The Fallacy of Social Media ROI with No Investment (or “I”)

The idea of generating social media ROI without investing in social media is a novel concept; that’s mostly because it is completely irrational.

One of the favorite sayings of economists is as follows: “There ain’t no such thing as a free lunch.” Some attribute the adage to a practice that started in the Old West where patrons at saloons could receive a “free lunch” upon the purchase of a beer. This lunch, of course, would consist of salty ingredients, which in turn would lead to the patron buying several more drinks. (Why do you think there are peanuts, pretzels and popcorn given out for “free” at most bars?) From an economics point of view, the saying relates to hidden costs and externalities; even if you think something is free, there are economic costs that go into it.

This has been true in business for generations. So why do marketers and business owners now think that they can reap the benefits of the “free lunch” offered by social media marketing?

When it comes to running a social business, there are several costs that a corporation will incur. These can either be material costs – like ad spend – or immaterial costs – like adaptation time. All that to say is there are costs we need to consider when undertaking a social media initiative, and we need to accept that these costs are unavoidable if we wish to reap the benefits that social media can offer.

The four costs listed below are by no means the only ones that businesses will incur over the course of a social media campaign or program. That said, these are fairly standard, and businesses should be ready to factor them into the cost of doing (social) business.

Time

So often this is an investment that is quickly overlooked. It is hard to imagine why. What happened to the self-confidence of the average businessperson? Your time is an extremely valuable asset. Take it into serious consideration when determining the costs of running a social media program.

How much would you be making per hour if you were not toying away with Facebook marketing or writing your blog? Is the return going to justify how much time you are investing in these activities? Too often when calculating costs, individuals forget about all the time that needs to go into effectively executing a strategy. Give this cost serious consideration whether you are a one-person operation or a large organization.

Tools & Technologies

OK – this is an easy one. While some tools and/or technologies are free – generally those integrated into a social network or larger company, like Facebook Insights or Google Analytics – the majority of social media tools are standalone companies. That, of course, means that they need to make money in order to stay in business. So with the exception of a few, you are going to need to make an investment in tools.

With so much happening in the world of social media – and so much happening so fast – a tool can be a wonderful complement to a strategy. But the key thing to remember is that your tool is a complement, not the program. Though many technologies boast themselves as being the godsend application to rid you of all your social media woes, most simply offer a solution to one (or a select few) issues. You still need to put in the work.

Social Ad Spend

Another fairly simple one. But it is one that, again, is completely forgotten. Not because people do not realize that they have to invest in advertising, but because they think that they to not need social media advertising. This is a key component behind many brands having trouble finding success with social media. It also relates closely to the concept of the “free lunch” and the misconception of the true cost when it comes to investing in social media.

The Golden Age of social media marketing, where brands could generate huge awareness and boost sales without so much as a penny spent on ads is, sadly, dwindling. Of course, this is still possible – but only to an extent. Much like the tools discussed above, networks like Facebook, Twitter and LinkedIn are businesses. These businesses all have (hugely inflated) valuations and need to find a way to justify those price tags to investors. The answer? Charge businesses to access their huge reservoir of potential clients. This is why we are seeing things like the near-extinction of Facebook organic reach. Brands are going to have to pay-to-play. There is still a tremendous amount of potential when it comes to social media marketing. You’ll just have to invest in advertising in order to reap that social media ROI.

Adaptation

Much like time, adaptation is an oft-overlooked cost that businesses will have to incur whether they notice it or not. Transitioning into a social business is no easy feat. It requires dedication, perseverance, and perhaps most of all, willingness to change. Social business is not business as usual; it is a whole new way of conducting yourself in the marketplace.

Image Credit: Shutterstock. Used under license.

This is something that takes time to adjust to and that time needs to be factored into your costs. The decision to become a social business is a smart one, but one that needs to be undertaken methodically so that you do not become overwhelmed by everything that needs to be done. Figure out what you know and what you need to learn based on the goals of your strategy, and determine the cost of adapting to this new way of doing business.

Conclusion

One of the greatest values of running a social business is that virtually everything is measurable; while some criticize traditional operations for its lack of exactitude, every last detail can be attributed in social thanks in large part to big data. What’s more, communications and overall business costs are reduced as a result of becoming an effective social business. That said, there are still costs, and we can’t forget that costs are a natural part of doing business. Don’t be afraid of the “I” in ROI – that is what is going to generate the “R”.

What other costs have you noticed when it comes to running a social business? Tell us in the comments below or on Twitter!