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Social Media ROI—What's the 'Return on Ignoring'?

by David Alston  |  
January 6, 2009

ROI is a hot topic.

Discussions surrounding the return on investment of social media have been prevalent lately, and with good reason. In a tightening economy, businesses are scrutinizing their spending and anxious to ensure that their resources are being allocated wisely.

The discussion of ROI has focused mostly on the search for the holy grail of a metric, but adapting traditional metrics to fit social media would be akin to sticking a square peg in a round hole.

But what does "return on investment" really stand for in a business? Roughly translated, it means the value we expect to get out of all the effort we put into something. It's the definition of the output (return) from an input (investment).

But here's the trick: ignoring the input, or doing nothing in social media, will surely guarantee no return at all.

So, then, what is the "Return on Ignoring" social media? Here are some perspectives from the front lines.

The following interviews were recorded at the MarketingProfs Digital Mixer in Scottsdale, AZ in fall 2008. This is the first article in a series that will explore the importance of social media in the marketing mix.

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David Alston is VP, Marketing and Community, at social-media monitoring platform Radian6. David blogs at and can be found on Twitter (@davidalston).

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  • by Lewis Green Tue Jan 6, 2009 via web

    I take exception to your definition of ROI, which in the corporate world is only measured in dollars. We also measure Value. Both have their own metrics, and when we use ROI to mean Value, our message to C-level executives is that we don't understand business.

  • by Kevin Horne Tue Jan 6, 2009 via web

    Well, this is certainly an interesting way to address the challenge "what is the ROI for social media?" i.e., you flip the question around and say "well if you invest nothing, you get nothing" or worse, you say something unfounded like "could very well will be the death knell for your brand."

    You list a lot of good examples, which just about everyone knows are positive for a business from a qualitative sense. It still doesn't answer the question that most companies have which is "what was the ROI in that case?"

    I hope this is what the social media gurus work on this year. As opposed to calling companies "dumb" for asking for some fact-based support.

  • by Eric Heinzman Tue Jan 6, 2009 via web

    Also, because social media usage is only going to grow. If it looks like a big deal now, just wait until it the mainstream really catches on. It isn't just a fad, and it isn't just for kids and techies anymore. Companies that embrace social media now will stand to benefit as the overall number of participants rises, because now is the time to work out the bugs and growing pains BEFORE your customers are all onboard and expecting you to have a fully realized social media channel.

  • by Lewis Green Tue Jan 6, 2009 via web

    Not meant to steal your thunder or promote my blog, but here is how ROI and Value are differentiated. The post received more than a 1000 hits, and that is a value measurement not an ROI one. Don't Say ROI Unless You Mean It

  • by Connie Bensen Tue Jan 6, 2009 via web

    Measuring the return on social media efforts is indeed a challenge. I totally agree that ignoring your customers (& potential ones) is even worse than making efforts to engage with them.

    The big question is how to express the ROI (or value, Lewis) of engaging in social media. Here are my suggestions for benchmarking & metrics:

  • by Mack Collier Tue Jan 6, 2009 via web

    Love your take here David. What's the return on ignoring your customers and not communicating with them using the same tools they are, and in the same way? We are making this ROI discussion MUCH more difficult than it has to be.

    Good common-sense reminder!

  • by David Alston Tue Jan 6, 2009 via web

    Thanks all for the comments. Specifically, Lewis thanks for bringing up VRM. I hadn't been aware of it as a model. I like your post describing it. My take on the article was to shake up the definition of ROI so I'm appreciative of your comment because in your own way you are doing the same.

    And Kevin, thanks for pointing out that we, as an industry, also must still strive for developing more quantitative measurements. I believe they do exist but would be different depending on the department in a company listening and engaging. So no magic bullet. I think the focus will probably be around measuring connections (and everything related to it) rather than impressions for sure.

  • by David Tue Jan 6, 2009 via web

    Thank you for your kind response. ROI need not be complicated and it is possible to measure it in SM as a financial metric, as it was meant to be and has been defined for decades. The Value metrics are newer and came not from me but from CIOs who recognized we needed another way to measure benefits that accrue in addition to the financial ones.

    When I urge SM folks to not use ROI unless it refers to a financial measure, it is because I believe it is in our best intests to measure both ROI and Value and to keep them separate. I offer a simple formula today for measuring a blog's ROI at What Have Social Media & Twitter Done for You?

    When I was in the corp. world nothing frustrated executives sitting in the board room quite like someone saying, "We can't measure ROI." I once heard a President & CEO reply: "If you can't measure it, tell me why we have you or your dept. around."

    In all my years in business, I never found any goal unmeasurable in both ROI and Value. We must remember that we don't measure tactics, whether or not they are SM or traditional. We measure goals, which include a mix of strategies and tactics.

  • by Lewis Green Tue Jan 6, 2009 via web

    Sorry about that last comment. It's not from David, it's from me. I meant to put David's name at the top of the comment where the greeting goes.

  • by Tom O'Brien Tue Jan 6, 2009 via web

    If there is a negative Return on Ignoring then there MUST be a positive Return on Investment.

    We ignore ROI modeling at our (industry) peril.

