Return on investment, or ROI, compares what you gain from social media with what you spend on it. Spend includes ad budget, tools, content production and the time your team puts in.
The basic formula is: ROI = (value gained - cost) / cost x 100. If social media drove $5,000 in sales and cost $2,000, ROI is ($5,000 - $2,000) / $2,000 x 100 = 150 percent.
The hard part is measuring value. Direct sales can be tracked with UTM parameters, pixels and promo codes. Other value, like brand awareness, customer support or leads that close months later, is harder to price, so many teams assign estimated values to key actions such as sign-ups or demo requests.
Questions about Return on Investment (ROI)
How do you calculate social media ROI?
Subtract your total cost from the value social media generated, divide by the cost and multiply by 100. Include ad spend, tools, content and staff time in the cost. Track value with UTM links, conversions and assigned lead values.
What is a good ROI for social media?
Any positive ROI means you earn back more than you spend, but what counts as good depends on your margins, industry and goals. Compare against your other marketing channels and your own past results rather than a universal number.
ROI vs ROAS: what's the difference?
ROAS, or return on ad spend, divides revenue by ad spend only. ROI considers all costs, including tools, content and labor, and shows profit relative to investment. ROAS is useful for judging ads, while ROI shows the bigger picture.
