This is a guest post by Eugene Farber.

“How do you measure the ROI of your social media efforts?”

It’s a question being discussed ad nauseum of late, and rightfully so. Social media investment is a legitimate issue that businesses have to face, now more than ever. So, being the problem solver that I am, I decided to figure out how to measure the ROI of social media once and for all.

The quick answer is there is no answer!

If you want a long-winded explanation, read on.

Enough “Whys” Already!

For my first stop on the way to figuring out how to complete this elusive calculation I went to all of the usual suspects.

What I discovered actually got on my nerves a little bit. There were no concrete answers. For all of the promises of “how-to” in the titles, all I got was “why.”

Why you need a strategy before entering the realm of social media.

Why you should use social media to begin with.

Why you should measure the ROI of your social media campaigns!

…OK great! But how?

Some Actual Value…

Luckily my next stop resulted in some actual numbers. This was it! I was finally going to figure it out!

To prove that social media provides a great return on investment (if used properly) The Next Web published 10 case studies on the ROI of social media. These are gleaming examples of social media done right. Case studies which every company should take as an example and follow suit.

Social media management firm Syncapse took it one step further. They recently conducted a study and concluded that the average Facebook fan is worth $136.38.

Now I just have to figure out how to get a lot of Facebook fans and I’m ready to retire!

The Caveats

The Syncapse study is utterly useless. To perform the study they used a selection of companies that are not representative of the average small business. Even Syncapse, within the study, states that no two fans are the same. Well no two companies are the same either. There are too many variables to make the $136.38 figure mean anything significant.

Plus, that takes care of the return part. What about the investment?

Sure Facebook is free, but someone has to run the page and the campaigns on there. How many man-hours does it take to keep those campaigns working. How many man-hours does it take for large companies like Starbucks to keep the customer engagement going?!

The “ROI from Facebook Ads” case study mentioned on TNW (originally published on Search Engine Journal) begins to explore the actual investment part of the calculation. But they still fall short.

The dollar cost of Facebook ads still doesn’t tell me what the REAL investment was. Hours of research to figure out how Facebook ads work? Keyword research? Ad design? Maybe even hiring a consultant to do the work for you?!

Strictly measuring ROI in terms of dollars spent on ads doesn’t really give you a true representation.

Attempting an Actual Measurement…

A recent post written by Jay Baer of Convince&Convert is probably the best summary of actual ROI measurement I’ve seen. The post focuses on the ROI of blogging but can be extended to any social media activity (and really any activity in general).

The first step is to identify what activities you (or your company) is performing and what it costs. Consider all costs including salaries, direct expenses and overhead. If you want to get really fancy (and I know you do) you may want to take into account the opportunity cost of time spent on these activities and what you could be accomplishing with those resources.

Once you have an idea of what your costs are you need to figure out what the return on those activities is. To do this you need to figure out what your revenue-producing actions are (what behaviors your customers can exhibit to drive revenue). Is it blog subscriptions? Is it opt-in subscriptions? Are you just focusing on sales?

As you can see the actual calculation is simple, but not easy. There are many variables to consider and the outcome of your ROI test greatly depends on which factors you focus on.

For larger companies the ROI becomes even more of an estimate because overhead allocations are often subjective. This also means that departments have to get together and interact (i.e. marketing and accounting departments). And how often does that go smoothly?

But even if you do get of that straightened out, it may be impossible (or at least very inaccurate) to measure true ROI in a short-term time frame.

Are We Asking the Right Question?

Gary Vaynerchuk has made a hugely successful business through social media engagement. He has made an even bigger business by promoting the idea of social media engagement.

As he points out in his book The Thank You Economy, it is the businesses that don’t begin to engage with their customers on a personal level that will fall to the wayside.

People born today are born in to a world that is connected more than ever before. By the time they are consumers they will expect connecting and interacting with businesses to be easy.

This may sound ludicrous, but Gary V believes it to be true. And who am I to argue with Gary V?

My grandmother never had a computer.

My parents are now using the internet for purchasing, yet they tend to stay away from the social network scene as much as possible.

I am in my mid-20s, on the cusp where the social media outbreak occurred.

