Social Media ROI: How To Find Your Return on Investment

When a video you’ve invested creative effort and budget into gets more comments than any previous post, you may be wondering what that means for your brand. Even when the long-term results are less immediately clear, social media successes and setbacks do have concrete impacts on your business efforts, and you can measure how much they benefit you.

With defined business goals, key metrics for determining success across different touchpoints, and strategies that help you maximize the efficiency of your budget, you can demonstrate a clear ROI for your social media strategy.

What is social media ROI?

Social media return on investment (ROI) measures the success of your social media efforts compared with the expenditures and costs you’ve put into them. In simple terms, social media ROI matters because it can illustrate whether a social strategy is effectively contributing to business objectives.

Measuring social media ROI is crucial for determining if the time and money invested in social strategy is worth it, and a strong ROI indicates that a social marketing strategy is successfully generating a profit.

This return isn’t solely calculated based on how many direct sales you generate from social media, and it relies on a relationship between revenue generated and funds invested. If your social media efforts yield a small amount of revenue but cost even less, your ROI may be reasonably high. Managing this balance is key to determining a long-term social media strategy.

As ecommerce expert Andrew Faris explains on an episode of the Shopify Masters podcast, “The goal is to think about how to generate the highest profit number in your business possible over whatever time period. So sometimes that’s about savings, and sometimes it’s about growth.” If you can find ways to walk back the costs of your social media efforts while still delivering the same results, that can raise your ROI.

Beyond revenue, social media marketing ROI underscores which aspects of a social media strategy are achieving the desired goals. With ROI, you can direct your marketing budget toward the most successful social media strategies and platforms, and demonstrate the progress that your social media efforts are making towards achieving broader business objectives.

How to calculate your social media ROI

1. Define your business objectives
2. Track key social media metrics
3. Assign monetary value to social media performance
4. Calculate costs funneled into all social media efforts
5. Calculate social media ROI

Calculating your social media ROI starts with determining what you want social media to help your business achieve and ends with showing your progress toward those goals:

1. Define your business objectives

Determine what you’re seeking to accomplish with a social media marketing strategy. What is your business working to achieve overall, and how does social media support that? For example, if your brand relies on in-person appointments, then generating new leads may be a major goal. 

Other objectives you work towards on social channels could include:

• Customer acquisition

• Social media customer service

• Developing brand identity

• Email list sign-ups

• Increased website traffic

• Customer engagement

• Brand awareness

Some business objectives have clear social media metrics for tracking them, like website sessions from social media platforms. For more complex objectives like customer engagement or brand awareness, use in-platform metrics (impressions, likes, follower growth) and surveys (“How did you hear about us?”) as measures of success. A high volume of user-generated content featuring your product can demonstrate increased engagement. 

2. Track key social media metrics

To calculate ROI, keep tabs on and track the metrics that you’ve identified as markers of success. There are a variety of social media management platforms—such as Dash Social and Sprinklr—that make tracking social media data easier and help categorize metrics by campaigns. Social channels will have in-platform analytics available, but these are often limited in scope and don’t provide comprehensive or long-term information.

Google Analytics is crucial for tracking social media ROI. At the most basic level, you can use Google Analytics to track referral sources for traffic, such as Facebook versus X. Through acquisition reports, you can see more specific social data about acquisition, including traffic coming from paid versus organic social campaigns.

By setting up ecommerce tracking in Google Analytics, you can see revenue per social media platform and more granular revenue insights like conversion rates per channel or the average order value for different traffic sources. Overall, Google Analytics will give you access to more comprehensive and specific data about multitouch attribution and revenue, while also making it easy to compare and visualize this information long term.

3. Assign monetary value to social media performance

To calculate an accurate ROI, you’ll first need to estimate how much revenue you’re driving from social media. Part of this revenue will be direct: sales that are placed as customers come to your business through social media. Other social media metrics will require a bit more digging to identify how they are earning money for your brand.

You need to connect the dots between something measurable on social channels—such as engagements, email signups, or clicks—and revenue. When you can’t always attribute sales directly to social success, ask yourself what business objective that success is moving you toward, and estimate the value it generates or costs it saves.

Here’s what that might look like when estimating the value of follower growth. With customer lifetime value (CLV), you can review how much long-term revenue customers acquired through social media will likely generate. For example, if every 1,000 followers you gain on Instagram typically produces three new customers, and the average CLV is $250, then growing your account by 1,000 followers is worth about $750.

From there, get even more granular: Does CLV change depending on the channel through which you acquire a customer? If you offer both single purchase and subscription options, and one social media platform generates more returning subscription-based customers, you’ll have a higher CLV associated with that platform and, thus, a better ROI. “Subscription orders generate a huge amount of customer lifetime value,” Andrew points out. “The net effect of that over time is that you generate a ton of revenue apart from ad spend.”

4. Calculate costs funneled into all social media efforts

Determine how much money you’ve put into social media efforts. Here’s a checklist of expenses that you should include when adding up social media costs to calculate ROI:

• Hourly wages or salaries for social media managers

• Fees for any freelancers or external agencies that help manage social media

• Paid ads and the cost of boosting content

• Influencer partnerships

• Fees for any affiliate programs, including percentages of revenue lost

• Any costs related to content production, including cameras, lights, studio rental fees, and graphic design tools

• Social media scheduling platforms like Hootsuite or Dash Social

• Additional analytics and reporting platforms

• Product distributed through giveaways and promotions

When calculating social media ROI, you’ll most often be considering the overall return on your investment in social media broadly or the return on a specific campaign.

