As a social media manager, one of my recurring nightmares is being pulled into a meeting with executives and asked to prove our social media ROI.
This scenario haunts me, and not because I don’t believe in the value of social. Proving ROI is a multi-step process with several variables, inputs and considerations. Still, I know that social does make an impact.
I’m not alone on this, either. 96% of marketers agree that social media delivers positive returns. And now, it’s time to prove it.
In this post, we’ll walk you through the steps to calculate and improve your social media ROI (including a list of our go-to tools). Nightmares begone!
Free downloadable guide: Discover 6 simple steps to calculating your social media ad campaign ROI.
What is social media ROI (and why does it matter)?
ROI stands for return on investment. For our purposes, social media ROI means the business value returned from social media marketing and advertising.
In other words, social media ROI measures the results of social media marketing compared to its costs.
It’s a way to assess whether your social media strategy is generating a positive outcome for your financial or strategic goals.
Here’s a simple formula to calculate social media ROI:
Social media ROI = ((Value generated from social media – Costs of social media investment) / Costs) * 100
Here’s what the components of the formula mean:
Value generated from social media. The definition of value varies from business to business. Value can include increased sales, leads, conversions, or cost savings due to effective social media engagement. We expand on this more below.
Costs of social media investment. This means all costs associated with executing your social media strategy. It can include advertising budgets, content creation costs, employee salaries, software & tool subscriptions, and other resources related to social media activities.
The result of the formula is usually expressed as a percentage.
Any ROI percentage greater than 0 means that your social media efforts have generated more value than the resources you invested. In contrast, a negative ROI means you invested more than you made back (aka you lost money).
Measuring social media ROI empowers marketers to prove their efforts’ value. By calculating ROI, you can determine what’s working and what’s not and attribute real business results to social media.
And if you want to earn more budget and resources to scale up your social media strategy? You’ll need to communicate these results to key stakeholders and executives. If you want to hang onto your budget, you better be able to prove why you need it.
How to calculate ROI on social media in 5 steps
How you calculate ROI varies from business to business. Measuring ROI depends on which objectives matter most to your company. These priorities might include brand awareness, revenue, or customer satisfaction.
Our 2023 Social Media Trends research found that marketing practitioners and leadership perceive the value of social through different metrics:
Tip: When calculating your returns, choose a reporting period based on your sales cycle. LinkedIn research found that 77% of marketers measured results within the first month of a campaign, even though the average B2B sales cycle is two months.
Sales cycles will vary from business to business. Connect with your sales department to know the appropriate timeframe for reporting social media ROI.
#1 Analytics Tool for Growth
Beautiful reports. Clear data. Actionable insights to help you grow faster.
Once you’ve measured the value created based on your chosen metrics, you can move on to calculating the cost side of the equation.
Social media costs should include all expenses required to create and publish content. These expenses may include:
Tools and subscriptions for social media management
Advertising campaign budgets
Content creation costs, including tools, assets, licenses, and fees for working with creators or freelancers
The ongoing costs for your social media team (salaries, training, etc.)
Agencies and consultants (if applicable)
Before adding up your costs, you should know the returns you’re looking for. This may be based on a specific time period, campaign, post format, or otherwise. This will help you narrow down which costs to include in your total.
Step 4: Calculate your ROI
You should be ready to input your total value and costs into the formula above to calculate your ROI.
Social media is constantly changing — if it’s not the algorithm, it’s your audience’s preferences. The content, strategies, and channels that work today might fall flat tomorrow. You need to update and adapt your strategy over time.
Advanced Analytics uses powerful integrations to help you track conversion and business goals. It also includes recommendations, easy-to-share reports, top-performing posts, and suggestions for improvement.
Clear and actionable reports bring value to your team and stakeholders. Even better? Using the insights to create new iterations of your social strategy. Your ability to adapt will lead to increased ROI over time.
Test and optimize
No matter the strength of your social media skills, you can never predict how your audience will respond. All audiences are different, but experimentation is the best way to mitigate this.
You can run A/B tests on social media to test different factors and optimize your content based on the outcomes. You can run experiments through organic social accounts and paid ad campaigns.
For example, we ran this experiment to test whether Instagram carousels perform better than Reels. After three weeks, we found carousels earned better engagement and reach!
Testing — and reviewing your social media analytics — helps you learn what types of content actually resonate with your followers. Based on those insights, you can scale up that content or ad and increase your social media ROI.
Track your competitors
Are you looking for ideas on what to test or how to gauge the success of your metrics? It might be time to do some competitive analysis!
I’m sure I’m not the only marketer who’s spent hours pulling together average engagement and clickthrough rates, only to wonder: “How do I know if these numbers are actually good?”
In those cases, benchmarks are my go-to resource.
Hootsuite has built-in industry benchmarks. You can compare your own post performances side-by-side with averages from other companies in your industry.
Want to compare your results with your direct competition? Competitor benchmarks are even better than industry benchmarks. Here’s how to use competitor benchmarks in Hootsuite.
7 useful social media ROI tools
Now that you know the theory behind measuring social ROI, here are some tools to make the process easier.
UTM parameters are short text codes within URLs. They enable marketers to attribute and track website visitors from traffic sources like social media.
UTM parameters feed information to analytics tools like Google Analytics, Adobe Analytics, and Hotjar. From there, they can help you measure social media success. UTMs allow you to review performance from a high level or get into granular details.
If you’re running social media ad campaigns, tracking pixels are essential for measuring the return on your ad spend.
Pixels allow you to track visitors that come from social ads and their actions (such as purchases). They also enable you to retarget and optimize your ad targeting.
These days, tracking pixels are less effective, thanks to iOS14.5 and ongoing changes with first- and third-party cookies. Platforms like Facebook are trying to get around this, though. They’ve introduced a Conversions API to collect information directly from your servers.
We’ve built this free calculator to help you calculate your social media ROI. You’ll need to know several inputs, such as website visits, website conversion rate, your sales team’s close rate, customer lifetime value, and costs.
The calculator will give you a public link to share your social media ROI with colleagues and stakeholders.
Social listening helps you tap into what people are saying about your brand, competitors, and industry. You can use it to discover trends, find collaboration opportunities, and dig into customer needs.
Hootsuite has social listening built-in to all plans. It also integrates with listening tools like Brandwatch, Talkwalker, Digimind, Meltwater, ReviewTrackers, and Google My Business.
Frequently asked questions about social media ROI
What are some common mistakes businesses make when measuring social media ROI?
Some common mistakes businesses make include measuring vanity metrics, not tying social metrics to business objectives, and only measuring profit instead of the total value generated by social media.
How do you make sure you’re tracking the right metrics?
When measuring ROI, you should determine your business objectives and choose the social metrics most likely to contribute to these objectives. These metrics should be actionable and easy to measure. For example, if your goal is to build an audience, your social metrics should be follower growth and email subscribers referred via social platforms.
How do you know if you have a “good” ROI?
A good return on investment is any number above zero. A positive ROI means your investments generated more value than your costs.
Use Hootsuite Advanced Analytics and get plain-language reports of your social data to see exactly what’s driving results for your business—and where you can boost your social media ROI.