How to Calculate the ROI of Online Communities

By Richard Millington

Chapter 15  LinkedIn  Google Plus
ROI People

Now, we’re inching closer to the holy grail of community – the mythical ROI.

Once we have the return and costs, the ROI is really just one additional step away. We simply divide the profit by the costs to determine the return on investment.

screenshot-2016-08-04-23-23-23

For example, in the image above, the return on investment is 27.85% in the first year and 27.57% over seven years.

This highlights the problem with using the total ROI. The total ROI might show a 27.57% ROI, but per year the community is now generating a 62% ROI.

Hence, the decision to allocate resources should be made on the previous year’s ROI, not the total ROI since the organization created the community.

Be careful when communicating ROI not to fixate upon the total ROI but the ROI per year. As we will see next, how we communicate value is as important as how we calculate value.

Summary

  1. The return is the sum of all the additional revenue generated or costs saved through any measured above.
  2. The profit is the return less the cost of investment.
  3. The ROI is the profit divided by the cost of investment.
  4. The return, profit, and return on investment are simple to calculate when you have collected all the data.

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