5. Calculate social media ROI

After tracking the total value (earnings) and costs generated from social media, calculating ROI is easy with a simple formula:

Social media ROI (%) = (Earnings - Costs) ÷ Costs × 100

Let’s say your total earnings from social media were $25,000 and total costs were $8,500. Plugging that into the social media ROI formula would look like:

(25,000 - 8,500) ÷ $8,500 × 100

16,500 ÷ $8,500 x 100

1.94 x 100

194

Social media ROI = 194%

ROI is expressed as a percentage, and a social media ROI of 100% means that you’re getting back $2 for every $1 spent. Or, in other words, for each $1 you spend, you’ll earn that $1 back and then gain an additional profit of $1.

In the example above, an ROI of 194% indicates that you’re earning $2.94 for every $1 you spend on social media, or a profit of $1.94 for each dollar spent.

Practical tips for tracking social media ROI

• Use UTMs to see granular data for revenue sources
• Create a central dashboard for tracking key metrics
• Create custom dashboards in Google Analytics
• Calculate and review ROI regularly
• Visualize ROI trends

To effectively track ROI, you’ll need to make the most of the analytics available to you, ranging from data on GA to in-platform insights and information from your third-party social media management services:

Use UTMs to see granular data for revenue sources

UTMs, or tags appended to the end of URLs, help GA separate sources of traffic and conversions based on where they’re coming from. This could be broad, such as the social media platform that a new customer clicks and converts from, or more specific, breaking conversions out into campaigns. You can also track revenue attribution based on in-platform content types, like Instagram Stories versus Reels.

Create a central dashboard for tracking key metrics

Use your social media management tool of choice to track key metrics in one place. Most third-party social media tools allow you to create a customizable dashboard that tracks all of your preferred metrics in one location that’s easy to review.

Create custom dashboards in Google Analytics

By integrating Google Analytics with your ecommerce website, the platform can easily connect conversions, customer lifetime value, new customers, and repeated customers to the social channels that acquired them.

Calculate and review ROI regularly

Whether it’s monthly or quarterly, set aside time to measure social media ROI at regular intervals so you are analyzing and reviewing data on a consistent basis.

Visualize ROI trends

Use the data points you glean from calculating social media ROI regularly to create visual representations of how the percentage changes over time. This will make it easier to ascertain how different times of year, algorithm changes on social channels, or shifts in your social tactics have influenced social media ROI. More importantly, you can adjust and optimize strategies accordingly.

Ways to increase your social media ROI

• Experiment with strategies that encourage more engagement
• Tailor content strategies to individual platforms
• Invest more in high-performing social media channels
• Use A/B testing to make your ad spend go further

Experimentation and finding more ways to engage directly with customers are the focal points you should always come back to when working to increase your social media ROI:

Experiment with strategies that encourage more engagement

Focusing social media marketing on content that prompts engagement and resonates with your target audience will keep people coming back to your social media accounts, making it more likely for them to convert. Consider giveaways, helpful information worth saving for later, and humorous clips that are easy to share with other users—all these content types can drive high engagement.

Generating engagement on social media is a constant effort in experimentation. Test different content types and styles of captions on each platform to see what elicits more responses. Try out in-platform tools that encourage engagement, like polls or questions on Instagram Stories. If you have an idea that might entice a customer to like, share, or comment on a post, give it a go. Utilizing user-generated content that features your product or service could also reduce the amount of money needed for creating original content and build greater customer loyalty.

Tailor content strategies to individual platforms

Know what audiences on different social platforms are looking for. Trending audio may have greater weight on TikTok when it comes to creating short-form videos, and you might find that interactive content like polls or Q&As is important for building community on Instagram. 

Invest more in high-performing social media channels

If you find the customer lifetime value for Facebook users is higher than CLV for Instagram followers, then infusing time, effort, and ad spend into that channel is more productive.

Paid social media campaigns will yield greater ROI in some channels than others, allowing you to adjust where you allocate paid versus organic strategies. As Andrew explains, “The power of Meta ads is that it’s incredibly efficient at getting the right ad in front of the right person.”

Use A/B testing to make your ad spend go further

You can combine limits like bid caps (how much you’re willing to spend to get a specific result) and spending caps with A/B ad testing to make your money go further. A/B testing calls for running two versions of the same social media ad or campaign to see which one is more successful with your audience. The benefit of this is that you learn what resonates more with customers and which campaign drives them to make more purchases, but you will experience a degree of opportunity cost when your less-successful campaign is shown to some customers in the test.

Leverage the capabilities of platforms like Meta, which can automatically adjust bids, budgets, and ad placements in real time—effectively handling the A/B testing process for you. This helps make the most of your advertising budget and minimize opportunity cost. Andrew recommends letting Meta’s algorithms determine which ads perform best. “You say, here’s the target ROAS or CPA [cost per acquisition] that I’m trying to get,” he says. “You tell me how to spend as much money as you can while maintaining this target. And I think it is a huge element of success, including at the level of creative testing.”