I can’t think of many instances where social media does not give you more bang for your buck. With the onset and increasingly more accessible stream of on demand content, and the dubious value of traditional advertising from the days people were forced to sit through it, social media is really a godsend for both sides. A more informed consumer will be increasingly unsusceptible to key word strategies and will demand to be reached through informative and interactive mediums. Social media delivers by essentially turning a company as large as Sony into your neighborhood electronics store.

We all know these television commercials aren’t working and banner ads aren’t exactly stellar performers either, I mean can you even remember the last time you clicked on one? What is very interesting to me is what will happen when we as an industry begin to talk more openly about the elephant in the room. How does television and other ad supported content survive in the new landscape.

The physical measurement of social medias ROI does entirely rely on ones definition of success. Regardless of whatever that is defined as social medias true ROI may be as simple as a happy customer. Social media has the potential to deliver more than traditional advertising ever could, yet even if it does at the end of the day do you need anymore ROI than happy customers with such a small investment?

There’s no question that ROI exists and I would think it’s entirely more measurable within the digital community than it is anywhere else. We’re not all walking around with our preferences outlined on our t-shirts, and our presence in a store or restaurant is in no way indicative of whether we actually care about being there.

In our communities, though, we build reputations. We seek out connections and we look for trustworthy sources of input, feedback, and insight. Our online communities have the added feature of keeping a record of those decisions and behaviors, so that we start to paint a picture of ourselves as a consumer, mini think tank, and advocate. The natural next step is to take your objectives as a brand or service and insert yourself into the conversation in a way that takes advantage of what you know, and allows for the community to tell you what you don’t know.

I look forward to that panel…I think there’s quite a lot to be said about the true value of authentic participation in the right communities.

hi Allan,
Yes it is possible to both quantify and measure ROI, but as a new media, it requires new metrics or more accurately, using current metrics in a new way. In social media, Customer Relationship Management (CRM) metrics are more relevant than traditional advertising metrics: the role of influencers, relationship and loyalty building, current and past conversations, strength of links, customer feedback, reputation management, etc. As much as we focus on the medium, it is, even more so about the relationships that are built. The new ‘tribes’ that are formed.
However, measuring the ROI will be quantified at some level by commonly accepted channel specific metrics (page views, click through rates, pass-along rates, etc.) and mapped back to industry standard dollar amounts.
I think metrics can be organised into 3 main categories
1.Conversation metrics: frequency of visits, dispersion effect, clusters/nodes, sentiment polarity, product attributes, offline conversations, momentum effect

2.Quality metrics: independence, time spent, attention,

3.Channel metrics: channel specific measurements tools (click-through, page views, comment postings, blog traffic, etc.)

I think some very interesting discussions are going on around the world about this.. Postrank and Social Arc (merger of Relevant Mind and another company, name escapes me) have both done some great work attaching values to the various channels of engagement.
cheers,
Lori

Jason,

The trick with ROI is that ultimately, it is an equation. You put X in and you get Y back. Buying banners and adwords is easy and, although click rates are not stellar, people do click. Google makes many billions of dollars doing this so I can work in high volumes.

There’s also familiarity. Mr. Restaurant has always bought a serious presence in the Yellow pages and it takes some serious effort to convince that doing mograting some $ and time to do a blog and shooting some cooking videos may get him better bang for he buck.

I totally agree on the bigger bang for buck through social media, but it is incumbent upon all of us in this space to continue talking about, and especially sharing specific examples.

On the “happy customer” angle, you are hugely bang on and that will be the subject of my next post since it is more important than anything else ultimately.

Cheers,

Allan @Isfan

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Allan,

I really appreciate you taking the time to read and respond. I had a few conversations with some older friends of mine who are more entrenched in traditional media and I must admit a partial retraction is in order. We on the forefront of technology often forget not everyone is here yet. Traditional advertising has always been hard to quantify, equations or not we still don’t know it’s true value. However these equations help investors sleep at night so one must be created for social media as well. Traditional media still has it’s place with the many people who are not tech savvy or a brand loyal to the point they deny negative product reviews. While the complete digitalization of everything is inevitable there are still many people who are reached solely through traditional means.

