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Tuesday
Jul242007

Is It Worth It? An ROI Calculator for Social Network Campaigns

worthithorizontal.gifWonder if you should spend your time campaigning in social networks?

You can use this tool to calculate an estimate of cost and return on investment for the recruitment and fundraising efforts of your staff in social networking sites like Facebook or MySpace. It works sort of like an online mortgage calculator. Just enter the starting assumptions in the yellow boxes below and the tool calculates results automatically.

Need some metrics guidelines? You might check out some of the online advocacy and fundraising benchmark studies. If you don't measure results strictly by fundraising -- maybe your results are based on advocacy or branding only -- you can just look at the "cost per friend" or "cost per email name" to compare with the costs of recruiting people elsewhere. You can also see how that translates into cost per action or email viewed (opened).

If you would like to see the assumptions and equations behind the magical calculations, they are available on the original Excel spreadsheet and you can download a copy here.


The Social Network ROI Calculator    
   
   
STEP 1. Fill in these metrics with goals or actual results Inputs in Yellow Metric STEP 2: Resulting Revenue and Costs  
Staff/ Volunteer hours per week for social network campaigns: hours/week Total "Friends" per year  
Cost per hour of staff & volunteer(s): $ per hour Email sign-ups/ week  
Employee receives benefits? Enter a "1" adds 30% Email sign-ups /year  
Social network "Friends" recruited per week (goal or actual): friends/week Revenue per emailing  
Viral growth rate per year of your Friends: friends/year Revenue per year  
% of Friends who join your email list: % of friends signing-up Number of donors/ year from emailings  
% of Friends who donate directly from your social network: friends converted to donors Number of direct donations/week  
Average direct donation /friend from social network site: $ per friend Number of direct donations/year  
Average donation from your email appeals: $ per email subscriber Average direct donations/year from social network  
Average response rate from email appeal: email donors Total $ donated from social networking  
Direct email fundraising appeals per year: emailings/year Total new donors per year  
Net churn rate per year for your email list: churn rate Total cost per year for social network campaigns  
Average Open Rate for outreach or advocacy emailings: % open Cost per Friend  
Average Response Rate for outreach or advocacy emailings: % of emails sent taking action Cost per email name recruited to your list  
# of Advocacy or Outreach emailings/year: emailings/year Cost per direct donation from social network  
             
STEP 3: Projected Response Rates for Email Advocacy and Outreach to Social Network Recruits  
  Year 1 Year 2 Year 3 Year 4 Totals  
Total email names remaining (last year + new names - churn)  
Emails opened per mailing n/a  
Actions/ Mailing n/a  
Total emails opened / year  
Total Actions/ Year  
Total Cost of labor (assumes 75% reduction in y2-y4)  
Costs per Email Opened and Cost per Action Average Cost:  
Cost per email opened  
Cost per action  
       
STEP 4. Projected Fundraising Results  
  Year 1 Year 2 Year 3 Year 4 Totals  
Total friends  
New friends/year (viral growth only in y2-y4)  
New email names/ year (viral growth only)  
Total email names remaining (last year + new names - churn)  
Total Cost of labor (assumes 75% reduction in y2-y4)  
Direct donors from social network  
Direct Donations from social network  
Total email donors  
Total Donations from emailings  
Total Combined Donations  
Total donors from social networking activities  
Overall Profit/Loss and ROI from Social Networking  
Cumulative profit/loss from fundraising (direct donations and email)  
Overall ROI for combined results  
             
Profit / Loss and ROI for Direct Fundraising from Social Networking Sites (not including email)  
Cumulative Profit/loss if direct donations from social network site only (no email fundraising)  
ROI for direct donations  
             
Profit / Loss and ROI for Fundraising Emailings to email leads recruited from Social Networks  
Cumulative Profit/loss if only email donations  
ROI for acquired (emailing) names only  



You might also consider other factors that aren't measured here:
  • Opportunity cost: what else could I have my staff or volunteers doing if they weren't spending time in social networks?
  • Viral benefit of social networks: if you have a network in place, you might increase your chances of reaching a lot of people during a crisis. Some social networks are set up to enable communications with a lot of people quickly.
  • Demographics: is the audience you're recruiting from the social network appropriate for your organization?
  • Message control: your message is likely to get picked up by others, and to be successful, some amount of message control will likely need to be sacrificed.
  • Investing in the future: Maybe the younger demographic of the social networks will be interested in your organization in the future, so it may not be a bad idea to start building awareness now.
If you think that fundraising and recruitment from social networks is the way for you to go, here are a few articles to help you get started.


