Social Networking is a form of business communication that can support the establishment of a brand, help maintain brand awareness and build relationships that lead to sales.

For an organization looking to build awareness of its products or services through social networking, the cost of social networking can be easily measured.

An employee, contractor or advertising agency, will establish a Twitter page, Facebook account and/or MySpace page. Target blogs, forums and communities (those networks having the Customer demographics the business or organization wants to reach) will be identified and joined. Signatures with links, coupled with backend landing pages and tracking codes will be created. And relationship building begins, consuming time and money on an hourly or per account basis. Since time and money are easily measured, the cost of social networking is also easily measured.

What is the Value of Social Networking to a Business?

What does all of this social networking do for an organization? Does social networking increase sales? For all of the costs involved in establishing and maintaining social networking relationships as business communications, is social networking worth the cost? To answer this question, we must measure the Return on Investment.

How Does a Business Measure Social Marketing ROI?

To answer this question, we must find a metric – a number we can measure before and after some event, something quantitative like traffic, sales volume, number of telephone calls or number of responses to an advertisement.

Brand perception, a qualitative metric, can be measured with surveys, no doubt, but who out there can calculate the length of time and the social networking force required to state, in a statistically relevant manner, that social networking changed or improved an existing brand’s perception in the marketplace? Surely this effort would not be undertaken without using other media, which makes measuring the contribution of social networking to a shift in perception a bit more cumbersome. So the question remains…

How Do You Measure the Value of Social Networking to a Business?

Simon Andrews at Big Picture on Advertising says,

…all our work shows the best way to calculate the ROI on social is to look at the effect on organic search…

Excellent point. We know Google indexes tweets (Twitter posts), LinkedIn, Facebook and Plaxo profile pages. Blog posts are indexed as are comments. What metrics, other than organic search results, do we have to measure the value of online relationships?

Measuring Social Networking ROI and Affiliate Marketing

The Web Development, Advertising and Affiliate Marketing industries developed tracking tools to measure the effectiveness of ad copy and links on sales. Recommendations that result in action can be measured and tracked back to the source or referral. But spur of the moment conversations, especially SMS messages are hindered by the insertion of affiliate links.

Taking this one step further, if your business model is based on an affiliate marketing model, you will maintain a list of cloaked links to your vendors. This list also needs to be maintained in such a way that your affiliate links can be easily dropped into social networking conversation when appropriate. That takes a bit of planning! It is somewhat less-than-natural.

Since a lot of social conversation is occurring within 140 characters or less, and I have to assume these conversations are not stunted by tracking links, how do you measure the value of social networking by any means other than organic search results?

Using Google Analytics and Tracking Codes to Measure ROI

My first metric is traffic to this site. And I use Google Analytics to give me the data I want.

Using Twitter as an example, I create and embed a tracking code in my Twitter profile; just add a slash after the end of your website address, followed by a question mark and the words, “twitterSidebar” like this:

http://www.insertyourdomainhere.com/?twitterSidebar

Any click on my Twitter profile URL will carry that tracking code with it right into Google Analytics. Because that code is unique to my Twitter profile, any traffic that comes to my site using that tracking code can only come from one place: my spreadtheword social networking Twitter profile link.

Log into your Google Analytics account and under “Traffic Sources,” click on “Referring Sites.” If anyone has clicked on the link to your site from Twitter, you will see Twitter.com under the Site Usage tab for the Source dimension. Click on Twitter.com then change the Dimension to Landing Page. If you’ve embedded a tracking code, you will see that tracking code listed. And you will now have one way to measure your social networking return on investment. You now know that people on Twitter do (or don’t) click on the link you put in your profile.

You can embed just about any tracking code into the links you create on Twitter, Facebook and MySpace. Remember to keep your tracking codes unique so you can pinpoint the origin of your site visitors.

Traffic is a very generic metric. So when we talk about Return on Investment, we are usually more interested in a metric that we can associate with an action other than “visited the site.” Converting a site visitor to a Customer, an RSS Feed Subscriber or a Mailing List Subscriber is typically the goal. And we can measure these conversions, and therefore measure our social networking return on investment by creating a funnel through which visitors pass to a pre-determined goal.

For example, when a site visitor makes a purchase, most businesses display a “thank you” page. The only way a site visitor lands on the thank you page is by going through the purchasing funnel. Google Analytics has a way to measure goal conversions. You set up your tracking codes, create your landing pages and configure your goals in Google Analytics, and Google will track the conversions. Then you can measure the return on investment of your social networking activities.

Thank you for reading!

I hope you enjoyed this article about social networking ROI. Please post your comments, questions or suggestions and I will respond quickly.