My kids will be born into a world where the President of the United States having a town-hall meeting over Twitter would be a thing of the past (the effectiveness and legitimacy of said meeting is a debate for another day).

The evolution is clear. And in a world that is evolving faster than ever before, maybe our questions should be evolving as well.

Are We Measuring the Right Metrics?

Maybe the answer to the question is no. Maybe the ROI on social media engagement doesn’t even matter at this point.

Perhaps it isn’t the ROI of social media we should be measuring, but rather the LOLOI – the loss on lack of investment (yeah…I just made that up).

How many potential customers might you be losing if you aren’t engaging in conversation with them? What if your competitors are engaging them? People would rather buy from people they like and can relate to. With social media even the biggest corporations can become more personable.

So at this point the wiser question might not be “what is the cost of implementing a social media strategy?” but rather “what is the cost of not implementing one?”.

A Learning Curve

In truth the investment, and the return, does matter. It doesn’t make sense to pump resources into social media if you can’t afford it. If all of your resources are getting sucked up by social media and not enough are being put into actual business operations then you have a serious problem on your hands.

But it is important to note that social media tools are just that…tools. And the magic isn’t in the tool, but rather how you use it. It doesn’t have to cost an arm and a leg, but it does take some practice.

There are certainly learning curves when it comes to using social media. And each individual and business has its own.

But it may be a good idea to get in now, while it is still early, to perfect the craft before it becomes an absolute necessity.

The Conclusion

There may not be a simple answer to measuring the ROI of social media because there are too many variables. And each individual and company needs to figure out which of those variables they need to focus on.

There is definitely no blanket one-size-fits-all answer. But just because it may not be easy to measure the ROI of social media, doesn’t mean you shouldn’t attempt it.

Go for it. Play around. Test different variables. Finagle some numbers.

And remember…the ROI of social media might not even be the right thing to measure.

About the author: Eugene Farber is an accountant turned internet entrepreneur. He blogs about internet marketing, business and life at Reality Burst. Visit his site today for a free Social Media ROI checklist, and connect with Eugene on Twitter @EugeneFarber.

image: Leads United
image: Debs

How to REALLY Measure the ROI of Social Media originally appeared on Danny Brown - under a Creative Commons license.

While that can be true depending on your needs, there are also plenty of ways to use Twitter more effectively as well as offer measurable ROI. Here are three of the tools I use – hopefully they’re as useful to you as they are to me.

Topify

The way Topify works is pretty simple – it takes over your email account from Twitter. It doesn’t hack into your existing email to do so. Instead, you set up your account at Topify and they provide you with a personal email address.

You then go into your Twitter account settings and replace your normal email address with the Topify one.

Once you’ve amended your settings, Topify starts to send you the same alerts from Twitter that you used to get, but to the power of ten. Now, you get to see the user’s bio, their followers/following ratio, when they joined Twitter, their five most recent updates, their website – basically everything you’d see on their Twitter homepage.

Topify then gives you the option of following that user by simply replying to the Topify email. No message needed – just hit reply. You can also send direct messages by replying with your message, or block unwanted users by forwarding that user to Topify.

By giving you all the options via one single email that it could take you several minutes to check out via Twitter itself, you can see why Topify is gaining popularity with Twitter users.

Seesmic Desktop

Up until now, the reigning champion of third-party applications to help run your Twitter account has been Tweetdeck.

Its use of columns, groups and account management has been hugely popular. Now, its time as undisputed champ might be near an end, thanks to Seesmic Desktop.

From the same guys that gave us Twhirl, Seesmic Desktop is more than just a possible alternative to Tweetdeck – it’s better (to me, anyhoo). Here’s why:

• Cleaner layout with fresh neutral colours as opposed to the dark Tweetdeck (although Tweetdeck’s colour options can be changed in the settings)
• Multiple accounts, ideal for users who want separate personal and business accounts
• Excellent Facebook integration
• Better API usage – Tweetdeck limits how many updates you can have per hour, Seesmic seems to avoid this (so far)
• Less memory suck on your system compared to Tweetdeck
• Easier navigation between columns and searches
• Remembers your preferences for URL shortening services and image uploaders

There are numerous other little tweaks – suffice to say, as an alternative to Tweetdeck, Seesmic Desktop comes up trumps. And then some. I love it.

bit.ly

Since Twitter only allows 140 characters per message, you need to optimize your space and make sure you’re not wasting any real estate.

