The Network ROI: Concept, Metrics, and Measurement of Social Media Returns (a Facebook Experiment)

Purpose: Leveraging social action theory, social network theory and the notion of network externality, the purpose of this paper is to model two different return on investment (ROI) measures: the networked ROI which captures the network effect originating from a social media investment, and the discrete ROI which focuses social media discrete returns from individual users.
Design/methodology/approach: A field experiment was set up over a period of three months to test the effects of two variants of an advertisement campaign (a social vs a discrete ad) on the modeled networked and discrete ROIs.
Findings: The authors find that emphasizing discrete user actions leads to lower network gains, but higher monetary returns while the social action emphasis produces higher network gains, but lower monetary returns. The study further suggests that social action focus is preferable for brand promotion and engagement, whereas the discrete action focus is suitable for boosting sales and website traffic.
Practical implications: Several potential implications for social media researchers and marketers are also discussed.
Originality/value: The authors for the first time showed that that the social media returns are derived not only from individual actions taken by the user (e.g. likes and shares) but also from users’ social interdependencies and the additional exposure that results from network effects.