Category Archives: Business

What’s the ROI of social media?

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My first look at ROI for social media focuses on revenue conversion, not surprisingly having recently worked in the online price comparison marketplace within eBay Inc this is an obvious starting point for me:

To explain that tweet (inspired by the holy grail of social media which is figuring out the return on investment (ROI) – it started with a good simple equation suggestion in the Hubspot webinar – slide 45:

How to Master B2B Social Media Marketing
View more presentations from HubSpot Internet Marketing
I then found a LTV calculator online. There it is, complete with LTV calculation examples. Use the equation with the LTV calculator and you can derive %ROI.
Ooh, one last thing you need to agree for cost of acquisition itself to determine whether the cost is determined by first action acquisition (eg came across you via  blog post, which is where you determine COA) or last action (see slide 48) acquisition (they went away, but came back via PPC Ad before buying). Up to you. Of course, there is no single ROI for social media. Above is just one way to do it around customer acquisition and retention, if that is a key overall business goal.
The gaming apporach to ROI
In a sector which uses metrics to guide day to day development this is another approach:
  • Exposed Persons (EP) = The number of persons exposed to the social media campaign.
  • Acquisition Rate (AR) = The percentage of EP that become new customers.
  • ARPU_monthly (ARPUm) = The average revenue per user/customer per month.
  • Churn_monthly (Cm) = The percentage chance of losing a customer at the end of each month.
  • We can then calculate revenue from the social media campaign as = (EP*AR*ARPUm) / Cm
Facebook engagement
For Facebook a neat example of a measure of ROI for your Facebook Page would be % feedback. Facebook handily tells you how this is calculated – and what is not included – though of course you can cover off links by only using bit.ly which comes with built-in metrics of its own:

FANS      

Average ER
0 –10k 0,96 %
10k – 20k 0,29 %
20k – 50k 0,21 %
50k – 100k 0,19 %
100k – 200k 0,16 %
200k – 500k 0,13 %
500k – 1 000 k 0,11 %
1 000 – ~ 0,09

It only measures comments and likes, and no other actions (such as video plays and link clicks). The feedback percentage is computed as (comments + likes)/Impressions. Facebook analytics specialists Socialbakers have even given an estimate from their clients depending on the Facebook Page size which is useful too (see table above).

When you are ready you can also try checking out FB Insight stats on fans vs active users to find out who to better target to improve engagement. Ultimately, to reiterate, it’s a question of taking is step by step, aligning with business objectives.

Simple launch plan for a new music app community

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To complete the marketing challenge of coming up with a June-December launch plan for a music community with a target of 500K users I would need access to customer segmentation data, and the current customer personas. But let’s just have some fun without that standard data and have a look at comparing Facebook vs Extole, following yesterday’s blog post on the social referral platform.

Given the challenge of finding 500K subscribers over 6 months it’s an interesting fact that 478K Facebook users aged 18-55 in the UK currently list the Apple iPod as an interest. You could therefore work backwards from this figure, and breakdown the demographics into their component parts, thanks to the Facebook ads tool, and in fact 373K of that group are 18-year-olds.

To deliver the core community base you need at least one core ‘killer’ channel which will deliver the kind of numbers you want, at a cost you can afford. The options that spring to mind are:

(1) Facebook adverts – e.g. ads for a 1 month’s free subscription offer incentive.

(2) A social referral campaign – a gift in return for a subscriber using a top class platform like Extole which will track the metrics. You’ll see from the attached deck that music is on average the top performing social referral sector.

There are plenty of great supporting ideas such as partnering with National Express who have already run a music festivals comp’, running affiliate ads, or working with a mobile company at festivals to save on costs while promoting your new music app. But the bottom line is that there needs to be one central channel for delivery so I’ve focused on that.

A top level view of the big numbers, based solely on the 373K 18-year-olds as a way of exploring the options:

Facebook

  • Users: 373,620 x 0.94 cost per click = £351,202.8 (frequency and duration determined by ppc budget)
  • Cost of 1 month’s music app free subscription at £1 a pop = £373,620
  • Total cost = £724,822.8
Social referral using Extole
  • Platform cost: $5k implementation to build and launch the program. $3k monthly subscription for management and optimization with a 12 month contract, total = $41,000/£25,870 – costs may vary for a June – Dec time frame though as a rule of thumb the longer these social referral campaigns run the more effective they are.
  • Incentive cost: 1 month’s free subscription to both referrers and sign-ups = £373,620.
  • Total cost: £399,490

This is without the benefit of your market segmentation, but I trust it is shows what the core acquisition channel might look like. There is of course the connected issue of retention of the ‘1 month subscribers’ to consider too.

On a qualitative level I believe a good foundation of the online marketing strategy retention would be to follow the GiffGaff community-led model where you would take the ‘bull by the horns’ and make the product feedback very open to customers to build advocacy and loyalty, as well as build a community peer-to-peer playlist swapping etc.