If you hire a social media advertising agency, how do you know they are delivering on your investment? This question is ambiguous for many small and medium-sized businesses that hire an outside social media marketing agency and lack the knowledge internally.

The good news is that you don’t have to be a social media marketing expert or even a marketing expert to determine if your agency is performing well.

To understand your costs, you should separate the management fee and media costs. Both are usually necessary and should be made available to you.

A management fee is typically used to pay for the staff and the overall expertise managing your social media ads. I’ve seen some fees range anywhere between 15% upwards of 200% (or a flat-fee resembling a similar model) of ad spend.

The cost of media is the amount of money that is spent on the advertisements themselves such as what Facebook and Twitter charge for distributing ads to their online audience.

At a minimum, I hope your social media agency provides transparency into their management fees and media spend. Without this data, you could be overpaying on your social media investment; or you might realize they are performing on target.

So, what performance is on target?

It’s not a specific dollar amount, but your social media agency should be demonstrating a pattern of discovering finely-tuned audiences and increasing clickthroughs and conversion rates. It’s okay if your reach decreases from initial levels so long as the conversions and CTRs are in check. Overall, the cost per conversion should decrease (from media costs).

Additionally, your social media agency shouldn’t only provide canned reports on ads and their distribution. The agency’s reports should be specific and aligned to your business needs such as a campaign or a major objective. Within them, they should document important actions they have taken, and forward-looking with activities for the following month. You should view every chart and data point as a SMART Goal (Specific, Measurable, Attainable, Relevant, Time-bound). I’m willing to bet that clicks and impressions don’t move the needle in your business.

Impressions don’t mean jack unless your business can simply scale from impressions. Companies that buy media based on impressions are Taco Bell, Redbull, Old Spice. If a product is so good that the only thing holding it back is exposure, that’s easily solved with a large digital budget, being a little reckless is okay if you’re confident that eyeballs alone will result in people buying more tacos, energy drinks, and deodorant. However, most products aren’t this irresistible. Even the iPhone has objections even in cases where money is not an issue. If your ad agency sells you on impressions alone and sales remain flat or decreasing, that’s a red flag suggesting that you should conduct a social media ads audit from a trusted provider.

Beyond the classic ROI measurement, which basically measures the entire investment of your social media channel and management, is the actual measure of the ad spend itself. A better metric to measure is Return on Ad Spend (ROAS). Even if the management fees are high, this metrics allows a unified measurement from one channel to the next. Not only does it measure the channel, it measures the output of that channel uniformly. While it’s potentially unequal to compare Facebook video ads to TV ads, they are all held to the same measurement of Return on Ad Spend. You might discover that some other marketing lead sources perform better than others. The missing link in all of this is attribution. We’ll get to that in a bit.

Innovation can be measured

Though it’s not a traditional way to measure a social media ads agency, I nominate that you should evaluate your social media agency by their activities driven by innovation. Ideas without execution are meaningless. I believe a portion of the ad budget should be allocated to experimentation. Investing in innovation is vital so you can test and validate new messages and creative so you stay relevant and your ad costs don’t rise due to fatigue. Winning ad units should be propagated to incumbent campaigns one-by-one to drive continued growth and performance.

Innovating your social media ads doesn’t only mean creating dozens of ad variations and throwing them against the wall. A hypothesis should be drafted, a method should be outlined, data should be acquired, and results should be evident that the hypothesis was confirmed, unconfirmed, or should be altered. This is essentially the scientific method, but social media ads are the perfect laboratory for testing marketing messages, creative, and user behavior.

Even if tests fail, that’s great. Why? Failures should be documented, to drive mutual learning and progression. It also means that for the low, low price of $100, you have proven (quantitatively) that your audience doesn’t like that specific combination of headlines, copy, and creative.

Does your social media agency perform?

Your social media ads agency should make a compelling case for continued engagement every month. Not just at the end of the term. They should be a trusted vendor that guides your use of social media for advertising, and they are responsible stewards of your social media ads budget. With a regular communication and check-ins, you won’t be driven to search Google for “How to measure my social media agency?”

If you think it’s time your social media ads are due for a review, request a free consultation. We won’t steer you wrong, and if everything is performing well, we’ll let you know that as well.