Proving value in social media is much akin to doing the same in public relations. This is precisely why so many CEOs and CMOs are hesitant to commit dollars to efforts there. When the bottom line determines every decision, much of what a company or brand should do winds up on the wrong side of the ledger.

Social Media MeasurementShould we spend more money on the more eco-friendly heating and cooling system? On recycled paper? On diversity training? On dental or optical coverage for employees? Yeah, you should. But none of those are a given because when it comes to running a business, bigger margins trump bigger heart every time.

So it makes sense then that companies spending money on social media are also hoping to provide sufficient measurement for success. Several good companies exist that attempt to generate metrics to please the bottom-liners. We have profiled Radian6, Collective Intellect and Cymfony here. Our hope is to look at several others, including standouts Nielsen BuzzMetrics, K.D. Paine and Associates, BuzzLogic and more in the coming weeks. If you’re looking for evidence of social media Return on Investment (ROI), you’ll do good to start with one or more of any of these folks.

But I would like to offer a philosophical consideration to CEOs and CMOs out there. Yes, it’s a bit of a pie-in-the-sky view, but gets to the heart of one reason companies should participate in social media in the first place.

Perhaps we shouldn’t measure social media ROI in the first place.

The reason? The core reason social media programs are successful is because they’re about people, not money. Look at the social media buzz words – community, conversation, dialog, sharing – all of them are people-centric, consumer-centric. Social media isn’t about sales. It isn’t about market share. It isn’t about profit margins. It’s not company or brand-centric.

John Iwata of IBM, on the May 5 edition of “For Immediate Release” public relations podcast, told Shel Holtz and Neville Hobson that a business’s activity in social media should start with an ROI focus that looks at the “I” instead of the “R.” He said:

“Some might obsess with the ‘R’ but I would ask them to first begin with the ‘I.’ What is the cost of the methods and technologies? What is the big ‘I’ with new media? I would start there. That, in fact, it is pervasive and is becoming a global and historic phenomenon because the ‘I’ is virtually not there. It is essentially free and available to all. It is very cheap to adopt these things. If there is an investment, it is on management attention and time to make sure these things are done and adopted thoughtfully and strategically.”

The cost is little. Tearing away the layers of corporate red tape and legal approvals to permit your employees (your communications staff for starters, but everyone in an ideal scenario) to comment on blogs, answer questions in forums and message boards and proudly wear the badge of your company in their online lives costs nothing more than the bravery to do so and the time needed to ensure strategic thinking lies at the foundation of the outreach.

A lot of what consumers find disconcerting about messages from brands and corporations is the ulterior motive of profits. By diving into social media with the proper attitude – that it’s for the consumer, not the bottom line and that it’s about the investment, not the return – brands will overcome consumer skepticism and be accepted into the community to engage in conversations and connect to consumers on levels never before thought possible. And with that, the bottom line, and return, will take care of itself.

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About Jason Falls

Jason Falls

Jason Falls is a leading thinker, speaker and strategist in the world of digital marketing and is co-author of two books, No Bullshit Social Media: The All-Business, No-Hype Guide To Social Media Marketing and The Rebel's Guide To Email Marketing. By day, he leads digital strategy for Elasticity, one of the world's most innovative digital marketing and public relations firms. Follow him on Twitter (@JasonFalls).

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Comments Policy

Comments on Social Media Explorer are open to anyone. However, I will remove any comment that is disrespectful and not in the spirit of intelligent discourse. You are welcome to leave links to content relevant to the conversation, but I reserve the right to remove it if I don't see the relevancy. Be nice, have fun. Fair?

  • http://blog.clearcastdigitalmedia.com/ Matthew Chamberlin

    I could not agree with you more, Jason.

    I have never been able to get a satisfactory answer to the question: Why are 2.0 communications tools held to a DIFFERENT standard than offline tools? A TV show has X Nielsen rating or a magazine has X number of readers. But can you tell me HOW MANY people saw my spot or read my ad? What did they do next? No one’s feet are held to that fire. Yet we have done this to ourselves in the new media marketing world.

