO Survey (August 2014), Highlights and Insights Report

 3. Social Media is Hard to Measure – Why?

Measuring the business value of social media is difficult. The top problems in measuring social media ROI:

  • Lack of experience. Most companies are experimenting with social media, proven techniques are hard to come by.
  • Lack of strategic intent. Few – less than 25 percent of companies – use social media to drive revenue. The top benefit: Eighty percent to 90 percent cite increased brand presence and awareness. Brand presence is not a CEO-friendly measure!
  • Only what is easy is measured. Eighty percent of companies want to know how to measure social media ROI. Less than 50 percent currently measure results. The most common metrics measured: reach (# of friends, # of followers) or Web analytics (clicks, website visitors). One bad approach: AVE – ad value equivalent – determining value based on the cost of ads that would have been needed to obtain the equivalent results.
  • Difficulty measuring campaigns. It is hard to tease out the effect of social media within a multi-channel campaign. Tracking the last click is relatively easy, not the path from first click.
  • Complex data and tool integration is generally required. Each platform has its own measurement and data analysis tools. Coherently tying Web analytics, lead gen, and sales data is difficult.
  • Trivial/bad calculators. Many social media ROI calculators are similar to: Get 1,000,000 Facebook friends -> 10 percent of them will become a lead -> 2 percent of your leads become sales -> You will get 2,000 new customers!

 4. What Others Businesses are Doing – Top Social Media Platforms

No surprise here, Facebook and Twitter are tops. LinkedIn is used as a social media platform 69 percent on average (however higher for B2B companies and lower for B2C companies).

Summary of Surveys Peter Brooks, International Institute of IT Economics

 Some examples, chosen to show varying social media approaches and platforms:

5. What is the Quantified Value of Social Media? 

Let’s pick the most popular platform: Facebook. Surveys show that the value of a Facebook “Like” can range from nothing to $215(!), typically based on higher sales from a business’s Facebook fans compared to non-fans.

These surveys show that the business value of a Facebook Like can be calculated, though widely varying by company. But does Liking a company result in higher sales or do people who are already high spenders tend to Like companies that they buy from?

6. What to Do? 

Get involved! Some relevant links:

  • Find out what are others doing. Check out three good research reports: the 2014 Social Media Marketing Industry Report, Forrester’s The 2014 State of Enterprise Social Marketing Report, and The CMO Survey Report. There are others. Research your own customer base.
  • Figure out your goal. Is the social media goal brand awareness? Better market research? Or – shudder – increased revenue?
  • Identify the costs of social media. Costs are critical input to an ROI analysis so if you can so if you can nail costs down you are on the road to insights and effective management.
  • Link social media to business results. Recommended business results are revenue, new customers, or economic value / customer lifetime value. The basics, though easier said than done. A potentially interesting new measure: Avinash Kaushik’s conversion rate, amplification rate, applause rate, and economic value metrics.
  • Start focusing on measurement tools. To get integrated, real-time or close to real-time results across your social media you can use perhaps a half dozen individual tools or investigate comprehensive tools from Adobe, HootSuite, Hubspot, Marketo, and other vendors. 

Good luck friend (and follower, and connection, and …) Remember: “What gets measured gets managed.” *

Social Media People Social Media 01 by Rosaura Ochoa (cc by 2.0)

* Often attributed to Peter Drucker, but original source is unclear.