    Tom O'Brien

  • by David Alston Tue Jan 6, 2009 via web

    Thanks for the extra info Lewis. And good point Tom.

  • by Charity Hisle Tue Jan 6, 2009 via web

    I think this is a GREAT post! Everyone discusses ROI, but measuring it shouldn't be as important as participating and listening.

    Speaking of listening: I've made comments via Twitter about Dell and NEVER got a response. I was testing to see if they were listening, and they weren't.

    I think all big brand employees should have Twitter accounts, it would sure cut down on my long telephone wait times. Can you hear me now? :o)

  • by David Alston Tue Jan 6, 2009 via web

    Thanks for the comments Charity. I expect you may hear from them very soon. I know they are very focused on engaging so it may have been the holiday break perhaps.

  • by Sean McDonald (Dell) Tue Jan 6, 2009 via web

    Charity Hisle
    If you tweeted someone to help with Dell product and we missed you, I am sorry. Our mistake. Feel free to reach me on twitter - smcdonaldatdell if you still have an outstanding issue. If just tweeting with a mention of Dell, sometimes we do not reply, unless we can add value (product support, product question, request a dell contact, etc.).
    I like the idea of more employees on twitter, still have to follow to engage in good conversations.

  • by David Alston Tue Jan 6, 2009 via web

    Thanks Sean, Charity hopefully you can connect with Sean. He's a great guy.

  • by Charity Hisle Wed Jan 7, 2009 via web

    Wow, David! You got the connections! :o)

    Sean: my Twitter ID is @CharityHisle. I ended up solving my own problem, in the end, but won't rehash the whole story here. Thank you for following up.

  • by David Alston Wed Jan 7, 2009 via web

    Charity, glad you were able to get things resolved. Glad to help as well.

  • by Sean McDonald (Dell) Wed Jan 7, 2009 via web

    good to hear no lingering issues. reach out to me if needed. I added you to people I follow on twitter.

  • by Kris Wed Jan 7, 2009 via web

    When I read the headline "return on ignoring" I thought the article would finally address how I can make my ROI in social media when I'm having trouble getting the COMMUNITY to interact. There is a lot of discussion available about social marketing, but I haven't seen much about what kinds of products/businesses are most suited to it. Most advice seems to be saying "everyone" should do it, but is that really true? To me, social media seems like another communication channel. And not every communication channel is applicable/appropriate to every audience. Low to medium involvement products that can generate buzz seem to be the excellent candidates. Becoming a fan of the iPhone is "cool." High risk, high involvement products like cars have a cool factor, but what about other services like health care, consulting or education? Can they also benefit from social marketing? In-depth discussion, certainly, but is social media the right venue? Is Facebook the right place to start a marketing conversation for those companies? I'd be interested in other POVs on these questions.

  • by David Alston Wed Jan 7, 2009 via web

    Lots of great questions here Kris. You are definitely right, social media is a communication channel. To me as long as there are customers wanting to communicate with a brand in social media then it would be in the best interest for a company to listen and engage in that channel. Even if there were only a small percentage this number could still hold a lot of weight (ie. it only takes one complaint from a influential user to sit quite nicely on a brands Google search page, affecting the views many more non-social media channel folks landing on that page for a long time.

    Healthcare has a lot of restrictions on communications but listening is still very valuable. Consulting, when it is focused on an area, is perfect for social media because it can be borderless and you can find your community and easily become part of it (being helpful, offering advice, posing great questions etc..) And with education (I'll pick colleges for this example) millions of students shop for the bit fit for them each year and listening and engaging with others that can offer information, help etc..could make the difference between picking one over another.

    Anyway, just my two cents. Others?

  • by Mack Collier Fri Jan 9, 2009 via web

    Kris that's a great question and I think the simple answer is, it depends if your customers are using social media to connect w each other and have a conversation about you/your competitors/your industry. If they are, then you should probably be interacting with them via social media. If they aren't, then your time could probably be better spent in other areas. It makes zero sense to divert time and funds from marketing channels that are working, to launch a Facebook fan page if none of your current/potential customers are on Facebook.

    I advise companies to start by monitoring the online chatter about them, their competitors, and industry. Free sites like Technorati, Google Blog Search, and Twitter search will let you do this. Additionally, David's company Radian 6 offers a more robust monitoring package that your company might want to consider paying for.

    But first things first, before you start using social media, you need to monitor to determine what is CURRENTLY being said, where it is being said, and who is saying it. That will greatly help you determine how you should use social media moving forward, or if you should at all. Good luck!

  • by David Alston Fri Jan 9, 2009 via web

    Great comment Mack. Thanks for adding this. Yes, definitely starting with listening is the way to go.

  • by Jac Star Tue Jan 20, 2009 via web

    Danny Brown wrote about this very topic a couple of months back:

    There's way too much emphasis placed on traditional ROI by business owners. Yes, at the end of the day, profitability matters but as Danny says in his post, you need customers to be profitable. You won't get them by going in all guns blazing and ignoring their real needs.

  • by Jonathan S Sat Jan 24, 2009 via web

    Is it ironic that there is no Facebook link in the share bar, or something more sinister?

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