Calculate the ROI of Social Media (part 2 of 4)

This is the second post in a series of four
presenting the theory behind our
 ROI model for social media

The first post in this series showed that every interaction on social media, from watching the online video to digesting a friend’s like, has a trust-tag attached to it. Every interaction also carries a time-tag. In the Dove campaign, all these little time-tags add up to 382 years of consumer time, including the time spent reading the blog posts on the dedicated discussion forums on the Dove Web site. For consumers, time is money. Instead of socializing with the Dove content, they could have spent these 382 years making money in the office. But they didn’t because an hour of socializing has the same value as an hour of work. The time with friends and relatives is worth a lot to us. It’s worth our paycheck.

A close look at the average bar tab or restaurant check—even the costs of a family holiday or yacht—reveals that we spend what we earn per working hour for an hour of time with friends. Pew Research data confirms this remarkable fact: an extra hour per week with friends makes consumers just as happy as an extra hour’s worth of salary. It makes sense: if we valued a working hour more than an hour with our buddies, we wouldn’t go to happy hour but stay at the office. Time is money, also online. Every time a consumer “likes” and repins branded content, she invests in the brand. Every brand touchpoint has a time-tag attached to it, which is worth the salary the involved consumers could have made. Together with the trust-tag, this time-tag defines the value of the touchpoint to the involved consumers. Sociologists have a term for the value per touchpoint: they call it social capital. Add up all these pennies of social capital, and you get the premium consumers are collectively investing in a brand. This collective brand premium is, by definition, a brand’s equity. Thus, the ROI for Social Media is the sum of all the little investments by consumers:

Formula ROI of Social Media

Marketers can quite easily measure the five factors that determine the ROI.

  • Number of touchpoints. Count every time a branded YouTube video was downloaded, every “Like”, and every view of the company blog, every visit to the discussion forum. Don’t know how many fans saw your Facebook post or tweet? Thanks to research by scientists like Dan Zarella, marketers can make a pretty sound assessment of how many friends and followers digest their content and pass it along by tracking the likes-per-fan and retweet ratios.
  • Time. Every tweet, retweet, post, comment, online video, pin, and repin takes a few seconds both to produce and digest. Deciding to click on “Like” takes the average consumer for instance seven seconds. In Facebook, an average eight close friends and twenty-six other friends will subsequently take five seconds to digest that “Like.”
  • Trust. Look at the intensity of the online interactions between consumers to assess how close they are. A good metric for intimacy form the comment-to-like ratios of Facebook fan posts: the higher these ratios, the more close friends shared the brand experience. On Twitter, the retweet-to-tweet ratio is a solid indicator.
  • Sentiment. Measure the shared sentiment between consumers by sifting through the comments and retweets. Companies like Radian6 offer natural language processing tools that automate this analysis for marketers. The word graph produced during such an analysis also serves to double-check the trust factor. Friends use words like “fun” in their exchanges, while close friends may use words like “moving” and “emotional.”
  • Income. Social marketers know the demographics of their fans and followers, including the net income of senders and receivers of their content.

With these five factors, marketers can determine how much consumers invest in every quality moment spent at the brand’s social media venues. Applying the five factors to the two online video campaigns shows why Dove enjoyed more than three time the ROI of Evian, despite the striking similarities between the two social marketing initiatives.


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