This poll analysis was written by Jeremy Victor, editor-in-chief of B2Bbloggers.com. For more of his writing, visit B2Bbloggers.com and follow him on Twitter and Google+.

SmartPulse — our weekly nonscientific reader poll in SmartBrief on Social Media — tracks feedback from leading marketers about social media practices and issues. This week, we asked:

Do you feel pressure from your company’s management to demonstrate a return on investment for your social media efforts?

  • Yes: 61.24%
  • No: 29.46%
  • Not using social media for work: 9.30%

The response to this poll is music to my ears. You should feel pressure. We live in tough economic times, and with that comes the shared responsibility of ensuring long-term survivability of our companies. If you are not being asked to measure and track the effectiveness of social media investment, you should be doing it on your own. Every dollar matters, and ROI as a measurement is vital for directing future activities and decisions.

I’m not quite sure how anyone can justify not tracking ROI. And even worse, some are claiming that executives who do ask for it are hypocrites, as David Meerman Scott did this week in a blog post titled “Social Media ROI Hypocrisy.” An excerpt:

It’s ridiculous that executives require marketers to calculate ROI (Return on Investment) on one form of real-time communications: Social media like Twitter, Facebook, or YouTube. Yet they happily pay for other real-time communications devices for employees like [BlackBerrys], iPhones, and iPads without a proven ROI.

Wait, what? Did he just compare devices used for a 20-year-old, established, universally adopted form of communication — e-mail — with a technology and communication medium that’s about 3 years old (from a business perspective)? That would be like asking, “Why aren’t you tracking the ROI of stamps?” when e-mail first hit the business world. It’s all communication, right? Wrong.

Any new investment is going to come under much higher scrutiny and skepticism than something long established. These executives are not hypocrites. They are smart business leaders. They are simply asking that when an investment in social is made, “Track its value to our company; understand its impact on our customers, stakeholders and bottom line.” You need effective measurements to know what is working, what isn’t and what’s necessary to justify further investment.

While I might agree that some executives are ignorant and use ROI as an excuse for not investing in social, I strongly believe a company’s management is doing the absolute right thing in asking for social media ROI.

What do you think? Are they hypocrites or good leaders?

Related Posts

6 Responses to “Is tracking ROI a social media requirement?”

  1. Absolutely right, Jeremy, but it may not be that simple.

    If a company gets on the social media bandwagon, it has to put down a certain sum of money before having a clue about the return. It takes a long time to build a following, let alone one that creates income. Not something you can show a profit for in one or two quarters.

    Once you are a member of the social media community, how easy is it to exit if the management decides they won’t invest any longer? Can’t you in that case find yourself between a rock and a hard place? Alienating and irritating the following you have already accumulated while still not getting any income from the exercise? Is there a way to calculate the negative ROI of exiting?

    • Kimmo, thought provoking comment. I'm certainly not suggesting that ROI will come quickly. Social media is a long term investment, but that doesn't excuse you from tracking your expenses and working at understanding the value of your community.

      As for exiting, that's another question all together, and probably worthy of a post in and of itself.

  2. Luis Hernandez says:

    After reading this I had the same types of questions as Kimmo. What does a company do that says they are not getting enough ROI? Withdraw? Retool efforts? How much does that cost? I'm not trying to say that ROI is unimportant, or ridiculous as David Scott did, but that not everyone has agreed on how ROI should be measured, or what to do when it doesn't meet the expectations no one was sure of in the first place.

    • Luis, thanks for the comment. What to do when not getting enough ROI is a tough decision. The question really will come down to how much of a return do you expect AND how much value you place in social media as a channel of communication.

      I think that is David's point. Your not tracking the return on your telephones because customers expect you to be there to answer them, he's predicting that eventually social media will be the same way for companies. You may not really have a choice to exit, you really will be spending more time transforming your entire business into a social enterprise.

  3. Great article Jeremy, and good points Luis & Kimmo. The issue with many ‘traditional’ executives is that they expect social media to all of a sudden act like a salesperson. By that I mean, you can look at a salesperson’s numbers at the end of a cycle and say “you sold $150k of services this quarter; good job.”

    They can’t think that way with social media. Because social media provides so many intangible benefits to an org once done right, you’ve got to determine the metrics over a given time that will be used to establish the “R” in R.O.I. And this is touching on what Luis was highlighting.
    Social media plays a role in a company’s inbound marketing (to their website), its lead generation (to their landing pages & offers), its sales (to their shopping cart or phone number), customer retention & feedback (to customer service dept), target market/customer sentiment (to marketing dept), etc – and as such the key metrics need to be identified, evaluated and tweaked in order to begin an evaluation of ROI.

    And Jeremy, you’re right, as a B2B tool, the machine isn’t well oiled yet, but we know where to begin evaluating performance. Executives need to look at social media’s ROI in terms of the role it plays in key areas, combined. But if they want cold hard dollars to be the direct metric right now, then they’ll probably be scratching their heads for a while.