References (1)

References allow you to track sources for this article, as well as articles that were written in response to this article.
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    Advertising Age: How New FCC Mobile Rules May Affect Marketers once consumer expectations are raised by the new open access mobile systems that give them control over content and handset-carrier combinations, as well as the ability to switch carriers...

Reader Comments (26)

Hey, Justin, dig the slick interface. :-)

From talking about this last week, the biggest question this has stuck with me is how relevant ROI is for judging the value of a tactic that might serve goals other than fundraising.

Is it irresponsible of me to spend ANY staff time on social networks? These calculations say it is, but strategic interests that aren't meausured in dollars raised pull in a different direction.

So I'm really curious about how many folks in this field are measured on goals other than raising money. Thoughts?
July 24, 2007 | Unregistered CommenterKira
Wow - this is fantastic! I sense that someone had a *lot* of fun doing the math behind these form fields... :)

I think this ROI calculator is a great means for getting down to the brass tacks of $$$-value that social networks generate per person-hour invested in them. Quantitatively, that's worth quite a bit as no one has been able to calculate this metric so thoroughly before. Job well done!

Incidentally, are you able to record the values that users enter in these fields? It might be interesting to find out the average # of staff time invested/friend/donation, and so on.
July 31, 2007 | Unregistered CommenterJonathon D. Colman
Thanks for your comments, Kira & Jonathon. Kira, in response to your question -- there is an attempt to calculate value for advocacy built into the calculator (thanks to your early feedback). The metric boils down to cost per action as applied to advocacy or outreach (branding, education, etc) campaigns. And in response to the question of "intangible value," I think it's about being able to access as many people as possible when your version of a Katrina hits or you have a window of opportunity where the issue you're working on hits the headlines.

However, when you go to analyze the cost of acquisition for supporters, it's worth asking the question as to where you'll get the biggest bang for your dollar. Best practices to date indicate that's via email, both in acquisition and in response. Hopefully others will chime in on this point with their own experiences from adventures in social networks.

Jonathon, currently the functionality for capturing every value entered doesn't exist with this tool. I would love to run an anonymous analysis to come up with some benchmarks, so contact me if you're interested.
July 31, 2007 | Registered CommenterJustin Perkins
I don't understand how I managed to miss this execellent post!

This is an excellent tool and thank you for sharing it.

Have you done this analysis on other tactics, I'm thinking Internet advertising for one.

I know ROI is important, but you do think the numbers alone can guide the decision. How do you factor in the potential benefit/value of the other strategic issues you mention at the end?

Lots to ponder here. Thanks for sharing this!
August 6, 2007 | Unregistered CommenterBeth Kanter
PS Thanks for adding to your blogroll! I'm honored!
August 7, 2007 | Unregistered CommenterBeth Kanter
Thanks for your comment, Beth. I'm working on the other analyses, too! I don't think ROI is the only factor, but I think it's important for people to have a realistic way to compare with other options at their disposal before jumping in with both feet. By breaking down to common metrics, development and advocacy and communications folks can compare with their cost for building a constituent base using other means. My mantra is to "be everywhere, but prioritize."

Social networks appear to be "free", but if you think about social networks as a microcosm of the broader world wide web (I haven't said that for years), the same rules, for the most part, apply. A lot of it comes down to a numbers game. It takes a lot of work to build a quality audience. It's really not that different from building an email list, except that it's a little easier for information to spread in fun and unexpected ways, and you can choose, more or less, who joins your list.

We saw people using Care2's social network to raise money during Katrina, and if the social network weren't in place, that self-organizing phenomenon couldn't have happened as easily. However, in the day to day, I have only seen a couple of examples of really successful nonprofit campaigns in social networks that have converted to "value" as measured by our current paradigm of what is valuable to nonprofits. I would love to see more success stories -- post 'em here!
August 8, 2007 | Registered CommenterJustin Perkins
Wow, your calculator is fairly thorough for a first version, thanks for sharing it with the community :)

I created a formula earlier in the year (see http://www.solidariti.com/article/Doesefforteffect) but it is not as specific as your ROI analysis and requires a fair bit of subjectivity, so is not much good for attracting funders for an online social networking campaign.

