Social Media's ROI

As the number of "chief data officers" grows and organizations try to analyze an increasing amount of online data, University of Texas at Austin researchers have created a statistical model that measures the ROI of social media efforts.

Gary Wilcox, professor in the Department of Advertising and Public Relations in the Moody College of Communication and Kristen Sussman, advertising alumna (M.A., '11) and president and founder of Social Distillery presented a case study of their findings in the summer edition of the Journal of Digital & Social Media Marketing.

"This research started when I was a graduate student and Dr. Wilcox and I had a desire to better understand social media," Sussman said. "Today, it still serves that purpose, yet applies to larger corporate initiatives offering many of the same understandings that we originally sought."

Using social media and website data, researchers demonstrate which social media activities are most useful in achieving certain objectives, such as sales or lead generation. In a case study of a cloud-based social business software company, researchers were able to effectively measure social media reach (i.e., followers), frequency (i.e., number of posts) and engagement variables (i.e., number of replies) related to consumer website traffic and "conversions," such as product downloads that require the downloader to submit contact information.

Using least-squares regression equations, researchers found that two reach variables (Facebook fans and Twitter followers) and four engagement variables (Twitter replies, Twitter mentions, LinkedIn clicks and Facebook page views) influenced website traffic the most. They found that two engagement variables (Twitter followers and Facebook clicks) led to more product downloads.

"Marketers could be doing a bunch of social media efforts – retweeting or trying to get more Facebook likes – but not understanding how those efforts affect business," Wilcox said. "For example, what are we concentrating on to drive page views? If the Social Media Performance Model showed that retweets were driving page views, we could modify our social media plan to focus more on Twitter. Then, we would continue to measure to ensure the most optimal performance."