As you referred to with the Mr. Restaurant example we do need a way to explain it’s value to people who do not understand the medium. We also need a way to convince older C level professionals and investors this is money well spent. As preposterous as I believe it is to create an equation, such as those used for traditional media, which is simultaneously quantifiable and unquantifiable I agree we must continue the discussion for the greater good of the medium.

It seems we agree on what should be focused on, at least for now, as far as translating an ROI to business. I believe perhaps we should continue to sell it to business as a low cost branding and customer relations tool until we have more examples of how it can be used to translate engagement into profit. Perhaps we should approach this from the start as something they should feel good about doing and then blindside them with the money they saved and made from it? I agree what we really need in order to create any sort of ROI equation is more examples of why and how it worked. We need more examples but have to get in to generate those examples which is hard to do without being able to quantify the value… This is our challenge.

Corporations will often spend money on advertising regardless of whether or not it has real value based on how they perceive it makes them feel or look to the public. Car dealers are in their car ads because they love seeing themselves on TV. Pfizer does not need to advertise, they do because they like seeing their brand out in the public eye. If we use this we can increase their exposure and ultimately gain the examples we need to prove they deliver across the board.

I am interested to read your next ideas on the subject, it’s such an exciting topic because we are really on the frontier of something nobody really knows exactly what to do with. Anybody claiming to be a guru or an expert at this point is selling snake oil. Things change and we must adapt and stay fluid with these changes, such is the nature of something in it’s infancy. Whatever we can make successful now will shape the future of what social media becomes in and with the implications and repercussions technology brings to every facet of life this really is the place to be right now.

Ciao,

Jason

Derek,

1. Awesome comment, especially regarding reputation. Social media types are generally nice but can also be nasty when a brand want to play but don’t seem to know the rules. For example, if I follow a company and then all they do spew marketing crap then I lose respect. Great that you’re getting involved but you’re losing face because there is plenty of advice out there if you do your homework.

2. On the topic of brands becoming part of the conversation, it seems that the more successful brands don’t have that as the focus. They build social media tools for their fans, or people passionate about the space, and let them interact with each other. MySpace with music, Facebook for your friends, LinkedIn for business etc. My point is, I don’t think brands getting involved should first consider how to become part of the conversation but rather foster the conversation of those passionate about the space. What do you think?

Cheers,
@isfan

1. I can say from my experience that I’m quick to judge companies and individuals based on a Social Contract online that I think is higher than it is offline. Brands who ‘do it wrong’ lose my respect, but they only lose it as long as they don’t listen. ChicagoReader (our local weekly) was an awful twitterer, and I even knew who was behind it (an awesome twitterer). I got fed up, made a snark comment, and they apologized and said they knew I was right and had already started thinking about how to improve. They are wonderful now, but manage their account in human way.

2. I have to disagree here, to some degree. I realize car companies are using Ning to build enthusiast communities, which I think is more relevant to this discussion than LinkedIn or FB. Niche, small, ‘brand driven’ communities (networks?). They’re fine and all, but they’re walled gardens, and they create a wake between an audience that’s been won over and the market share that hasn’t. Brands need to GO to FB, LI, Twitter, and other, distributed worlds and become a PART of that community by acting like a cool, useful participant. Help people out. Listen for complaints. Be responsive.

THEN, when you’ve got something new or cool like a crazy new car or a viral video, put it out there, get some help from your best friends, and ask the crowd around you what they think.

Lori,

Some very interesting and thought provoking thoughts. I never considered measuring ROI in terms of CRM metrics. Makes huge sense and I’ll be digging into that some more.

When I was heavily into marketing for a large company in telco space, we would get leads from a variety of sources, including tradeshows, webinars, people registering on the website to get white papers and so on. They all came with a quality metric that we knew inherently so we could very quickly prioritize.

Similarly, we have to get much better at realizing that all visits are not created equal and it isn’t just a big numbers game. How a person got to your site and who that person is is supremely important because it will convert differently. We need to figure out how to quantify and measure that so that we get away from a pure big numbers mentality.

Thank you again for your excellent perspective.