Facebook Marketing: How to Measure and prove ROI

Let me get this off my chest. Proving Facebook ROI for non-revenue or non-transactional activities is not f$*** easy if you think like a CFO, however, once you get in the right mind set, it’s quite simple. It’s not easy to derive a tangible ROI from our activities because Facebook does not share the data necessary with us to do this. But it’s not like there’s no value in our activity. As marketers and advertisers, we know that we’re creating economic value even when it does not lead to a paid conversion event. We get to test brand messaging. We get to improve our brand positioning, etc…and all of that does provide value. This article will help you showcase the value of those activities to your team so that next time your CEO or CFO asks you why you’re asking for more Facebook money, you will have a great answer based on tangible calculations.

We’ll focus on an actual case study we’ve faced at Factivate to show you how to do this:

  1. Client posted a number of organic posts and videos for a product they were about to launch.
  2. One video got a magnificent number of Likes and two posts got shared beyond their normal rate.
  3. Client ran boosted posts. Got more Likes.
  4. ROI? It was huge. The new product sold off the shelves.
  5. Facebook is awesome!

If you consider this correlation, you’ll begin to notice it’s flawed. The conclusion that ROI was huge because of the Facebook activity may or may not be there. There might have been a series of online and offline media buys that could have lead to that. Facebook was only part of that effort. So to imply ROI from Facebook, even as an educated guess, is just wrong.

From the data received from Facebook, there’s no way to tell if the campaign worked (even it the campaigns were liked by hundreds of thousands).

The only real way to prove ROI here is to run controlled experiments. For example, only use Facebook for geography x vs using other paid buys in geography y. Then look at sales from both regions. Then compute ROI (cost of FB campaigns + agency costs vs. profit from product sales)

Here’s the problem with this thought process: It’s not realistic.

So, why is it so hard to measure the value of Facebook. Do we not understand what is unique about Facebook? Why do we keep looking at Reach and Online GRP equivalents to do this? It’s freaking insane!

Let’s take a step back. Consider the following assumptions and we can move forward with our model

#1 Your current Facebook ROI Challenge is not that it’s not possible, it’s that that you’re thinking about based on a revenue transaction and not on Facebook’s strengths.

#2 Compare Facebook and Direct Response to Traditional Advertising

#3 Understand Facebook’s Business Value

Facebook Advertising / Marketing ROI challenge:

In almost all other types of advertising today (Adwords etc), our purpose is to run an ad with the objective to find the right person, at the right time, and then target them with the right message so that they interact with my brand. For almost all non-social platform ads, you then can measure ROI by how they interact on your website or what happens offline).

To understand your ad’s effectiveness, you’ll spend some time measuring CPCs, CPAs, CPMs, conversion rates, micro-conversions, macro conversions, etc…All of the things that directly tie to the bottom-line of your organization.

But all of this changes when it comes to Facebook.

LESSON 1: People don’t participate on Facebook to get people to come to our digital site. We use Facebook to engage with people, to have conversations, or to share pictures of our awesome dogs. Maybe some users interact with brands and products when it’s time for them to think about making a purchase. Maybe not.

We create a Facebook brand page and spend money on Facebook Advertising to engage with this huge community. This is very different from what we’re doing with Google and other advertising platforms.

You’re not pushing the audience to your digital existence.

You are spending money on Facebook for an opportunity to build a community on Facebook for an opportunity to engage them (not just sell to them) for an opportunity for this audience to: 1. love you 2. recommend you to their friends and 3. remember to buy your products and services when they might need them.

As a lover of insights, I believe there is value to this and I believe there is a way to measure this. BUT, it is absolutely critical that you understand that when you engage in any discussion about the value of being on Facebook and spending money on Boosted posts, the picture (ie, your goal) is substantially different than AdWords. Understanding and painting this picture if even more critical when you’re asking for higher marketing budgets.

LESSON 2: Structure the right conversation on the elusive Facebook ROI variables

Almost all of your analysis should be spent: “get me more friends of friends to engage with my messages”. As a result, we measure likes, CTR, weekly reach, gender, CPC, and many more.

Don’t get me wrong, we still have our business URL on our brand page and some people click on that URL to come to our site, BUT since your original purpose was to create an owned engaged audience on Facebook, rather than primarily driving direct revenue via constantly printing coupons/offers, it will come as no shock to anyone that the conversion rates, revenue, and bottom-line metrics from Facebook will not explain all of your value from a Boosted Post. Simply put (I’m repeating myself), that was not the point. Having a conversion business impact is not the point of Facebook. And people who try to make it the primary point have failed miserably on Facebook. If you execute only for this outcome on Facebook, you will likely achieve less than optimal success.

Prior to sharing this model with your team, it’s very important that:

  1. Everyone understands this
  2. Gets on the same page as to why you’re on Facebook
  3. Then think about how you’ll use the model to measure ROI

Using Facebook as a Traditional Advertising Tool

If you’re just running traditional ads in Facebook where you: create an offer, show it to people, drive them to your online/offline existence, you are taking advantage of a huge audience. You can also prove ROI a lot easier. However, for these types of formats, you’ll end up forgetting about audience building, engagement, and utility marketing. You’ll be able to measure CTR, CPC, Bounce Rates, Conversions, AOV and present this to your senior leaders. Easy peasy.

But as I mentioned, this is not what makes Facebook unique.

Proving out the Facebook Business Value with ROI on our minds

To convince your CFO and CEO that Facebook delivers value, you’ll need to prove two things.

