When it comes to building effective social media ad campaigns, the biggest question isn’t “how much should I spend?”
It’s “for every dollar I spend, how much do I get back?”
In other words, it’s all about return on investment (ROI) — how are ad spending and customer conversion linked? Understanding this connection makes it less important how much you spend, and instead lets you focus on the impact of your social ads. In this piece, we’re taking a look at how to measure social media marketing ROI and offering a look at eight tools to help streamline the process.
ROI is a measure of spend versus value: If I spend “X” amount, how much do I get back? The best-case scenario is an ROI greater than one, where companies get back more than they spent on an investment.
Consider a manufacturing company buying a new piece of production line equipment that costs $10,000 but brings in $20,000 worth of revenue each year. The result is a positive ROI and a worthwhile investment. While measuring social media ROI isn’t quite as straightforward since companies need to account for the reach and impact of specific ad campaigns, the underlying concept is the same: Over time, the goal is to get back more than you spend.
While specific measurement timelines and media metrics will differ, the role of ROI remains the same.
How to Measure Social Media Marketing ROI
One of the most popular and data-driven ways to measure social media marketing ROI is through paid advertising. The problem arises, though, when there isn't a sound strategy in place to yield a positive return on investment.
How does this happen? Typically, social media marketers build an AdWords campaign to rank for important search terms. The campaign drives clicks, traffic, and leads, but ultimately the ad spend outweighs the impact of the ads which is bad news for ROI.
These marketers end up learning a really expensive lesson, one that could be easily prevented by following these simple steps:
1. Develop a Budget.
Ads aren’t right for everyone. Some industries have extremely high competition with astronomical CPCs. Some products have too low of an average sales price for the economics to work.
To determine if ads are worth your time, start by building a budget. This isn’t always an easy task, especially considering the hit many marketing budgets have taken over the past two years. According to Tequia Burt, Editor in Chief of the LinkedIn Marketing Solutions Blog, market knowledge is a key component of this process. “As marketing leaders evaluate their budgets and organize their plans for the year ahead,” she says, “a bit of context and clarity can lend helpful structure.”
Consider that 76% of companies plan to boost spending across areas such as branded influencer content, ads in social media stories and ads in social media feeds. Knowing where and when this spending makes the most sense is critical to drive ROI.
Featured Resource: Budget Templates To Manage Your 2022 Spend
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2. Continually Evaluate Ad Performance.
Try not to look at ads as a shortcut. It’s possible to get to a place with ads where they become a recurring source of profit, but typically that’s not how things start.
Don’t be surprised when a week after your campaign launches your ads aren’t generating tons of profit. “Around 80% of businesses online feel that they deliver great assistance via social media, but only 8 percent of their customers agreed,” says John Kopanakis, professor of Business Intelligence at Hellenic Mediterranean University. “Despite putting in a lot of effort, many marketers hardly reach their targeted sales. It is because they struggle to measure the impact of their social media efforts on their sales.”
As a result, incremental improvements in clickthrough rates and conversion rates can have a huge impact on profit. Use the ads calculator to explore the impact these changes could have. Watch your ads like a hawk for the first month and you’ll avoid big mistakes.
3. Make Sure You’re Amplifying the Right Message
Ads act like a megaphone to amplify your marketing campaigns and content. The more complete and well-developed your campaigns are, the better your ads will perform.
As noted by Samuel Bu, Marketing Director at FortuneNote Chinese Business Magazine in a recent LinkedIn Pulse post, it’s also critical to find the right channel for your business. While he highlights LinkedIn as a great way to generate leads and calls out Facebook’s huge impact on the social market, he also highlights challenges with platforms such as Instagram. Why? Bu says “Most likely, Instagram falls short of producing strong ROI due to its more intangible metrics — such as brand awareness, reputation, loyalty, and consumer engagement.”
Think about it: Which ads do you think perform better? Those promoting your homepage or those promoting a remarkable piece of content that helps someone?
Bingo. Those promoting awesome content.
Campaigns that use ads should be treated like other campaigns. Establish your goals first, build great content, focus your message and optimize your landing pages, then figure out how ads can help amplify your message. Taking this combined approach and only using ads as a strategic component of your marketing campaigns will pay off.
How Much Should You Spend on Ads?
Assuming you’ve run the numbers and now know what you can expect in terms of profit and ROI, it’s time to launch a campaign. To do this you’ll have to make two budget decisions, regardless of where you are advertising:
- Total campaign budget or duration: How much do you plan to spend in total? How long will the ads run for? Be aware that if you don’t set a limit there will be no maximum or end date.
- Daily budget: How much do you want to spend a day?
There are two ways most marketers use ads, short-term and long-term. Let's take a look at both ...
Short-term ads. Budget = at least a few hundred dollars over a month.
When marketers use ads for a short-term goal, it’s usually to jump-start a campaign or boost content that needs a bump. These ad spends are generally smaller and shorter, but can be large.
