Social Media ROI - The Amplification Model

Ignite Social Media developed this model to measure the amount of money it would take to purchase the impressions and social actions generated by social media marketing. More at http://bit.ly/MTMF61

Transcript

1. The Amplification Model of Social Media Return Purchase Equivalency Calculator June 2012
2. The Challenge ROI = (gain from investment – cost of investment) / cost of investment • For clients that sell through channels and many others, directly measuring the “gain from investment” has proven problematic. • While we work on direct ROI calculations for clients individually, we are today publishing our “Amplification Model for Social Media Return.” – This model measures the volume of social media impressions and social media actions generated by marketing and provides a dollar figure for what it would cost to generate a similar level of activity through paid methods. – This calculates “Relative ROI,” which means the return on investment relative to where the money could otherwise be spent. It is, admittedly, not a measurement of Direct ROI, but it is an important component for those looking to validate spending where budgets are limited and where non-productive investments can be re-assigned. • In this case, we’re calculating “purchase equivalency,” the answer to, “How much would it cost us to buy this much exposure?” Given that, we use the formula: (value of exposure if purchased) / (cost of social media marketing)
3. What We Know • Social media is great at driving vast amounts of conversation. Conversation that gets seen. • One of the major reasons brands advertise is to generate positively sentimented impressions in front of an audience with a propensity to buy. – By this definition, social media marketing is every bit as valuable as advertising, as fans/followers and YouTube video watchers have all intentionally opted-in to brand messaging, making them a potentially high value target audience. • Study after study has shown that fans are more likely to buy from a brand than non-fans, and also more likely to recommend that brand to friends than non-fans. • Many (but certainly not all) social media campaigns have successfully driven traffic that converts at a high-level, often higher than those who visit a website through paid advertising.
4. The Amplification Model Photo Credit: The Paradigm Shifter
5. 1) Amplification Model Calculates the value of the following: 1) Facebook Organic Impressions 2) Clicks on Facebook Links 3) Twitter Impressions 4) Clicks on Twitter Links 5) Organic YouTube Views 6) Blog Page Views 7) Online Brand Mentions Using Data from: A) Cost Per Thousand (CPM) impressions for targeted online buys ($8 CPM) B) Average for cost-per-click advertising (varies by industry, used 50 cents for this model) C) Average cost per view for promoted YouTube videos ($0.20 per view) D) Parts of “Social Equivalent Ad Value Model” created by Tourism Ireland (http://scr.bi/KjPwEd)
6. 1) Amplification Model: The Formula For a given time period, calculate: 1) Organic Facebook Impressions (Sum of Daily Total Impressions – Sum of Daily Paid Impressions) x $10.00 CPM 2) Clicks from Facebook Posts (use tracking links) x Average Cost of PPC Clicks 3) ((Tweets x Followers) + (Retweets + @Mentions) x .12) x $10.00 CPM 4) Clicks from Twitter (use tracking links) x Average Cost of PPC Clicks 5) Organic YouTube Video Views x $0.20 Per View 6) Blog Pageviews x Average Cost of PPC Clicks 7) Online Brand Mentions x Average Cost of PPC Clicks For each line, you will receive a dollar value. The sum of those values are the “purchase equivalency” for that time period. Divide the purchase equivalency by your spend on social media marketing to get a Relative ROI. What you’ve calculated is the cost of purchasing that same level of activity through traditional online media.
7. Amplification Model, Purchase Equivalency Calculator Facebook Clicks number example Page Total Organic Impressions* CPM Value # clicks CPC Value Client Page A 15,276,282 $ 10.00 $ 152,762.82 44,803 $ 0.50 $ 22,401.50 Client Page B 66,030 $ 10.00 $ 660.30 73 $ 0.50 $ 36.50 15,342,312 44,876 22,438 $ 175,861.12 *Sum of Daily Total Impressions - Sum of Daily Paid Impressions Twitter Clicks number example Page Followers Tweets Retweets @Mentions Max Impressions+ View rate^ Est Impressions CPM Value # clicks CPC Value @ClientAccount 34,228 160 668 3,141 6,657,270 12% 798,872 $ 10.00 7,988.72 16,895 $ 0.50 8447.5 ^Rough estimated based on: http://adspace-pioneers.blogspot.com/2009/08/popping-twitter-reach-bubble-10-reach.html =+(Tweets*Followers*viewrate)+(RTs*310*viewrate)+(@mentions*310*viewrate) 310 Twitter followers based on: http://totalaccess.emarketer.com/Chart.aspx?R=116589&dsNav=Ntk:basic%7ctwitter+followers%7c1%7c,Ro:16,N:500 $ 16,436.22 Organic YouTube Views Brand Total organic views Cost/Promoted View Value Client Account 326,632 $ 0.20 $ 65,326.40 $ 65,326.40 Used the Social Equivalent Ad Value Model for videos developed by Tourism Ireland: http://www.scribd.com/doc/85406652/A-new-simple-way-to-measure-social-media-Return-on-Investment-Social-Equivalent-Advertising-Value Blog Pageviews Brand Pageviews Cost per Google click Value Client Blog 82,909 $ 0.50 $ 41,454.50 $ 41,454.50 Used the Social Equivalent Ad Value Model for videos developed by Tourism Ireland: http://www.scribd.com/doc/85406652/A-new-simple-way-to-measure-social-media-Return-on-Investment-Social-Equivalent-Advertising-Value Online Brand Mentions Brand Total brand mentions Cost per Google click Value Client Brand Mentions 120,411 $ 0.50 $ 60,205.50 $ 60,205.50 Used the Social Equivalent Ad Value Model for videos developed by Tourism Ireland: http://www.scribd.com/doc/85406652/A-new-simple-way-to-measure-social-media-Return-on-Investment-Social-Equivalent-Advertising-Value Total Impressions & Actions 16,732,907 Impressions 16,141,184 193,694,212.80 Monthly Value $ 359,283.74 Actions 591,723 7,100,676 Annualized 200,794,889 $ 4,311,404.93 Actions = brand mentions, organic YouTube views, blog page view, link clicks If client spends $150,000/month on social media ($3m annually) $ 1,800,000.00 ROI $ 2.40 of value for every $1 spent Download the Excel spreadsheet here: http://sdrv.ms/Q5NTvw
8. Summary In this model, the client would need to spend $2.40 in advertising (banner ads, pay-per-click, etc.) to get the same results from $1.00 of social media marketing. This model is certainly not perfect, but we offer it as a starting point in the hopes that our agency and others will find ways to improve it. Ultimately, we hope that it is one of 3-4 ROI models that can be applied to social media marketing depending on the situation and the objectives.