Confusion over the meaning of ROI in social media

You say tomato, I say tomahto….

Here’s a quick vocabulary lesson I’ve learned about social media ROI (“return on investment”), a topic I’ve been writing a lot about lately. In a nutshell: ROI means different things to different people, so it pays to be specific when you are talking about it.

• Olivier Blanchard, a brand strategist who published a book about social media ROI last year, ignited a modest social media kerfuffle with his reaction to the unmitigated disaster that was, in his opinion, the 2012 SXSWi panel on social media ROI last week. He had been invited to be a panelist, and declined due to conflicting obligations. But he followed the event remotely via Twitter. He had such a strong negative reaction to the Tweets he read about panelists’ non-standard definitions for ROI, he said, that he would have felt compelled to walk off the panel in disgust had he been on it. (Without taking sides about the merits of the panel, or Olivier’s critique, for fairness’ sake I’ll point out that some people who participated in person, like Petri Darby, had a different perspective about what the panelists actually said.)

• In contrast, Sean Jackson, CFO for social media services vendor Copyblogger, opined in a December 2011 interview that there is no ROI in social media marketing. His argument stems quite logically from the simple observation that marketing is an “expense”, not an “investment”, and thus no “return on investment” is possible, from a strictly financial standpoint. He goes on to encourage businesses to focus on measuring social media’s effectiveness in driving traffic to landing pages and profits generated via that traffic. He also redefines marketing as “everything your organization does”, with which I wholeheartedly agree.

These two posts are a slick demonstration of the little-discussed fact that “ROI” has both a literal, financial meaning and a metaphorical, common use meaning.

• For people hip to financial accounting ROI is something that is displayed on a spreadsheet in a cell containing a mathematical formula.

• For the average Joe, including the average marketing Joe, ROI has a loosey-goosey, tree-huggy meaning. For instance, Olivier took exception to someone’s statement about “return on experience”, whatever that might wind up meaning.

The theme of my current series of posts is ignore statistics that don’t link to concrete outcomes. Personally I don’t care how you define “return” or “investment”. Go ahead and measure customer experience, or profit, or whatever your target business outcomes are. And by all means do what you can to link your social media activity to those outcomes. My point is simply that if you focus on social media metrics such as “likes” or “engagement” in isolation, without linking them to your target business outcomes, you’re spinning your wheels; there is no independent signal about ROI hiding in social media metrics.