This piece originally appeared as a free article in the Late September edition of The Measurement Advisor.
The Paine of Measurement
As we’ve said in these articles too many times to count, return on investment (ROI) is an accounting formula. Unfortunately it is a term that is misused 99% of the time. Most recently we read “Super Bowl 50 And ’16 Summer Olympics: Expectations For A Positive ROI?” The piece raises many interesting questions about the value of Super Bowl and Olympic advertising. Yet it never talks about ROI.
This phenomenon—throwing the letters ROI into a headline so you get more clicks (yes, we do it to, and if you
ve read this far, it works) —gets to the heart of what is so wrong with most discussion of communications ROI today. This post and the discussion that ensued are emblematic of what is really going on. There is no ROI in most of social media.
Augie Ray cites some pretty compelling statistics in his incendiary blog post:
Not only is reach falling but social has never succeeded in delivering reliable marketing scale, no matter how many case studies suggest otherwise. Social does not deliver purchasers (accounting for 1% of e-commerce sales, compared to 16% for email and 17% for CPC). Social delivers poor conversions (with a conversion rate of 1.17% compared to 2.04% for search and 2.18% for email). Social fails to deliver trust (with B2B buyers rating social media posts among the least important for establishing credibility and just 15% of consumers trusting social posts by companies or brands). Nor is social media a major factor in search engine rankings (placing dead last among the nine major factors affecting SEO, according to MoZ’s 2015 Search Engine Ranking Factors report).
And yet, there are 35 million references to “social media ROI” according to Google. I’m willing to bet none of them accurately calculate ROI. Even if they do follow the formula, most neglect to factor in all costs—preferring to simply use the out-of-pocket spent on the agency or the paid social media.
And it’s not just social media that’s at fault. PR is just as guilty (there are 2.4 million references to that in Google). And mea culpa: I’ll confess that I’ve used ROI incorrectly a time or two. So I accept the fact that we’re never going to wipe the misuse of ROI off the face of the earth.
We just have to accept that it is a meaningless term, that is frequently used inaccurately as a synonym for value, cost efficiency, or cost effectiveness (or whatever term describes what you’re actually doing). Read this for more help picking the right term. ∞