June 2012 The Amplification Model of Social Media Return

Purchase Equivalency Calculator

The Challenge

ROI = (gain from investment – cost of investment) / cost of investment

• For clients that sell through channels and many others, directly measuring the
“gain from investment” has proven problematic.
• While we work on direct ROI calculations for clients individually, we are today
publishing our “Amplification Model for Social Media Return.”
– This model measures the volume of social media impressions and social media actions
generated by marketing and provides a dollar figure for what it would cost to generate a
similar level of activity through paid methods.
– This calculates “Relative ROI,” which means the return on investment relative to where the
money could otherwise be spent. It is, admittedly, not a measurement of Direct ROI, but it is
an important component for those looking to validate spending where budgets are limited and
where non-productive investments can be re-assigned.

• In this case, we’re calculating “purchase equivalency,” the answer to, “How
much would it cost us to buy this much exposure?” Given that, we use the
formula: (value of exposure if purchased) / (cost of social media marketing)
What We Know

• Social media is great at driving vast amounts of conversation. Conversation

that gets seen.
• One of the major reasons brands advertise is to generate positively
sentimented impressions in front of an audience with a propensity to buy.
– By this definition, social media marketing is every bit as valuable as advertising, as
fans/followers and YouTube video watchers have all intentionally opted-in to brand
messaging, making them a potentially high value target audience.
• Study after study has shown that fans are more likely to buy from a brand
than non-fans, and also more likely to recommend that brand to friends
than non-fans.
• Many (but certainly not all) social media campaigns have successfully
driven traffic that converts at a high-level, often higher than those who
visit a website through paid advertising.
 Photo Credit: The Paradigm Shifter

The Amplification Model

1) Amplification Model
Calculates the value of the following:

1) Facebook Organic Impressions

2) Clicks on Facebook Links
3) Twitter Impressions
4) Clicks on Twitter Links
5) Organic YouTube Views
6) Blog Page Views
7) Online Brand Mentions

Using Data from:

A) Cost Per Thousand (CPM) impressions for targeted online buys ($8 CPM)
B) Average for cost-per-click advertising (varies by industry, used 50 cents for this model)
C) Average cost per view for promoted YouTube videos ($0.20 per view)
D) Parts of “Social Equivalent Ad Value Model” created by Tourism Ireland (http://scr.bi/KjPwEd)
1) Amplification Model: The Formula

For a given time period, calculate:

1) Organic Facebook Impressions (Sum of Daily Total Impressions – Sum of Daily Paid Impressions) x $10.00 CPM
2) Clicks from Facebook Posts (use tracking links) x Average Cost of PPC Clicks
3) ((Tweets x Followers) + (Retweets + @Mentions) x .12) x $10.00 CPM
4) Clicks from Twitter (use tracking links) x Average Cost of PPC Clicks
5) Organic YouTube Video Views x $0.20 Per View
6) Blog Pageviews x Average Cost of PPC Clicks
7) Online Brand Mentions x Average Cost of PPC Clicks

For each line, you will receive a dollar value. The sum of those values are the
“purchase equivalency” for that time period.

Divide the purchase equivalency by your spend on social media marketing to get a
Relative ROI. What you’ve calculated is the cost of purchasing that same level of
activity through traditional online media.
Amplification Model, Purchase Equivalency Calculator

Facebook Clicks number example

Total Organic
Page Impressions* CPM Value # clicks CPC Value
Client Page A 15,276,282 $ 10.00 $ 152,762.82 44,803 $ 0.50 $ 22,401.50
Client Page B 66,030 $ 10.00 $ 660.30 73 $ 0.50 $ 36.50
15,342,312 44,876 22,438 $ 175,861.12
*Sum of Daily Total Impressions - Sum of Daily Paid Impressions

Twitter Clicks number example

Max Est
Page Followers Tweets Retweets @Mentions Impressions+ View rate^ Impressions CPM Value # clicks CPC Value
@ClientAccount 34,228 160 668 3,141 6,657,270 12% 798,872 $ 10.00 7,988.72 16,895 $ 0.50 8447.5

^Rough estimated based on: http://adspace-pioneers.blogspot.com/2009/08/popping-twitter-reach-bubble-10-reach.html

=+(Tweets*Followers*viewrate)+(RTs*310*viewrate)+(@mentions*310*viewrate)
310 Twitter followers based on: http://totalaccess.emarketer.com/Chart.aspx?R=116589&dsNav=Ntk:basic%7ctwitter+followers%7c1%7c,Ro:16,N:500 $ 16,436.22

Organic YouTube Views

Cost/Promoted
Brand Total organic views View Value
Client Account 326,632 $ 0.20 $ 65,326.40
$ 65,326.40
Used the Social Equivalent Ad Value Model for videos developed by Tourism Ireland: http://www.scribd.com/doc/85406652/A-new-simple-way-to-measure-social-media-Return-on-Investment-Social-Equivalent-Advertising-Value

Blog Pageviews
Cost per Google
Brand Pageviews click Value
Client Blog 82,909 $ 0.50 $ 41,454.50
$ 41,454.50
Used the Social Equivalent Ad Value Model for videos developed by Tourism Ireland: http://www.scribd.com/doc/85406652/A-new-simple-way-to-measure-social-media-Return-on-Investment-Social-Equivalent-Advertising-Value

Online Brand Mentions

Cost per Google
Brand Total brand mentions click Value
Client Brand
Mentions 120,411 $ 0.50 $ 60,205.50
$ 60,205.50
Used the Social Equivalent Ad Value Model for videos developed by Tourism Ireland: http://www.scribd.com/doc/85406652/A-new-simple-way-to-measure-social-media-Return-on-Investment-Social-Equivalent-Advertising-Value

Total Impressions & Actions 16,732,907

Impressions 16,141,184 193,694,212.80 Monthly Value $ 359,283.74
Actions 591,723 7,100,676 Annualized 200,794,889 $ 4,311,404.93
Actions = brand mentions, organic YouTube views, blog page view, link clicks
If client spends $150,000/month on social media ($3m annually) $ 1,800,000.00
ROI $ 2.40 of value for every $1 spent

Download the Excel spreadsheet here: http://sdrv.ms/Q5NTvw

Summary

In this model, the client would need to spend $2.40 in advertising (banner
ads, pay-per-click, etc.) to get the same results from $1.00 of social media
marketing.

This model is certainly not perfect, but we offer it as a starting point in the
hopes that our agency and others will find ways to improve it. Ultimately, we
hope that it is one of 3-4 ROI models that can be applied to social media
marketing depending on the situation and the objectives.