1. The activity you generate on Facebook is valuable.

The prove value scope here is: Brand Awareness / Word of Mouth and Engagement. We use Conversation Rate, Amplification Rate, and Applause rate. This helps you sell the value of Facebook to your business. Frame it like that.

It will help when you point out to CFOs, CROs, CxOs, who are used to Print, Radio, TV that a) it is extremely unclear how to measure success and 2) unlike what happens on Facebook, there is ZERO engagement/longer-term value delivered. At best, you’re renting the audience

An additional value scope can also be Cost savings. The number of PR people you can let go, the reduction in customer service costs, the reduced TV ads you have to run, etc…harder to prove, but if you try, you can do so.

So far, it’s very hard to showcase the value of Facebook all by itself mostly becaues the execs can’t make the leap required to see the longer term potential. They spend money because everyone else does so. This is why it’s critical to get them on the same page.

2. The activity you generate on Facebook delivers business value, online or offline, and helps produce profits.

Prove value here means visitors to your website. Revenue per Facebook referred visitor (considering last click attribution for now). Number of qualified leads. Number of downloads, etc…) I will go out on a limb and assume that there is no CxO in the world who does not understand the value of Facebook if you can show any of the above.

The Holy Grail: Proving the Value / ROI of an investment in Facebook

Enough talk, let’s get into some awesome metrics.

If you strip everything away, as designed, Facebook is a quest for community. It is what you are asked to hunt at every turn for Facebook gurus. In the end, what matters should be:

  1. Did my activity (Likes, comments, shares) cause any activity of value on your Facebook presence?
  2. (Most importantly) Do all of these activities add value to your business beyond Facebook.

For each Facebook campaign, we’re going to look at #1 and #2 depending on what we are trying to accomplish.

Facebook Brand Pages

Remember, the point of your ROI model is to answer the “so what” model with data. If you’re measuring Likes, so what will quickly get you off of looking at that. Reach, same thing. Same for compound metrics like virality etc.

Your metrics should only measure outcomes. Here are the metrics to help you prove Branding ROI campaigns:

  1. Conversation Rate: # Audience comments (or replies) per post
  2. Amplification Rate: # Shares per Facebook post
  3. Applause Rate: # of Likes per Post

These three clean metrics answer these questions clearly. When we post on Facebook, does anyone actually engage with us via typing on their keyboards and adding to our discussion? Does anyone amplify our contribution so that it’s seen by people who don’t know about us? And, (really important!) when we post on Facebook, which content or type of content is loved by our followers/fans/friends so we can kill off the loser stuff.

In the data below, we’re noticing that of the 45 ads released this period, our conversation rates and amplification rates are abysmal with the conclusion that: We need some serious engagement to improve it!

Now look at what happens when I remove the ratios from each of these measurements where Conversation rate is now total comments, applause rate is likes, and amplification rate is shares:

Not great but numbers are saying some people engaged! Look at all those likes!

You see how easy these totals can misguide us? The reality is that none of those ads engaged our audience. We just wasted money. We need a new strategy, don’t we? aaah…beautiful insights!

Side note – we saw an agency showcase these comparisons when they were pitching a new client. The client was so astounded that they switched agencies in less than a month!

Once you start looking at this data correctly, measure this over time and you’ll be able to show your management team high-value content that engages user behavior.

woohooo…more people are engaging on average with our content, we’re increasing our incremental audience reach, we’re learning what messaging works better!

Freaking sweet, right? Now you know the “so what”. It’s clean, you know what to fix, you know what works, and what is adding value.

Now let’s dive deeper into message validation.

Facebook Organic Posts ROI

At an individual post level think about these same metrics. Likes/Post, Shares/Post, and Comments/Post. This helps us achieve a clear page and post-level value delivered by us and what kind of engagement we get in return.

How can you magically report all of this together? Look into the Factivate spreadsheet marketplace and use any one of the Facebook organic templates available. The document references this specific Factivate template: Facebook ROI Optimizer. Check out the weekly report tab for the paid activity reports and FBPageOptimizer tab for your insights with organic activities

In the post activity reports section you’ll find something like this:

Now you’ll know which content works and promote analysis rather than data puke. There is value in testing messages with large audiences and you just proved it!

Whether you’re doing organic or paid activities with posts, you can now frame the argument that your Facebook brand page got more valuable via the incremental reach your activities provided. Now you’re building an owned audience on Facebook which you can then retarget with conversion-related activities if you want to.

Closing thoughts: does Facebook provide value to me?

This is a complex space.

1. Don’t have a social strategy. Instead, create products and services that compel social activity.

At the end of the date, it’s important to remember to make your products and services so amazing that people can’t help to talk about them on Facebook. The impact of this organic activity will blow your mind.

2. Social media success does not guarantee business success.

Business success can be hugely amplified by Facebook. Social media success, however, can rarely make up for core problems with your business / business strategy / products and services.

Keep these two lessons in mind. I hope you see this post as a pragmatic way to look at optimal Facebook participation and a real-world practical guide to measuring the value of Facebook using non-conversion activities. If you use the recommendations in this post to show reality today, learn your lessons, go back and optimize for your strategy, and drive more business value, you will accelerate your company’s ability to move from the past to the future (conversation marketing)

Your turn now. Do you use any other metrics to derive a Facebook ROI from non-paid or non-revenue conversion activities? I welcome your critique, brilliant ideas, observations, and comments.

Thank you.

Tagged under:

Leave a Reply

Your email address will not be published.