Ebusiness Critical Analysis: Measuring Social Media Marketing ROI

This essay critically examines the challenges of measuring Return on Investment (ROI) in social media marketing within the context of e-business. It highlights the increasing importance of social media for businesses to reach customers, yet also acknowledges the difficulty many brands face in accurately measuring the ROI of their social media efforts. The essay explores barriers such as a lack of understanding of target customers, inadequate knowledge of social media platforms, and the absence of suitable metrics for qualitative analysis. It references the Internet Advertising Bureau's (IAB) findings on effective social media marketing measurement and IBM's success in improving ROI through social media. The essay further explains the reasons behind the stagnation in measuring social media ROI, including fear of negative results, compromise on using easily measurable tactics, and the lack of advanced technology for comprehensive social media analytics. It concludes that the inability to accurately measure social ROI is a major obstacle to successfully implementing social media marketing strategies and reaping profits.

Running head: SOCIAL MEDIA MARKETING AND ROI
Social media marketing and ROI
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As of 2018, business owners are slowly coming to terms with the fact that social media is
indeed the future of marketing around the world. Businesses and organizations have arrived at
the conclusion that social media is the ultimate way of reaching out to existing and potential
customers (Tuten and Solomon 2017). It must be kept in mind that the purpose of any marketing
or advertising strategy is ROI or return on investment (Westcott 2016). Keeping an eye on the
current economic scenario, it is important to ensure that businesses are investing in a practice
where they are getting their return on the market investment. With budget cuts being rolled out in
corporations around the globe and the extensive reach of social media, ROI within social media
marketing must be analyzed. However, a report released by marketers show that more than forty
per cent brands are unable to measure ROI when it comes to social media (Fisher 2009). The
barriers standing in the way of ROI measurement are the main reasons why social media
adoption is still in the developing phases.
The ultimate purpose of any business is to ensure that the shareholders or the ones
investing in a particular business get their money’s worth; in other words, there has to be some
kind of return on the investment that has been made (McCann and Barlow 2015). In the case of
social media, it would be difficult to define ROI in exact terms because there a number of
variables at stake here, including brand awareness, trust, customer loyalty and interaction and
visibility; none of these technically have a definite numerical value. Thus, if these cannot be
measured using definite metrics, it would be impossible to evaluate the performance of a
particular campaign, highlight its flaws and optimize the strategy for enhanced results. It is
evident that businesses lack understanding of who their target customer is, and what they want; it
is not sufficient to simply carry out market research, metrics like influencer measurement and
APIs will also have to be utilized. Similarly, an inadequate knowledge of the various platforms

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of social media and their functioning further makes it impossible to reap the benefits of social
media marketing.
According to reports, nearly 40 per cent of companies have not been able to pinpoint the
impact of social media on their revenue; while some brands have successfully been able to
conduct a qualitative analysis of the effect of social media marketing, it has been deemed almost
impossible to translate that into numbers (Clark and Melancon 2013). Going by the same poll
which claimed that inability to measure ROI was the chief reason behind failure to successfully
implement social media, it can also be said that this is because marketers are more inclined to
resort to tactics which are measurable, instead of assessing their effectiveness (Kumar et al.
2016). Marketers are not particularly keen on opting for qualitative analysis, and would be more
comfortable with specific quantitative metrics. It must be remembered that social media
marketing is a fairly new field; thus, there are not sufficient metrics or benchmarks for analyzing
and studying the impacts of social media marketing on revenue or sales of a company (Peters et
al. 2013). While judging the role of social media in business, none of the business owners are
looking at the bigger picture; their horizon is limited for they tend to focus only on the likes,
engagement tactics and comments. Conversion rates, which ought to be top priority, go largely
ignored by the marketers.
Earlier, it was comparatively easy to measure the performance of online advertising
campaigns; marketers could use metrics like cost per click, page views, unique visitors and so on
(Fisher 2009). However, with the advent of social media, measurement of ROI has become all
the more complex; now, marketers would have to take into account not just the online
advertising, but the frameworks that form the foundation for it. The Internet Advertising Bureau
(IAB) had released a report stating its findings on the effectiveness of social media marketing

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(Tan, Kwek and Li 2013). According to the report, in order to efficiently measure the success of
social media marketing, the marketer needs to categorize the various tenets of such a marketing
strategy (namely, blogs, social media websites and applications) and employ specific metrics
(like conversion rates, return visits, interaction time, conversation density, content freshness,
relevance, influence and growth, installs and so on) to measure the same (Scott 2015). IBM, for
example, has one of the most robust social media strategies globally and has observed that
measurement of social ROI has led to increased productivity and streamlined communications;
also, in companies that IBM caters to, there has been nearly 18 per cent increase in ROI (Treem
and Leonardi 2013).
To measure the impact of social media on revenue, a social ROI pyramid was developed
by marketers, which started with engagement data at the bottom and business metrics at the top.
But studies show that only about fifteen per cent of companies around the world have been able
to quantify the effect of social media; most of the companies are still stuck at the bottom of the
pyramid. Three reasons have been established for this stagnancy as far as social media is
concerned – namely fear, compromise and technology.
One, social media, unlike other channels of marketing, is multifaceted; it is practically
impossible to trace the various channels or platforms within social media, let alone the revenue
generated through them. Thus, marketers are simply satisfied with measuring what little they can
instead of focusing on what they should measure (Chaffey 2016). In other words, marketers
today are settling for a theoretical framework of the ROI, instead of the actual one. While large
companies have the means to establish business goals, measure them and optimize the business
and marketing strategy, small scale firms lack resources and technology required for such
evaluation. Two, the field of social media is like a giant black hole to the marketer, the

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intricacies of which are completely unknown. Thus, a marketer who is unaware of the revenue
per social post, would have an ambiguous idea of the traffic generated by social media where the
conversions originate from. As a matter of fact, they might not even know if customer
engagement has an impact on the revenue obtained by the company. It might so happen that high
levels of engagement yield absolutely no revenue generation; in that case, knowledge of the
harsh truth could be daunting. Instead, marketers prefer to stay in the dark; they fail to realize
that identification of the problem would lead to consequent implementation of improved
strategies that would enhance revenue generation. Three, the lack of state of the art technology
which would present a wholesome view of social media analytics poses a severe challenge to
measurement of social ROI. Technology pertaining to web analytics, social network API, social
listening and financial data would be required to successfully measure the impact of social media
marketing in numbers (Moe, Netzer and Schweidel 2017).
To conclude, it must be reinstated that the purpose of any investment whatsoever is to get
a return on it in terms of profits generated. The sole purpose of using social media as a marketing
tool is to ensure that the message is delivered loud and clear to the target audience and also to
reel in profits. However, due to lack of advanced technology and resources, most organizations
are unable to measure the revenue generated through social media marketing; without accurate
measurement of ROI through social media, it is impossible to understand how far a particular
social media marketing strategy works or if it needs improvement. Therefore, it can be said that
the inability to measure social ROI is one of the major obstacles in the successful
implementation of social media marketing.

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Chaffey, D., 2016. Global social media research summary 2016. Smart Insights: Social Media
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Clark, M. and Melancon, J., 2013. The influence of social media investment on relational
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