Social media ROI is a way to measure what you get back from what you put into social media marketing. It considers your investment, including money, time, and effort, against the benefits you receive.
Social media ROI is important because it offers valuable insights into which strategies deliver the best results for your business and what kind of content is bringing in the most profit. It’s a reliable method that helps you estimate your marketing campaigns’ performance.
Calculating your social media ROI is vital for quantifying the effectiveness of your social media marketing efforts. However, the process can be complicated because social media ROI involves both monetary and non-monetary values, making it challenging to measure accurately.
To determine your ROI, you must establish clear social media goals, track metrics that are relevant to your goals, and assign them financial value. It’s also crucial to consider the cost of your social media investment to get an accurate result.
Like most people, you’ll encounter a common hurdle of assigning monetary values to elusive social metrics, like conversion rates, which can be challenging. However, with convenient analytic tools and knowledge about which social media platforms are best for specific goals, doing the ROI math can be a breeze.
Once you’ve gathered your stats and applied the social media ROI formula to obtain your numbers and percentages, you might wonder whether it’s a favorable ROI and how to increase it. To maximize your social media investment, you must engage your audience, create outstanding content, experiment with various approaches, and conduct thorough analyses.
What is social media ROI?
Social media ROI (return on investment) is a metric that shows how effective your social media strategy is in generating profits for your business. The most common way to calculate your social media ROI is to divide the net profit by the total cost of the investment and multiply the result by 100.
ROI = Net income / Cost of investment x 100
How you calculate your social media ROI depends primarily on your social media goals and the metrics you use. After setting clear goals and tracking the corresponding metrics, the next step is to assign monetary value to those metrics. Finally, after determining your social media marketing cost, you can use the above formula to get the precise figure of your ROI.
By the last quarter of 2024, Facebook and Instagram were named the top platforms for ROI by global marketers, cited by 28% and 22% of respondents, according to Statista. This highlights the growing confidence marketers have in measuring ROI through social media, especially on platforms owned by Meta.
What is the importance of social media ROI?
The importance of social media ROI is in its ability to help you figure out which social media strategies work best for your business. While a single formula doesn’t guarantee social media success, companies that put time into tracking their social media ROI are better positioned for a positive return on their investment.
Measuring your social media ROI is important for several reasons.
- Performance assessment: Understanding your social media ROI helps you evaluate whether your social media marketing strategy is working, allowing you to amp up what works and rectify what needs improvement.
- Budget planning: Through social media ROI tracking, you can become more efficient in managing your resources. You’ll be able to figure out which social media campaigns are the real money-makers. This way, you can channel your time and budget where they really count.
- Competitive edge: Gaining insights into your social media ROI compared to your competitors gives you a competitive advantage, allowing you to gauge your performance and pinpoint areas of improvement.
- Long-term success: Understanding your social media ROI helps you adopt a data-driven, results-oriented approach to social media marketing, ensuring your efforts remain profitable in the long run.
How to Calculate Social Media ROI?
Follow the steps below to calculate your social media ROI.
- Define your social media objectives
- Track metrics that align with your goals
- Determine the monetary value of these metrics by selecting the proper social media attribution model
- Calculate your total social media cost
- Calculate your social media ROI by using the formula above
- Consider intangibles
As you can see, calculating your social media ROI takes more than just the simple formula – it calls for good strategy and planning. So, before you start cracking numbers, explore these steps in detail.
1. Define your social media objectives
Defining your social media objectives can significantly improve the outcomes of your social media strategies. These objectives pinpoint areas for strategy improvement, and setting clear goals enables you to track your progress toward reaching those goals.
Common social media goals include driving traffic to a website, generating leads, getting more followers, and increasing reach. However, the term ”social media goal” is very broad and can apply to anything from an organic post or single ad to a full-scale campaign.
A great way to start is to define SMART goals for your social media marketing, meaning that your goals should be Specific, Measurable, Achievable, Relevant, and Time-bound.
