Is Social Media worth the Investment?
How to Calculate Your Social Media ROI: Stop Wasting Money on Likes
"We spent $50,000 on social media last year."
"Great! What did we get for it?"
"Um... lots of likes?"
Sound familiar? You're not alone. A lot of marketers really can't prove social media ROI. That's millions wasted on vanity metrics that don't move the needle. Let's get controversial: Most social media marketing is a waste of money. There, I said it.
Take this example: A major beverage brand spends $2 million on a viral campaign. Result? 10 million views. Impressive, right? Wrong. Sales didn't budge. Not even a little. That's $2 million down the drain. Ok, perhaps not totally, but the impact on brand value also is not measured in views.
The Social Media ROI Formula That Actually Works
Here's the formula in its very elemental form that successful brands use:
ROI = (Value Generated - Total Cost) / Total Cost × 100
A lot of marketers mess up because they ignore these hidden costs:
content creation (average €500-€1,500 per post),
staff time (€25-€100 per hour),
tools and software (€200-1,000 monthly),
paid promotion (minimum €5 per post),
and agency fees (20-30% of budget).
Success Stories: When Social Media ROI Works
Case Study 1: Duolingo's TikTok Revolution
Investment: One full-time creative team
Strategy: Weird, controversial content featuring their owl mascot
Result: 5 million followers and 30% increase in app downloads
App downloads they can translate into value. If of course they did not hand out €20 in Bitcoin for every download or some other incentive that really does not help reaching quality audiences.
Case Study 2: Ryanair's Social Media Transformation
Investment: Minimal budget, focus on creative
Strategy: Savage responses to customers, meme-worthy content
Result: 2 million TikTok followers, 15% boost in direct bookings
Now these case studies, of course are not full case studies, I put them there to illustrate they actually aim for a KPI that can be directly linked to business value.
How to Budget for Social Media Success?
Very high level you could say a lot of companies dedicate somewhere between 5-50% of their spend into marketing budget. Of course this can vary, a lot, depending on the business the brand is in. Fashion for one can go waaaaay higher. Hollywood is also known to spend a lot. The costs of movie production often gets equaled in marketing budget. It’s not exactly the quality itself that sells most of the high profile brands. But, the key is not just how much you spend, but how you distribute it across different strategies and how you optimize that spend.
The Three-Pillar Strategy
Anyhow, for your social media budget should be distributed across three key areas:
Organic Social (If you have no clue start with ~40% of budget): Focus on long-term brand building, community engagement, and content creation
Paid Social (If you have no clue start with ~45% of budget): Invest in direct response campaigns, lead generation, and customer acquisition
Co-op Campaigns (If you have no clue start with ~15% of budget): Develop influencer partnerships, brand collaborations, and shared promotional costs
Measure What Actually Matters
Stop counting likes. Instead, you should be tracking metrics that truly impact your business.
Direct Value Metrics
Sales revenue from social channels
Lead generation, cost per lead
Email sign-up conversion rate
Customer service resolution rate
Indirect Value Metrics
Brand mention & sentiment
Share of voice vs. competitors
Customer satisfaction scores
Referral traffic quality
The Monthly ROI Audit Framework
To maintain control over your social media ROI, implement a monthly audit process that covers three essential areas:
Cost Analysis: Track all expenses, calculate cost per engagement, and review tool subscriptions
Value Assessment: Measure direct revenue, track lead quality, and monitor brand metrics
Strategy Adjustment: Cut underperforming tactics, scale what works, and test new approaches
I've created a simple tool that does the math on ROI for you. Just plug in your numbers and get clear ROI metrics":
Social Media ROI Calculator
Include costs for graphics, video production, copywriting, etc.
Include salaries, agency fees, or time value for social media management
Social media management tools, analytics platforms, etc.
Sales, sign-ups, or leads attributed to social media
For businesses that monetize traffic (e.g., ad revenue)
Social Media ROI Results
How to Interpret Your Results
ROI (Return on Investment): This percentage shows how much return you're getting for every dollar spent. A positive ROI means your social media efforts are profitable.
Cost per Conversion: This metric shows how much you're spending to acquire each conversion (sale, lead, etc.) through social media.
Cost per Click: This shows how much you're paying for each website visit from social media.
For most businesses, a good social media ROI is at least 100% (or 2:1 return), meaning you're making €2 for every €1 spent.
Taking Action: Your Next Steps
The path to better social media ROI isn't complicated, but it does require some discipline. Like in all digital marketing activities, the data is often there, but you need to be selective in what you need to be looking at on a weekly. Start by stopping all social media activities that don't tie to revenue or brand building. Calculate your true costs using the formula or tool above, then set up tracking for real metrics instead of vanity ones. This does not mean you cannot track vanity metrics, they are indicators of movement for sure, but you need to be able to see the ones with actual value, use the vanity ones for trends, platform assessment, difficulty indicators.
Review and adjust your strategy monthly, and use the calculator tool to stay on track. Soon your competitors are probably still gonna be counting likes while you're counting profits.
FAQs
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Aim for a lot more than 1:1. Higher than one as goal sets you up for failure as it doesn’t account for all costs. So have a chat with someone who can read the financials. If the outcome of that is you need to aim for a 5:1 (500%) ROI minimum, make sure anything less gets killed or gets optimization.
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Just like with SEO, organic is a long term ballgame. Roughly expect 6-12 months for significant organic results.
Of course it also depends on whether or not you still needs to start, you already have an audience, you have some interest co-op opportunities and more.
Overall though, this is why you need paid social for quick wins. Need to boost a campaign? Paid social as well.
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Depends on your customer lifetime value, on their focus (B2B / B2C) is it thumb-stopping for the type of feed?
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The minimum to get meaningful data. For which you need to do some calculating.
Average cost per action you’re paying for, times the amount of results you need to be statistically correct. -
Yes, through brand lift studies and sentiment analysis tools, but this is not a beginners game though.
Focus on the value metrics first.
