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Measure Social Media ROI

on September 14, 2011

ROI is A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.

now, click the video link, it will clearly shows how does RIO work.


ROI formula:

the formula shows how to calculate the Return of Investment in any situations. But are there some differences between the social media ROI and other’s ROI?  Today, my post will talk about the ROI of social medias.

Let’s back to the ROI formula, to simulate the ROI formula, we can quickly obtain the Media ROI formula:

Social media ROI = (SM return – SM investment) / SM investment

however, what returns social media could achieve and what’s the investment in social media business?

Firstly, to know what you will return, you need to know what is your goals in the social media campaign. The goal is that what you want to achieve through using social medias. For example, X wants to use social media for advertising his online media vault. person who want to use his media vault just pay him 15 dollars per year.

Then, calculate your returns. But it is difficult to achieve, because you need to know how much money earned from each social media returns. For example, last month, X used face book to encourage 5000 people to use his media vault and 3500 people use his product through the twitter, so that the total return in this year ={ [5000(facebook)+3500(twitter)]* $15/year}*1 year= $127500

Now, turn to the costs, you need to calculate your expenditures of these activities. For example, X farm employed 1 person for manage his social medias and pay him $500 per week. Also, he spend $30 per year on web server and $1000 per year for renting a cloud computing platform. the Total Costs=$150*2*12+$30+$1000=$25030

Finally, calculate the ROI=($127500-$25030)/$25030=409%

*above just a simulation to show how to calculate the ROI.

Some sources:

Investopedia:this web site gives the definition of ROI

SocialMediaExaminer:this post shows how to calculate the social media ROI

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