The Opportunity Cost of Social Media - More Than $30,000 a Year?

ginnybayes
Ginny Bayes CEO, Harvest Moon Publishing

Posted on June 3rd 2011

If you're a business owner who earns $70,000 a year,
your time on social media may be costing you
more than $30,000 annually

Is your business on Facebook, Twitter, LinkedIn?  Do you spend a fair amount of time updating your posts and pages to inform and connect with customers?  Then it may be time to assess how much participating in social media is costing your business and whether it’s a good use of your time. 


Social Media is Free, Isn’t It?

If you’ve hired a social media professional  to handle your business’s presence on the most popular sites, you know the hard costs of promoting your products and services, or establishing your brand and expertise, online.

But what if you handle social media yourself?  Most small business owners and entrepreneurs do, but that doesn’t mean social media is free.


Social Media’s Opportunity Cost to Your Business

Remember when your economics professor covered the concept of opportunity cost? Everything we do has a cost, even social media. One way to determine that cost is to access what your potential earnings would be if you used the time you invest in social media to focus on activities that will drive revenue for your business.


Ironing Shirts and Opportunity Cost

The best way I ever heard opportunity cost defined was listening to two business associates argue about whether or not they should iron their own dress shirts or send them out to the laundry.  One guy insisted that ironing his shirts himself was well worth his time, since he liked the way they felt when he wore them much better than the stiffer laundry-ironed variety.

But his peer asked him a few simple questions:  1) How much does the laundry charge to iron one shirt? Answer:  $3.00 per shirt.  2) How much do you earn per hour?  Answer:  $43.00 per hour. 3) How many shirts can you iron in an hour?  Answer:  3.

Doing the math, it was costing the guy who ironed his own shirts $14.33 per shirt based on the fact that he could be spending his time – and valuable time at that – doing other things.  If he’d sent his shirts out to the laundry, three shirts would cost him $9; but doing them himself cost him $43 – almost 500% more.


Evaluating the Cost and Worth of Social Media for Your Business

So what does all this mean for your business?  Using a simple method of assigning value just for argument’s sake, and leaving out the varied nuances and complexities of undefined ROI and brand value social media brings to your company, let’s see how much it costs a small business owner or entrepreneur to handle their own social media.

Assumptions:

Business Owner A earns a net income of $40,000;
Business Owner B, $70,000;
Entrepreneur A, $100,000;
Entrepreneur B, $120,000. 

If they each work 50 hours per week, their hourly wages roughly come to $15, $27, $39, and $47 respectively.

The following chart estimates the opportunity cost each of them invest if they devote one, two, or three hours a day to social media.OpportunityCostGraph

An Hour a Day of Social Media Can Cost $12,267 Every Year

As you can see, investing only one hour a day toward social media can have real costs:

Business Owner A - $4,176
Business Owner B - $7,047
Entrepreneur A - $10,179
Entrepreneur B - $12,267


Three Hours a Day of Social Media Can Cost $36,801 Every Year

Business Owner A - $12,528
Business Owner B - $21,141
Entrepreneur A - $30,537
Entrepreneur B - $36,801


Making Social Media Profitable for your Company

That’s a lot of money.  So what are your options? The reality is that for entrepreneurs and small business owners, it’s hard to equate opportunity cost with checks you mail to vendors.  If you’re determined to handle your social media marketing yourself, there are things you can do to make your time worthwhile:

  • Limit your social media time to one hour or less per day
  • Schedule your tweets in advance using apps such as Tweetdeck, HootSuite, or Twuffer
  • Set specific goals for your social media presence and make sure your updates and tweets match those goals
  • Limit the time you spend looking at non-business related social media material
  • Sign up for an app which automatically sends a direct message to your followers and/or automatically follows back whoever follows you
  • Break your Twitter followers into usable lists, i.e. SEO, website design, social media, human resources, angel investors, etc.  That way you can scroll through a topic-specific list of tweets instead of hundreds that may be of no interest to you.
  • Take advantage of top sites which follow the important events happening in business, social media, tech, and the world instead of trying to keep track yourself.  I recommend Mashable, Alltop, Huffington Post, and your favorite newspapers and magazines.

If these tips don’t redirect your focus from social media to generating revenue, it may be time to hire a social media professional to take care of your online presence for you.  Only you can decide what your time is worth and how best to spend it for your company.

ginnybayes

Ginny Bayes

CEO, Harvest Moon Publishing

Bayes has extensive experience in the fields of broadcast, print, and digital advertising, writing, and content development. She's been at the helm of Harvest Moon since its founding in 1997 and oversees its operations including business development, client revenue program initiatives, content development and management, and daily operations.

Prior to founding Harvest Moon Publishing, Bayes was president of Bayes & Associates Advertising, a Denver advertising and public relations agency. The company represented more than 80 clients ranging from small businesses to national firms.

During her tenure at Bayes & Associates, she was also a weekly columnist for the Rocky Mountain News and Denver Post on real estate topics.

See Full Profile >

Comments

Posted on June 4th 2011 at 5:45PM

"Sign up for an app which automatically sends a direct message to your followers and/or automatically follows back whoever follows you"

Doesn't that sound like spam?

Posted on June 5th 2011 at 9:07PM

That's why it can definitely be worth it to hire a professional to take care of your social media marketing. Not only does it free you up to work on your business, they often have much better results. I know at The Content Factory (www.contentfac.com), you can work with them to figure out which services you want, which can save you money (and put your social media in the hands of people who have lots of expertise).

Posted on June 9th 2011 at 2:21PM

Hi Gina,

I love that you're focusing on dollar signs associated with social media. Too many people forget that the time they spend has real revenue implications and needs to be appreciated from that perspective!

It's important, however, to not only look at the cost side of the equation. The entire reason that a business would spend time on social media is to earn revenue, not simply for fun. Therefore, we should really be looking at social media investment from a total ROI perspective. If your time spent on social media has a positive ROI, there's no need to reduce it!

The trick in doing this is attributing revenue to social media. How you do this depends on what kind of business you are. A good place to start is social media conversion tracking on your website, but you should also attribute offline revenue as well. Once you know how much revenue you're taking in from social media you can begin to make good decisions on how to spend your time!

Tristan

Posted on July 6th 2011 at 2:01AM

Two problems associated with opportunity cost as far as the article and subsequent comments go.

1. There's no mention of how much social media brings in per year, everything is purely a cost. Social media nor any other designated cost is a one-way street. How much do the leads social media brings in create in revenue for your firm?

2. Outsourcing social media to a third-party just means that I connect with them, not you. For the small business owner that highlights personal service I want to connect with them, not with a social media company. For larger companies I realise I'm dealing with a department within a multinational but I'd still like to think one customer is worth more than a scripted reply or worse, someone that has no ability to deal with the issue.