On the other hand, if you're not looking for funding, subjectivity might not be such a bad thing ... I agree with Beth that a dollar value alone can't determine whether using online social networking is a worthwhile activity, which is why I've also included time and geek knowledge in my formula. The ROI on the amount of time an online campaigner spends networking with sympathisers to build lasting relationships is not something that can be measured easily, if at all. For instance, you can count the number of MySpace friends your organisation has, but you don't know how many of those "friends" are close supporters of your organisation, how many just made you their friend because they liked one of your blog posts, or how many wanted to simply be seen as associating themselves with your organisation. As an online campaigner you need to engage all these people regularly and in a meaningful way as they are all potentially advocates for your cause. You do this to build the relationship with these people with the belief that some will eventually become campaigners for your organisation and/or your greater cause, which will eventually help you achieve positive social change.

Anyway, sorry to write so much, and thanks again for sharing this useful tool with us, I'll be having a close look at it using our organisation's numbers to assess our organisation's online activities. I look forward to continuing this conversation :)
August 21, 2007 | Unregistered CommenterPriscilla
Hi, sorry the link didn't work in my previous post, here it is again:
http://www.solidariti.com/article/Doesefforteffect
August 21, 2007 | Unregistered CommenterPriscilla
I think you raise an interesting question for not only the charitable sector but also P/R due to the fact that so many air eyeing the value of Facebook and the time needed to establish a network of friends and then to actually get them to answer the specific call to action.

As the earlier post said - great first crack at the calculator. Looking forward to sharing your calculator (and the blog) with my clients within the sector. Cheers,

Andy
November 8, 2007 | Unregistered CommenterAndy Donovan
We saw people using Care2's social network to raise money during Katrina, and if the social network weren't in place, that self-organizing phenomenon couldn't have happened as easily. However, in the day to day, I have only seen a couple of examples of really successful nonprofit campaigns in social networks that have converted to "value" as measured by our current paradigm of what is valuable to nonprofits. I would love to see more success stories -- post 'em here!
December 11, 2007 | Unregistered Commenterçadır
This is great - too many people become enamored with technology without thinking about the various costs/benefits.
April 25, 2008 | Unregistered CommenterLisa Neal
I need help getting training on how to calculate ROI -- more for our client services and training programs. For example, my agency moves client X from a $9 hr wage job to earning $14/hr through training and capacity building, and so now that person is able to leave food stamps aside and is paying more taxes (we increasingly need to measure "community impact" of our programs). Does anyone know of resources to help me learn to track and do this kind of research/outcomes work?
Please feel free to email me leslie@ppca.org
July 18, 2008 | Unregistered CommenterLeslie
Good day i'm happy to received this Glorious message in my box as a matter of fact am very excited. the comment that i want to make is we can join hand together to make a different in this year campaigns.
September 12, 2008 | Unregistered Commenteroyesola abisoye dada
hello, from delhi
September 13, 2008 | Unregistered Commentersudhakar mishra
with any online marketing/business efforts, having a clear goal, developing a good sound plan and then taking action is the best bet for non profits.
December 17, 2008 | Unregistered Commentersocial networking software
Thanks for creating this. Very helpful as we weigh the rush into social networking sites. It is not necessarily true that: If you build it they will come...
February 9, 2009 | Unregistered CommenterKM - Milwaukee, USA
Marketing is only a part of it. Together with the students of the Social Media Academy we developed a calculation which includes Sales, Marketing, Support, Product development, Logistics, Procurement... all areas where social media makes a total sense.


A = Contribution margin in currency generated from externally referred customers
B = Cost in currency for human interaction and other cost to manage and engage in the ecosystem
C = Social Media ROI
A/B = C
(source Mike Johansson)
http://www.socialmediatoday.com/SMC/77179
March 24, 2009 | Unregistered CommenterMarita Roebkes
Love the detail and how well you have thought through this. Too many people start to think about ROI for social media and then just throw in the towel and start talking about the "greater good" and "strategic direction".

However, why make it so complicated? Best to tie things as closely to revenue as possible. What do you think about the idea in this post: http://bit.ly/KCatb ?
April 6, 2009 | Unregistered CommenterSwan
Wow, this is huge. Many thanks for the tool!
May 30, 2009 | Unregistered CommenterDaniel
You've left out some very important measurements.

How many 3rd party events did you acquire as a result of relationships made via social networks? How many corporate sponsorships were gained as a result of your social media efforts? How many sponsors did you increase contributions from as a result of the added exposure?

How many middle/major gift donors did you identify and/or cultivate as a result of your social networks ability to engage new/previously unidentified supporters?

How many media outlets contacted you and ran stories as a result of your social media efforts? What impact did this exposure have on your awareness and fundraising activities?

This list goes on and on... and your list lacks these and many others. This isn't direct response. Don't measure it in the same way.
May 31, 2009 | Unregistered CommenterLaurie Pringle

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