Return on Investment For Social Media: A Proposed Framework For Understanding, Implementing, And Measuring The Return

Abstract

Web 2.0 has enabled a whole new way for companies, user communities and others to engage each other. Social Media (SM) platforms (i.e. blogs, micro-blogs, social networks, video/photo upload sites), in particular, comprise a flourishing new set of eWOM and viral marketing mechanisms that are growing exponentially. More and more global companies are using SM –some because they know it works, others because they’re afraid not to use it. How much they spend, and how long they continue to spend it, will depend on how effective SM proves to be in the long run. The measurement of social media effectiveness, or return on investment (ROI), is a key factor in the long term success of SM marketing and management programs. This paper provides a summary overview of the SM ROI literature where there is a vast range of opinions/models/calculations in both academic and trade journals. It suggests that the SM ROI issue is far more complex than most report, and provides a business “unit of analysis” framework for better understanding this complexity. It also discusses SM ROI measurement within the context of business process/performance management basics and suggests guidelines and principles for how and when to proceed with such measurement.