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

Wonder 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.

Update on Friday, June 11, 2010 at 01:10PM by Justin Perkins

A couple of years ago I put together this "social network" calculator as a free resource to assess the opportunity cost of recruiting email subscribers and donors online.   It was ahead of its time and may still need some tweaking, but the basic assumptions hold true - if you're paying staff to spend time on social networks and the end goal is list-growth or dollars, then this tool is for you.

Enter the cost per hour of your staff, and other basic web and email metrics, and you can get a realistic snapshot of how you're doing.I'll preempt the typical response of "well, there are other intangibles and other types of ROI" by saying that if that's your world, that's fine, you're right - there are interesting and good things that happen as a result of social media, and you should do it, but I wouldn't expect a lot of direct response in terms of dollars, and you might want to hold off if you haven't done some of the basics, first.

And if you're going to spend time on social media, and you aren't leveraging your email list to do so, you're doing things the hard way.

ROI (Return on Investment) in its simplest form has has a very specific mathematical definition. ROI = (gain from investment - cost of investment)/(cost of investment).  That will give you a percentage that you can compare against other potential investments.  You usually want to go with the highest percentage or percentages if you're making a decision as to where you spend budget.

I think social networks have huge potential - but if you're being asked by your boss (or you're a boss asking your employees or volunteers) to do the near impossible, and beat the numbers, then this tool is for you.  You can quickly see the actual cost per friend you recruit, the supporter you recruit, or cost per donation and hopefully compare that to other options - web traffic, direct mail, ads, email, events, etc.

This tool was designed to assess OPPORTUNITY COST; namely, if you're spending time doing something with a lower return on investment than another opportunity, you should stop doing it and choose the investment with the higher potential return.

So... let 'er rip.  Bring on the peer review.  I'm sure all you highly opinionated folks have a lot to say about this now that we have been watching the gold rush for four years NOT pan out to be the viral miracle we dreamed of early on for MOST nonprofits.

It's time to bust out the calculator and have a realistic look.

My hope is that people will help me refine this to make it a more user-friendly tool, and hopefully save the nonprofit sector millions of dollars.

http://ow.ly/1XgIb or http://www.socialnetworkcalculator.com if you want to tweet it.  (Ha! The irony).

Coming soon - I'm working on an overall online ROI assessment calculator.  Email me (Justin at care2team.com) if you'd like to help beta test it.

Cheers,

Justin

--

Justin Perkins

Director of Nonprofit Strategy

Care2

303-475-4827

www.frogloop.com

justin at care2team.com

Comments

[Kira]

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?

[Jonathon D. Colman]

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.

[Justin Perkins]

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.

[Beth Kanter]

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!

[Beth Kanter]

PS Thanks for adding to your blogroll! I'm honored!

[Justin Perkins]

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!

[Priscilla]

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 :)

[Priscilla]

Hi, sorry the link didn't work in my previous post, here it is again:
http://www.solidariti.com/article/Doesefforteffect

[Andy Donovan]

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

[çadır]

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!

[Lisa Neal]

This is great - too many people become enamored with technology without thinking about the various costs/benefits.

[Leslie]

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

[oyesola abisoye dada]

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.

[sudhakar mishra]

hello, from delhi

[social networking software]

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.

[KM - Milwaukee, USA]

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...

[Marita Roebkes]

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

[Swan]

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 ?

[Daniel]

Wow, this is huge. Many thanks for the tool!

[Laurie Pringle]

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.