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Tuesday
Jul242007

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

DateTuesday, July 24, 2007 at 09:10AM | by AuthorJustin Perkins
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  

Powered By SpreadsheetConverter


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.


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Comment24 Comments | by Reference1 Reference | by
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References (1)

References allow you to track sources for this article, as well as articles that were written in response to this article.
  • Response
    Response: links for 2007-08-09
    at justinhamilton.org on August 9, 2007
    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 (24)

Love to see ROI discipline and looks like an interesting gauge, so is there any validation that these formulas play out in reality?

Can you point to any external organizations or studies that have used these assumptions and verify that the costs & revenues were actually realized?
July 9, 2009 | Unregistered CommenterChris Wolff
Very, very slick calculator Justin. :-)
November 23, 2009 | Unregistered CommenterLeonard Williams
Very interesting. While I appreciate these attempts to establish ROI, I don't think they are necessarily valid. How about the SEO and SEM advantages? What about the contact advantages? Doesn't more exposure and awareness account for anything? It's pretty hard to directly track a contribution or sale sometimes. Revenue may be generated from an exposure, ad, social media relationship and that is never discovered. I'm not convinced that social media can be measured this way nor many things we are determined to establish a formula for "validity". We touched on this a bit and included an excellent video on our blog at http://solveris1.blogspot.com/2009/11/new-video-social-media-roi.html .
December 11, 2009 | Unregistered CommenterTony Sarcone
That's a rockin' calculator you've got there. I'm looking forward to checking it out in more detail post-conference.
May 11, 2010 | Unregistered CommenterMonica Maye
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