2. Track metrics that align with your goals
To track metrics that align with your goals, start by establishing measurable targets for each performance metric, keeping in mind that different social media metrics correspond to different goals. Consider what you want to increase: reach, impressions, brand awareness, etc, and track metrics that align with these goals.
3. Determine the monetary value of the metrics
Determining the monetary value of different social media metrics, like conversions, engagement, and average lead value, helps you evaluate your financial gains from social media marketing more precisely.
The basic formula for translating conversions into dollars is relatively simple. All you have to do is to divide the total revenue generated by the number of conversions. For example, if you generated $12,000 in revenue from 200 customer conversions, the figures would look like this:
Average revenue per conversion = $12,000 / 200 = $60
Now, to determine the conversion value, multiply the revenue per conversion with the number of conversions. For example, if an online store makes $30 per purchase and records 75 conversions in a month, the conversion value would be:
Conversion value = $30 x 75 = $2,250
Next, to determine the monetary value of engagement, you’ll need to figure out the cost of engagement and its estimated benefits to apply the return on engagement (ROE) formula below.
(Benefits – Cost / Cost) x 100
ROE is the quantitative and qualitative return you expect on the investment of engaging your audience through social media.
In this case, benefits are the income related to or coming from engagement. On the other hand, cost in this context refers to time, production, staff, and marketing costs spent on boosting engagement.
To calculate your financial gains from generating leads, divide the revenue by the number of leads to get the average revenue per lead for a specific period.
For some metrics, it’s nearly impossible to determine the exact amount of money they bring. Luckily, most platforms offer analytic and calculation tools and apps to help you estimate your earnings based on different metrics.
4. Calculate your social media cost
To calculate your social media cost, you should consider all costs associated with your social media activities, which can include:
- Ad spend: Social media advertising costs depend on your goals and the platforms you use for ad campaigns. Facebook and Twitter are generally more affordable, while LinkedIn and YouTube tend to be more expensive.
- Content creation costs: This includes graphic design, copywriting, images, video production, etc., and, of course, working hours spent on creating content. Content creation is often a major spending point, and its specific cost varies based on factors like content quality, content type, and whether you used internal or external resources for its production.
- Social media management tools: The cost of social media management tools is tailored to your specific needs, goals, and available resources and can vary widely, ranging from $500 to $5,000 per month. This cost is influenced by factors such as the size of your business, the extent of your online community, whether you manage multiple social media channels, and the complexity of the software or tool package.
- Labor costs or agency fees: It’s vital to consider the people managing your social media accounts when calculating social media ROI. This includes the hours spent planning, creating content, engaging with the audience, and analyzing results. To get a more accurate picture, track the time spent on social media activities and assign a monetary value to that time based on employees’ salary or hourly rate.
- Any other costs related to your social media campaigns: software, utilities, and other related expenses, in addition to advertising costs that don’t fall under traditional marketing costs.
When you sum up these factors, you’ll arrive at the “investment” component of your ROI calculation.
5. Calculate your social media ROI
The most common way to calculate your social media ROI is to divide the net profit by the total cost of the investment and multiply the result by 100. The formula for ROI calculation is: ROI = Net income / Cost of investment x 100
Social media investment cost encompasses all the expenses linked to executing your social media game plan.
For example, you invest $100 into a business project and generate $500 in revenue. The net profit is $400 (generated revenue – total investment, or $500 – $100 = $400). Then, you divide the net profit ($400) by the total expense ($100) and get 4. Lastly, to get your ROI in percentages, multiply the result (4) by 100 and get 400% ROI.
If your social media ROI tops 0% – congratulations! You’ve generated more value than you invested. If it’s in the negative, your investment outpaced your gains.
Using the above formula, you can calculate your social media ROI for paid advertising since it relies on monetary value, which seems pretty straightforward. But things can get tricky when trying to factor in non-monetary metrics and intangible social media assets. For instance, we can’t precisely calculate the monetary value of brand awareness, but we could measure ROI using the growth in the number of followers.
