We all seem to be trying to find the magic answer to the question about the return on investment (ROI) in Social Media. We must view it from both the user and the provider, and yet those lines are becoming more unclear. From the perspective of the user the cost of participation is determined by the value of our time and the return is dependent on our needs as a participant. What is it worth to you to build your network and brand? As entrepreneurs, we are our brand, so what is that worth? As recruiters, employers and potential employees what is the value of building a trusted network of references? As content providers or advertisers how do we measure the impact of recommendations when the end consumer may be simply browsing content but leaving no interactions themselves? These considerations defy the system of how we calculate ROI from revenue models.
The social investment can be greater or smaller at different times in our lives. We therefore struggle to find a tangible value to attach to this interaction. We participate more when we are in “need” of something. That need might be based on a investment and return when calculating ROI. In the current economic situation we see escalating participation in social media as the needs are high. Individuals need to connect to others both familiar for comfort in the known and unfamiliar for the potential for change. Small businesses require maximization of their minimal capital for marketing niche products and services via tools through contextual advertising on social media. Consultants must build their personal brand to compete with the growing pool of resources released by downsizing organizations. Globalization opens the world to new products and services and new markets that previously were not considered. Entrepreneurs in the developing world are now able to compete on a more level playing field and opens opportunities for new partnerships and cooperation.
This is not to say that there is no return on investment capital from social media participation on either the business or individual’s perspective. But rather, it is critical to use a more extensive equation to calculate the true return on investment in social media. For the social calculation we need to consider: time invested (hourly rate), value of satisfying the “needs” (comparison of cost for alternate methods for supplying that needs), effectiveness, reach, actual cost of investment, and satisfaction with results. Only then will we have an accurate calculation.