Social Media ROI (return on investment) is a topic I find I’m discussing more and more these days. But unless I’m talking to an online business, my perspective is always the same: “It doesn’t matter.” Here’s why.

1. Most Businesses Aren’t Prepared to Measure Social Media ROI

In a recent talk at Social Media Camp in Victoria, BC, I asked a room full of people to raise their hands if they had recently made an off-line purchase that was influenced by social media. Nearly all raised their hands.

Next I asked them to raise their hands if they had been asked, at the time of purchase, if they were referred through social media? Not a single hand.

So, hundreds of people in the audience had recently made offline purchases influenced by social media, but not a single one was measurable. If you multiply this audience by a few million, you’ll start to see how significantly social media is influencing commerce, and that the volume that can’t be measured.

Sure you can measure quarter over quarter or year over year revenue and extrapolate some ROI – and you should, but what are the chances the gap will be attributed to social media? Zero.

Some other businesses may be capturing social media purchases at the register, through coupons, or simply by asking. But here’s the rub: Half the time we don’t even realize our purchases were influenced by social media!

For example, you discover a new realtor in your area from a blog post he tweeted out on Twitter. Eventually, you buy a house from that realtor. What role did social media play in your purchase decision and what return on investment in social media should the realtor attribute to that purchase? Should he attribute the ROI to his blog, Twitter, or both?

2. The technology isn’t there yet

Closing the loop between social media efforts and in-store sales is (currently) impossible, at least in any accurate fashion. Coupons help, Foursquare check-ins are the closest we’ve seen – but the technology to accurately measure ROI does not exist yet.

Note: If your business is transacted online, then this particular bullet doesn’t apply – there are ways to accurately measure returns which we can cover another time.

3. Mindshare isn’t measurable

social media is about winning mindshareSocial media is not about transacting commerce. It’s about raising awareness and capturing mindshare so that when purchases are made (or about to be made), you’ll be chosen more than you otherwise would.

For example, you see some of your friends ‘checking-in’ via Foursquare to a new restaurant in town. The next time you’re hungry, you browse Yelp and the name of that restaurant stands out because you remember your friends mentioning it online. Finally, you visit the restaurant and then post a review on Yelp – and the process repeats itself.

In this case, the restaurant has benefited greatly from social media mindshare – but how does that restaurant measure the connection from mindshare to sales?

Right now, that’s just not how social media works. Using the above example, instead of trying to measure mindshare, the restaurant would be better off trying to generate it – by giving customers and an amazing product, service and experience that they can’t help but share and spread to others.

4. What’s the cost of not being involved?

Social media is the lowest cost medium for attracting and retaining customers that has ever existed. Today, maybe a handful of your competitors aren’t using social channels (or not using them well), but that won’t last.

If you spend all your time trying to measure returns, in a year’s time you’ll be trying to figure out how to catch up – and that’s going to cost a lot more!

For now, let’s stop worrying about how to measure ROI and make hay while the sun is shining.

Treat your customers exceptionally well, deliver a great product and make it easy for people to share your awesomeness. Your return on investment is that they will!

[Image credit: epSos .de]