Here is another example of social media ROI calculation that is not based on clear monetary value but rather on intangible assets.
Imagine a software company investing $5,000 in a LinkedIn advertising campaign to increase its brand visibility, and the campaign results in 300 new followers. In such cases, ROI is quantified using non-monetary metrics.
Calculating ROI from your social channels can sometimes feel like chasing a hidden treasure because some social media metrics are quite elusive.
When measuring your social media ROI, non-monetary metrics such as reach, brand awareness, conversion rates, and click-through rates will often hold more significance than the sole focus on revenue. Some businesses will focus on boosting sales, while others might focus on generating more leads or conversions.
6. Consider intangibles
When evaluating your returns, it’s easy to overlook intangible benefits and focus only on the dollar value you gain. However, intangible benefits in social media marketing include essential aspects such as brand awareness, reputation, and customer loyalty. Although intangibles cannot be attributed to a fixed monetary value and included in the ROI formula we discussed above, they still play a key role in adding value and shaping your business’s long-term trajectory.
How to increase your social media ROI?
To increase your social media ROI, apply the following steps.
- Know your audience
- Create quality content
- Analyze your content regularly
- Engage with your audience
- Use A/B testing
- Optimize paid ads
- Optimize your landing pages
Know your audience
Knowing your audience is critical to increasing your ROI because numbers and metrics won’t make much sense if you don’t know who is into your content. An effective way to get to know your audience is by observing their behavior and studying your competitors to discover what makes your target audience engaged.
By understanding their preferences, you can produce content that truly resonates with your intended audience. You can also use this data to customize your ads and even adjust their timing to synchronize with your followers. As a result, your audience is more likely to take action and convert.
Create quality content
Creating quality content is crucial for growing your audience and engaging your followers. It’s easy to overlook the importance of consistently delivering top-notch content over time. Sharing relevant, captivating content that keeps your audience engaged is the basis for building a loyal follower base.
Use A/B testing
A/B testing works as a social media lab experiment, and it’s an excellent tool for finding what works best for your audience. Only posting engaging content won’t automatically increase your ROI – you also have to stay on top of ever-changing social media trends and be up to date with new features that social media platforms are constantly launching.
Keeping things fresh by trying something new each month is a good idea. To run the A/B test, you should create two slightly different versions of the same content and present it to two groups of equal-sized audiences. For example, those following you on Instagram might have other preferences than those on Facebook. The winning version of the content reveals your audience’s preferences and variations within your audience.
Analyze your content regularly
To boost your social media ROI, you have to analyze your content regularly and tweak your strategy to align with the ever-changing social media dynamics. Whether it’s algorithm shifts or evolving audience tastes, what succeeds today might flop tomorrow. However, analyzing your content and its metrics will provide valuable insights for tailoring content to your audience, which is a solid starting point for maximizing your ROI.
Engage with your audience
High audience engagement enhances the relevance of your content, making it stand out from the rest. Audience engagement is the basis of improving brand visibility, building trust and reputation, opening doors for more monetization opportunities, and improving ROI in the future.
That’s why it’s unsurprising that measuring engagement (clicks, comments, mentions, etc) is the most commonly used metric by most marketing specialists. Keeping your audience interested in your content, inspiring them to comment, send feedback, participate in discussions, and respond to their questions promptly is the cornerstone of building a solid online presence.
Although engagement metrics don’t have direct monetary value, they are key to nurturing brand loyalty. If your goal is cultivating a devoted online community, you’ll likely place greater significance on engagement rates than other metrics.
Optimize paid ads
After selecting your paid ad strategy, the next step is to optimize it for your target audience. Optimization increases your chances of getting the most out of your ad campaign.
Different channels offer various ways to optimize your paid ads. You can customize them by location, choose ad posting time, and test different ad versions. Ultimately, as we’ll discuss below in detail, you should aim for an ROI of 5:1, which is a pretty good ROI generated from paid ads.