If you have a few hundred dollars to spend, spend it this way. Create a social post that promotes a piece of content and then use your ads to boost the post. Facebook, Twitter, and LinkedIn all have good solutions for this. Make sure you use the social network that gives you the best targeting for your persona and returns the most valuable leads. Measure this by assessing the quality of the leads generated after the campaign.
Long-term ads. Budget = at least a few thousand dollars over a quarter.
Ads can be a great solution in a pinch but if you really want to use ads strategically build them into your overall marketing strategy. This means more consistent, quarterly ad spends.
Consider how potential customers make purchase decisions and use ads to influence them. This may mean always relying on search ads or retargeting to make sure prospects find you when they are ready to buy. You’re more likely to accumulate better data taking this approach, which will allow you to get more sophisticated in how you optimize your ad spend.
Given the quickly-changing nature of social media platforms and posts, it’s worth considering social media ROI tools to help stay on top of spend and revenue measurements. Here’s a look at eight great options.
The HubSpot Advertising ROI Calculator makes it easy to narrow down when and where it’s worth spending on social ads.
Start by inputting your projected monthly budget, then your expected cost-per-click (CPC), target conversion rate, average sale price and lead to customer rate to get a general idea of your ROI on advertising spend. Use the calculator regularly to reevaluate your campaigns and make sure they’re delivering on key metrics.
Hootsuite also offers a free Social ROI Calculator that lets you input ad spend data to determine potential ROI. While it uses slightly different metrics and has a different setup than the HubSpot version, the general function is the same: Input your data to see where it makes sense to spend on ads and where the return may not justify the investment.
While both offer a solid starting point for ROI, we’re naturally biased toward the HubSpot version.
3. Sprout Social
Next up is Sprout Social. Unlike HubSpot and Hootsuite, you’ll need to sign up for a free trial to access Sprout Social’s ROI calculator. After 30 days, it’s $99 per month if you want to keep using the tool.
Depending on your current ad campaign and ROI goals, however, the cost may be worth it. Sprout’s tool offers message-level insights to see which posts are proving their worth along with follower, engagement, and keyword analytics that cover the entire publishing process from draft to queue to posting.
Cyfe provides a set of all-in-one business dashboards that provide insights across key social platforms such as Twitter, Facebook, Instagram, and LinkedIn. Easily monitor what ads are being posted, how they’re performing, and how users are interacting with your campaign efforts.
Cyfe comes with a 14-day free trial. After that, it’s $19 per month for two dashboards and one user.
5. Google Analytics
Google Analytics is familiar, free, and functional. While it doesn’t have the same laser-focus on social media as some other offerings on our list, it comes with the advantage of access to massive data sets, and also helps inform social advertising SEO, which is critical to any effective campaign.
To see how your social ads are performing at a high level, first log into your Google Analytics dashboard. From there, select Acquisition, then All Traffic, then Channels. This will bring up a list of your traffic sources, including those from social sites, in turn helping you get a general sense of how social ads are working to drive revenue.
Featured Resource: The Ultimate Google Ads PPC Kit
Buffer is an all-in-one social media marketing and ROI tool that’s designed to simplify the process of measuring and managing ads. The tool streamlines the creation of social ad content and lets you measure impact in just a few clicks to see what’s working, what isn’t, and what needs to improve.
If you’re just getting started with social media ads, Buffer has a free plan that lets you manage up to three channels with basic tools. From there, plans start at $5 per month for “Essentials”, $10 per month for “Team” and $100 per month for “Agency”.
Keyhole lets you accomplish two key tasks: Listen to what people are saying about your brand in real-time and monitor the impact of your influencer marketing campaigns.
The first is critical because customer sentiment is a solid bellwether when it comes to ad effectiveness. If the number of people talking about your brand is going up — and if most of what they have to say is positive, you’re on the right track.
Influencer marketing reports, meanwhile, help keep tabs on influencer partners who exist outside your business ecosystem but offer potential benefits for your brand, as long as they’re posting consistently and in line with your messaging.
8. Social Mention
The simplest tool on our list, Social Mention lets you search any keyword or key phrase for recent social mentions.
In practice, companies can use Social Mention to see what’s currently trending and what opportunities exist to target specific keywords, and can then follow up after ads have gone live to see how campaigns are performing.
Getting the Biggest Social Impact for Your Spend
Bottom line? There’s no single way to spend your social marketing budget. Some companies may prefer to keep spending low and handle most of their ads through free platforms and word of mouth, while others are willing to spend top dollar for on-demand results.
Whatever budget you choose and whichever approach you take, however, there’s a common rule of thumb: Ask lots of questions about your ad spend, and make sure ads are performing as intended.
Why? Because even targeting the right market with the right approach, it’s easy to burn through money fast. Safeguard yourself by knowing what to expect, having clear expectations, and using the right tools to measure social ad ROI.Editor's note: This post was originally published in July 2016 and has been updated for comprehensiveness.