For many Australian small business owners, social media can feel like a ‘black hole’ where time and money disappear without a clear result. Understanding your Social Media Return on Investment (ROI) is the only way to move beyond ‘vanity metrics’ like likes or follows and see how your digital presence is actually impacting your bottom line.
Measuring ROI allows you to identify which platforms are driving sales, where you are wasting budget, and how to optimise your strategy for better growth. This guide will walk you through the exact process we use at Local Marketing Group to help our clients track every dollar spent on social media.
Prerequisites
Before you begin, ensure you have the following:- Access to your social media business accounts (Facebook, Instagram, LinkedIn, etc.).
- Google Analytics 4 (GA4) installed on your website.
- A clear understanding of your business costs (labour, ad spend, and software).
- An Australian Business Number (ABN) linked to your Meta Business Suite (required for some ad tracking features).
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Step 1: Define Your Social Media Objectives
You cannot measure ROI if you don't know what you are aiming for. ROI isn't always about direct sales; it can also be about lead generation, brand awareness, or customer retention. What to do: Choose one primary goal for the next 30 days. For example, "Increase website enquiries by 15% via Instagram."Step 2: Assign a Monetary Value to Your Conversions
To calculate ROI, you need to know what a 'win' is worth in dollars. If you sell products online, this is easy. If you are a service-based business (like a plumber in Brisbane or a lawyer in Sydney), you need to estimate. Example calculation: If 1 in every 10 leads becomes a customer, and a customer is worth $1,000, then 1 lead is worth $100.Step 3: Set Up Conversion Tracking in Google Analytics 4 (GA4)
GA4 is the gold standard for tracking what happens after someone clicks a link on your social media. Screenshot Description: In your GA4 dashboard, navigate to Admin > Property Settings > Events. You should see a list of events likegenerate_lead or purchase. Ensure these are marked as 'Conversion' events.
Step 4: Use UTM Parameters for Every Link
If you post a link to your website on Facebook, GA4 might just label it as 'Social'. To see exactly which post or campaign drove the sale, you need UTM parameters. What to do: Use the Google Campaign URL Builder.- Source: facebook
- Medium: social
- Campaign: spring_sale_2024
Step 5: Calculate Your Total Social Media Investment
ROI is calculated by subtracting your costs from your earnings. Most businesses forget to include the 'hidden' costs. Sum up the following for the month:- Ad Spend: Your actual budget paid to Meta, LinkedIn, or TikTok.
- Content Creation: Costs for photographers, graphic designers, or stock footage.
- Labour: The hourly rate of the staff member managing the accounts.
- Software: Monthly subscriptions for scheduling tools (like Buffer or Hootsuite).
Step 6: Identify Your 'Social-Assisted' Conversions
Sometimes a customer sees a post on Monday, visits your site on Wednesday via Google, and buys on Friday. Social media played a part, but it wasn't the 'last click'. Screenshot Description: In GA4, go to Advertising > Attribution > Conversion Paths. This report shows you how many people interacted with social media before eventually converting through another channel.Step 7: Gather Data from Native Platform Insights
While GA4 tracks website actions, native platforms track 'on-platform' ROI, such as Lead Forms on Facebook or LinkedIn. What to do: Export your monthly reports from Meta Business Suite. Look for 'Cost per Result'. If your goal was lead generation, compare this cost to the value you assigned in Step 2.Step 8: Use the ROI Formula
Now, put it all together using the standard ROI formula: ROI = (Net Profit / Total Investment) x 100 Example: You generated $5,000 in sales from social media. Your total costs (ads + labour + software) were $2,000. ($5,000 - $2,000) / $2,000 = 1.5. 1.5 x 100 = 150% ROI.Step 9: Analyse and Adjust
Once you have your percentage, look at the outliers. Did LinkedIn have a 300% ROI while Instagram had -20%? Pro Tip: Don't kill off a low-ROI channel immediately. Check if it is driving 'Assisted Conversions' (Step 6) before deciding it's useless.Step 10: Create a Monthly ROI Report
Consistency is key. Create a simple spreadsheet or use a tool like Looker Studio to track these numbers month-over-month. This allows you to see seasonal trends—for example, many Australian businesses see a spike in ROI during the EOFY (End of Financial Year) or the lead-up to Christmas.---
Pro Tips for Better ROI
- Focus on 'High Intent' Platforms: If you are B2B, LinkedIn usually offers a higher ROI per lead, even if the ads are more expensive than Facebook.
- Quality Over Quantity: Posting five times a week with zero engagement costs more in labour than posting twice a week with high-quality, conversion-focused content.
- Test Your Landing Pages: Sometimes social media is doing its job (driving clicks), but your website is failing to convert them. Ensure your site is mobile-friendly for Australian users who browse on the go.
Common Mistakes to Avoid
- Ignoring Labour Costs: Your time (or your employee's time) is not free. If you spend 10 hours a week on TikTok and get one $50 sale, your ROI is deeply negative.
- Chasing Likes: A post with 1,000 likes and 0 clicks has an ROI of $0 unless your goal is purely brand awareness.
- Short-Term Thinking: Social media often requires a 'nurture' period. Don't expect a 500% ROI in your first week of a new campaign.
Troubleshooting
- "My GA4 data doesn't match Facebook's data": This is normal. Facebook uses 'view-through' attribution (counting people who saw an ad but didn't click), while GA4 usually relies on clicks. Trust GA4 for website conversions, but use Facebook to see brand reach.
- "I can't see which posts drove sales": You likely forgot to use UTM parameters (Step 4). Start using them today; they aren't retroactive.
- "My ROI is negative": Don't panic. This usually means your targeting is too broad or your 'Value per Conversion' (Step 2) is set too low. Refine your audience to focus on local Australian postcodes rather than the whole country.
Next Steps
- Set up your GA4 conversion events today.
- Calculate your total social media spend for the last month.
- If you're struggling to make the numbers work, contact the experts at Local Marketing Group for a comprehensive social media audit.