To help with this, there have been a host of URL shorteners that allow you to share a website link without having to post the complete URL. My favourite is bit.ly.

While you can use bit.ly straight from the box, the really good stuff happens when you sign up for an account. Once you’re logged in, you can tweet your link and message straight to Twitter.

You can then track how many times your link was clicked, who by, what’s being said about your link and more. There are also a host of additional tools, including support for Firefox, Gmail, email, Facebook, mobile use and much more.

A really cool feature is bit.ly’s support for Google Documents – you can create a Google Spreadsheet template and convert your links into an Excel report. Of all the URL shortening systems, bit.ly is definitely my favourite.

So these are three great tools – but where does the ROI come into play? There are a few ways:

• Better time management, allowing you to interact with more people, more effectively, building the relationships that could lead to customers/clients
• Keep tracks on the searches that matter most to you, your brand and your customers/clients
• See who’s discussing your links, helping you target warm leads for promotional or sales campaigns

Of course, you don’t need to worry about ROI if it doesn’t affect you.

But, if you’re trying to convince your boss (or client) why they should get on Twitter from a business point of view, and need to convince them it’s not a waste of time and does offer ROI, you could do a lot worse than the three examples here.

How about you? What are you using to better manage your time on Twitter and how are you measuring success?

• Update Friday May 22 – Topify have very kindly released 100 beta invites to readers of this blog. You can get your invitation to try Topify by clicking here.

photo credit: arikfr
photo credit: adamjackson1984
photo credit: Christopher Blizzard

Better Twitter (and ROI) with Topify, Seesmic Desktop and bit.ly originally appeared on Danny Brown - under a Creative Commons license.

But maybe we’re looking at the wrong ROI to start with – instead of return on investment, perhaps we should be more worried about the Risk of Ignoring.

This can work on both levels, personal and business-led, but for the sake of this post, I’m going to stay with businesses.

(If only from the viewpoint that it seems to be businesses more than individuals that are using social media less effectively).

Say the CEO of Company X brings in his sales or marketing director to the boardroom, and tells them he’s heard wonderful things about this “social media craze”. He’s heard that millions of people are using it, and he wants his company to have a bite of the money that these millions of social media users have, just waiting to be spent.

So the sales or marketing director decides to have a look at social media. Perhaps he’s even on Facebook, so he knows what social media is all about. He’s told his CEO not to worry, Company X will soon be rolling in extra cash from all the wonderful sales to be made through social media marketing.

So the director sets up a Twitter account – after all, just look at the conversation going on there. That’s a surefire sales arena if ever there was one! He starts following people left, right and centre and pretty soon he has a sizable following back. Time to start selling Company X to the masses, thinks the director, and starts sending out Tweets and direct messages about how great Company X is and why people should buy from them NOW.

The director has carried out the legwork and now has his message in front of hundreds, if not thousands, of people. Time to sit back and wait for that Holy Grail of ROI to start. Which it will – just not the one that was expected.

This is where the Risk of Ignoring plays its hand.

By ignoring the simple fact that social media is about conversation, the director has completely missed the point. Instead of building up a loyal and quality-led following, all he’s done is build the equivalent of a non-optional email list for a sales pitch.

Now he’s wondering why so many people are un-following him on Twitter. He’s also wondering why no-one has rushed to Company X’s website and bought anything from their online store. Most of all, he’s wondering what he’s going to tell the CEO at the next progress report meeting.

I see this happening all too often with businesses. While originally there may be good intentions for using social media, trying to use traditional sales or marketing tactics will usually backfire. Whereas CEO’s and sales or marketing directors may be used to success with the heavy-handed “shout at everyone” approach, it’s just not going to work when it comes to social media.

You want your business to enjoy success with social media users? Be social with us. Get to know us, and what interests us, and in return I can pretty much guarantee you’ll have the interest you want in you and your product. Because we are actually interested in what you have to say.

Just don’t ignore us.

The REAL Social Media ROI – Risk of Ignoring originally appeared on Danny Brown - under a Creative Commons license.