Optimize your landing pages
Optimize your landing page to be user-friendly, easy to navigate, load quickly on any device, look excellent, connect to your ad, and make a powerful first impression on your potential customers.
Your landing page should also feature a clear and persuasive call to action. Don’t leave your visitors wondering. Offer them some enticing options, whether it’s making a purchase, subscribing to a newsletter, or downloading free software.
And remember, a well-optimized landing page can significantly boost your conversion rates, which can ultimately reflect on your social media ROI.
What is considered a good social media ROI?
Good social media ROI should be at least 3:1, meaning earning $3 in revenue for every dollar invested. While this might appear as a challenging goal, with effective social media advertising, careful planning, and a touch of dedication, any business can confidently reach and even exceed this 3:1 ROI target.
What’s more, many small companies aim for an ROI of 5:1, which is considered a good ROI for paid ad campaigns. Anything above that would be regarded as outstanding. But remember that despite this benchmark, each social media channel brings in a different ROI. We’ll be discussing this further in more detail.
What is the difference between organic and paid social media marketing?
The difference between organic and paid social media marketing is that organic marketing relies on the virality and organic reach of high-quality content, whereas paid marketing relies on paid promotions. Both of these methods can effectively generate traffic, improve the visibility and relevance of your pages, and affect your social media ROI in different ways.
If you have more time than money, relying on organic marketing is a better solution. Organic marketing has the potential to generate substantial ROI in the long run. On the other hand, when your budget is more flexible and time is of the essence, paid marketing is the way to go.
Organic social media marketing is about creating good stuff your audience likes, like photos, videos, reels, status updates, etc. The most apparent advantage of organic social media marketing is its cost-effectiveness.
Organic marketing is a time-consuming strategy that limits your reach to existing followers, whereas paid social media ad campaigns affect a wider audience. Plus, with paid social media marketing, you can target specific demographics, interests, and locations.
To make the most of paid campaigns, many businesses turn to social media advertising services, which offer strategic planning, ad creation, and ongoing optimization tailored to specific goals. These services help ensure your ad spend is used efficiently by targeting the right audience segments, testing creatives, and continuously refining campaign performance to drive stronger results and improve ROI.
Which marketing strategy provides better ROI, organic or paid?
Both organic and paid marketing can boost your ROI in different ways. Focus on organic marketing if you aim for long-term goals, and use paid marketing to achieve quick results and short-term goals.
Prioritize the option that has shown better performance for your business. Although profiting from organic traffic is challenging, if it’s proving successful, invest more time and resources to enhance content quality and increase organic traffic rather than spending on paid ad campaigns.
Organic marketing is essential for naturally attracting clients, and it has the potential to generate substantial ROI in the long run. On the other hand, paid social media marketing is your ticket to swift lead generation, revenue boost through time-sensitive campaigns, and broad audience reach. It includes paid social media posts, video ads, and sponsored content. So, when your budget is more flexible and time is of the essence, paid marketing is the way to go.
However, a hybrid approach often works best—leveraging organic traffic for brand awareness and trust-building while using paid marketing for conversions and short-term goals. It’s a potent combo for businesses aiming to make their mark and achieve a positive ROI.
Can you have a positive ROI if you are not selling on social media?
Absolutely! You can have a positive ROI even if you’re not selling tangible items. There are many ways to make a profit and achieve a positive ROI from social media through various monetization avenues.
You can earn money by offering your expertise through courses or providing valuable tips and insights in free videos. You can also monetize your intellectual property or initiate an affiliate marketing program.
For instance, if you’re a chef, your YouTube channel featuring cooking videos can generate income without your audience making direct purchases. To amplify your income, you can promote cutlery from a renowned or emerging brand or even publish your own cookbook. The possibilities for enhancing your ROI are vast; you’re not limited to relying solely on direct sales.
What is the difference between ROI and ROAS?
The difference between ROI and ROAS is that ROI looks at profit, while ROAS considers revenue. While ROI stands for return on investment, ROAS means the return on ad spent.
