Can Companies Measure Social Media ROI?

A new Gallup study challenges the effectiveness of social media ads.

Jul 3, 2014 at 8:04AM

(Editor's note: The original version of this article attributed the ownership of the Oreo brand to Kraft. It is owned by the Nabisco division of Mondelez International. The Motley Fool regrets the error.)

According to a recent Gallup survey, 62% of Americans report that social media advertising has no effect on their purchasing decisions. Especially surprising is that this finding extends to Millennials, or adults born before 2000, a group especially dedicated to the genre. Nearly 50% of Millennials report social media advertising does not influence their buying decisions.

Screen Shot

The Way of the crumbled cookie
For brand managers, the results of this survey have to be about as welcome as a dirty diaper in a swimming pool. After all, it's a tricky business to make a case for return on investment, or ROI, on social media. In an analysis of social media ROI, there is a lot of what Time described as "proving" the media.

Nabisco, for example, has garnered widespread credit for its online Oreo campaign, but has been tight-lipped about sales results (an inquiry made to Nabisco was unanswered). What is known is that Oreo is a $2 billion worldwide brand for Mondelez International, with half of those sales in the U.S. market.

It may be that Nabisco isn't returning media calls because it doesn't want to talk too much about a good thing – the power of social media. Real-estate agents have a marvelous expression: "Buyer are liars." This sentiment refers to the self-deception involved when we purchase. This quirk has been studied in depth, and it turns out that we consumers really don't know ourselves very well.

The psychology of purchasing behavior
The impact of advertising has been under study for a long time. In 1904, Walter D. Scott, a professor at Northwestern University published an article in The Atlantic Monthly titled "The Psychology of Advertising." He labeled advertising as "the nervous system of the business world … to awaken as many possible images as the object itself can excite." In the modern field of consumer study, this is known as "affective conditioning."

In a 2010 article in The Journal of Consumer Research, a Ph.D writing in Psychology Today summarizes: "We live in a world of advertising. It is a world of our making, of course. We don't like to pay the full price of things, so we allow other people to pay part of that price in exchange for letting them pass a message to us.... That information ultimately affects the way we make choices, whether we know it or not."

It seems that no one likes to admit that advertising influences them; we're too smart for that, right?

Further evidence indicates that, indeed, "buyers are liars." In a study published in a 2009 issue of The Journal of Database Management and Consumer Strategy Management, "ROI in social media: a look at the arguments," it was reported that 49% of consumers "made a purchase decision based on the information they found through social media sites," and that 45% of people who searched for information via social media sites "engaged in word of mouth," compared to 36% who found information on a company or news site. A hundred years earlier, our old friend Professor Walters said the "only method of advertising known to the ancients was the word of mouth."

The ROI debate
It turns out that social media ROI results are measurable. Mondelez, for example, increased sales of its Toblerone chocolate in the Philippines by 132% after 500,000 website hits were achieved through a social media marketing campaign; Coffee Groundz increased sales by 25% as the result of a Twitter campaign; and Jimmy Choo, an upscale shoe company, increased sales by 30% via a Twitter campaign.

No doubt, the Gallup results are accurate. It just turns out that we are not the individuals we imagine. Our consumer behavior is predictable, including our denial of that behavior.

However, Gallup offers another rationale for its findings: "In the State of the American Consumer report, Gallup reveals that consumers who engage with brands often do so when they are already attached to a product or service. Companies that engage their customers -- by providing exceptional service and a pleasurable in-store experience -- will, in turn, drive those customers to interact with them on social media. Simply promoting products and services on Facebook or Twitter is unlikely to lead to sales."

It's a classic chicken-or-the-egg dilemma. Do consumers engage brands because they are already customers, or do we become buyers because of the brand exposure on social media? This is research that needs to be conducted. 

The debate, however, is further confused by the fact that advertising now appears on eggs. CBS recently printed laser messages to promote its fall lineup on 35 million eggs. This "outernet" strategy to "engage consumers … as they go about their daily lives" is perhaps confirmation that, per Professor Walters, everything old is new again.

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

John Mitchell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers