Don Power is the Managing Editor of Sprout Insights, a blog by the company Sprout Social, which also offers social media management software. He writes content and edits articles produced by other contributors. Don is also a Social Media Consultant and Professional Speaker. Connect with Don on Twitter: @donpower.
In response to questions about the ROI (Return on Investment) of social media, entrepreneur and social media juggernaut, Gary Vaynerchuk, is famous for his reply: “What’s the ROI of your mother?”
According to Vaynerchuk, it’s just understood that one’s mother (like social media) has an intrinsic value and trying to measure that value is unnecessary. When it comes to social media, Vaynerchuk’s advice is simply to stop measuring and start doing.
On the other hand, Mark Schaefer, social media advisor and author of “The Tao of Twitter” says: “As marketers we should measure EVERYTHING. And generally, we can. It’s imperative that businesses evaluate the resources spent on social media to determine whether those resources are producing positive results. If you’re in business, chances are you are trying your best to make a profit. If you’re using social media as part of your marketing strategy, then you need to know if that strategy is paying off.
So, is the investment in social media worth it? Does it provide a positive return on investment? Whether it’s in terms of person-hours spent engaging on social media, money paid for social media management tools or additional staff, there is growing evidence to suggest that the answer is “Yes!” Here’s why.
The Myth of Free Social Media
Although participation in social media is technically free, there are still costs associated with this activity. Perhaps chief among these is the physical time it takes to engage meaningfully with your target audience.
If you haven’t assigned a dollar value to the time that you and your staff are spending on social media, you’re not alone. According to a recent survey from Awareness Inc., 57 percent of marketers said that they “have not allocated budgets to social marketing, but rely on people resources”. Yet these marketers must be realizing a positive return on investment, since in the same survey 78 percent of respondents said that “expanding social reach” will be a major marketing initiative for them in 2012. Like any form of business marketing, you have to allocate an appropriate time frame before you can expect to see results; an investment in social media is no different.
Social Media Marketing Vs. Traditional Advertising
Some business owners may still be inclined to scoff at social media and the time investment it takes to produce results. They may prefer to forego the effort of social media marketing in favor of traditional advertising instead. Not Jonathan Kervin. Since investing his time into social media marketing for his inbound marketing agency, Jonathan has seen traffic to his website increase by ten fold.
“Before social media, I would have spent upwards of $1000 a month on advertising to produce that kind of traffic,” says Kervin. When asked if he’s come out on top of the ROI equation, “Definitely!” he says.
Kervin also takes issue with those who say traditional, or even online-advertising doesn’t take the same effort or committment as social media. He says, “What about the time it takes to research and fine-tune your ads, what about split-testing different versions? This all takes time and money.” No matter what type of advertising you’re doing for your business, you have to make strategic investments to produce positive returns. Now, says Kervin, “instead of money, I invest my time.”
What many business people also tend to overlook when it comes to investing in social media is that you can create reusable social content like videos, podcasts, blog articles and so on. These marketing tools continue to promote your business long after you’ve invested the initial time to produce the content. “I’ve gotten better at social media”, says Kervin, “now that I have the learning curve out of the way.” The bonus, he says, is that “now I have all this content and it’s producing traffic for me even while I’m sleeping!”
It would seem that if you compare the time commitment of social media vs. the money committment of traditional advertising, social media has its advantages particularly if your business is on a tight budget. Factor in the hands-on marketing training and reusable advertising content you produce while investing your time in social media, and the relative dollar value of social media marketing is something a business person can no longer afford to ignore.
Facebook Fans Worth $50 Million
You may have seen the chatter on the Internet asking: “What’s a Facebook fan worth?” Well, according to beer company, New Belgium, the answer is 50 million dollars. More precisely, when the company surveyed its Facebook fan base, it calculated that each member spent an average of $260 on its products. Collectively that amounts to approximately $50.7 million in annual revenue. For an initial social media investment of $235,000 “mostly dedicated to Facebook,” that equates to a very positive endorsement of social media ROI.
Of course, not every business has the social media budget of New Belgium brewery. In fact, the Awareness Inc. survey (mentioned earlier) found that only eight percent of businesses spent over $50,000 on their social media budgets in 2011. Still, as we’ve seen in the above examples, you don’t need to break the bank to get positive results from social media.
Even if you don’t generate immediate sales from social media, there is immense business value in using these social platforms. Whether it’s increasing awareness of your business to a global audience, providing transparent customer service, or establishing relationships with future customers, the results of your social media activities are tangible, measurable, and definitely worthwhile.