In other words, ROI gives you insight into the overall return from all your social media investments, and ROAS calculation focuses on your gain from a single ad campaign. We can think of ROI as a big-picture metric, whereas ROAS is tailored for measuring more specific, individual actions. Although each of these metrics deals with different data, both ROI and ROAS are essential when measuring the effectiveness of your social media investment.
Determining a good ROAS can be a bit nuanced. While some businesses struggle to get by with a 10:1 ROAS, others thrive with just 3:1, but overall, most companies strive to reach the golden standard of 4:1 ROAS.
How does conversion rate impact ROI?
Conversion rates can significantly affect your ROI because higher conversion rates drive more leads and customers, resulting in an increase in sales, which leads to boosted ROI.
Conversion rate is one of the key metrics to measure the success of your social media efforts because it gives you insight into your website traffic and the percentage of visitors who have performed a desired action (a conversion).
But there’s a catch: even if you get high conversion rates, it doesn’t automatically increase your social media ROI. This is because the conversion rate doesn’t always equal sales. It comes in the form of clicks, subscriptions, or lead generation, and each one of these actions has a specific value.
Improving this metric often requires implementing social media CRO, a technique focused on optimizing the user journey to increase the likelihood that those actions lead to meaningful business outcomes.
What tools help measure and analyze social media ROI?
Tools that help measure and analyze social media ROI include Google Analytics, Facebook Pixel, and UTM parameters, among others.
These nifty tools prevent you from relying on superficial metrics like shares, likes, and follower counts to measure your financial gains. To accurately calculate ROI, you need to focus on the right metrics, and these tools are purpose-built to collect, analyze, and report the essential social media statistics for ROI calculations.
What is a UTM parameter?
A UTM parameter is a simple piece of code appended to your URL to aid in monitoring the effectiveness of your content and social media campaigns. These small codes function as digital detectives. They inform you about the location of your website visitors and their interactions with your content, arming you with the essential data for calculating social media ROI.
What is Facebook Pixel?
Facebook Pixel is a free analytics tool that helps you measure the success of your Facebook ad campaigns. More specifically, it’s a piece of code embedded into your website’s code that monitors the traffic between your website and Facebook. Facebook Pixel is tailored to track the actions of visitors on your website, letting you determine how to optimize your Facebook ad campaign to appeal to your audience.
Which social media platform delivers the highest ROI?
Facebook is the social media platform delivering the highest ROI, with Instagram, YouTube, and TikTok as second. However, results vary from research to research, with some recent reports ranking Instagram as the absolute winner when it comes to social media ROI.
When choosing the right platform for your content, letting your specific business goals guide you is the most logical move because ROI varies depending on your particular objectives. So, a better question to ask is how to choose the best platform for your objectives.
But before you jump ahead, do the following:
1. Research your audience
2. Define your social media goals
3. Find out what platforms your competitors are using
4. Decide on the type of content you will create
5. Decide on how many platforms you can manage
6. Consider the platform’s advertising options
7. Consider the platform’s algorithms
Here’s how you can leverage various social media platforms according to your goals:
Facebook: Offers the best ROI for cultivating a devoted customer community and enhancing brand visibility. Plus, Facebook’s algorithm excels at discovering audiences with similar preferences who are likely to convert, so it’s an excellent platform for driving return on ad spent.
Instagram: Works best for engaging with your audience, understanding their interests, launching new products, and boosting sales. It’s a go-to platform for influencer marketing, generating ROI from organic content, and obtaining quality leads.
YouTube: covers a wide and versatile audience and is known for delivering strong ROI and ROAS. In a study of 56 case examples from eight countries, YouTube ads outperformed TV, delivering a higher ROI in nearly 80% of these cases.
X (formerly Twitter): A platform to ramp up shares and clicks, grow a following, boost website traffic, and connect with potential clients. Plus, Twitter ads have the potential to generate excellent ROI. Plus, Twitter offers convenient tracking tools to monitor the performance of your ad campaign and user engagement.