    It has always struck me as a fatal error how we trumpet these measurement tools since they are, at best, imperfect and at worst, the noose that is hanging us all since we are forced to fight two battles at once. One is the battle of changing decades-old thinking that blogs, podcasts, wikis, etc., are not something for your 12-year old daughter but the way EVERYONE is going to be communicating in very short order. The second battle is the old school metrics battle. If you going to change the conversation, you are going to have to change the vocabulary, too.

    One fifth of all US heads-of-households have never used e-mail. Ouch.

  • http://websuccessdiva.com Social Media Marketing Expert

    You are absolutely dead on, on these points. Social media, by it’s very nature, is very difficult to measure — especially at the level of ROI. This is always the conversation with CEOs and CMOs — most still have a hard time grasping it. Great, insightful post!

    Maria Reyes-McDavis

  • http://prstore.typepad.com Scott Hepburn

    To change the conversation about social media metrics, we may have to define the metrics ourselves. I’m just not convinced the “Well, it’s hard to measure…” and “ROI doesn’t apply here…” arguments will gain traction.

    When a hotel puts a mint on every pillow or purchases 600-thread count sheets, can anybody quantify that impact? If bookings and revenues increase, how much of the increase can be attributed to mints and linens?

    Rather than trying to show a quantifiable correlation between social media and profits, we need to find ways to demonstrate that social media — the mint on our corporate pillows — is a vital part of our success.

    Any ideas?

  • http://everydotconnects.com Mike Chapman

    You’re right on here. The added burden is to remain true to the concept of basic honesty in our approach. We don’t want to stress fuzzy math metrics and we have passed over opportunities to take the credit for successes that we actually shared in with our clients. We continue to stress the long-term over short-term in strategic decision making.

  • http://www.socialmediaexplorer.com Jason Falls

    Thanks all for your comments. Generally, I would point out that while my post is philosophical in nature, the practical matter resides that measurement is needed. However, I agree with Matthew that old school metrics aren’t applicable. (Frankly I never thought they were. Sampling is inherently flawed, in my opinion.)

    Thank you, Maria!

    Scott – Agreed and I don’t think ROI shouldn’t be calculated. To determine the value of the social media mint-on-the-pillow, I think we have to look at things like conversation share online, customer satisfaction, customer interaction and tie each of these to strategic points on the timeline of social media activity. There will always be a delay effect … buzz doesn’t happen over night, but if a social media program is launched in January and sales pick up in March, there can be correlations made, just like your hotel bookings scenario.

    The topic is certainly worth discussing more as we all come together to define success in the new media landscape.

    Mike — Amen on the long term. I know of a Fortune 100 company whose Q1 earnings were down several million from projections. They happen to have started some cool social media programs that will probably be reflected in late Q2 or Q3 earnings or market share. But the impatience in today’s corporate environment dictates all the people running the social media programs will likely be fired. Ugh.

  • http://humanvoice.wordpress.com/ Tom O’Brien

    Hi Jason:

    New things are always held to a higher standard (for ROI and scrutiny) than familiar things. Social Media investment and measurement definitely falls into this category – so it is up to us (as an industry) to prove our case.

    Love to talk more SMM with you – we had an article in AdAge yesterday about brand advocacy in social media.

    TO’B
    MotiveQuest LLC

  • http://kmlearning.blogspot.com Ravi Govil

    Hi Jason
    I agree with you that it is difficult to measure the ROI of the new initiatives in social media. One reason is that companies do not have measures in place to calculate the exact costs of collaborating and communicating within the enterprise or outside with partners and customers. But still executives look for ROIs to justify their initiatives and extend of commitment. Secondly there is no quick win in adoption of social media, since it is user centric and a cultural change.

    Ravi

  • http://www.socialmediaexplorer.com Jason Falls

    Tom and Ravi – Great points both. Thank you for adding your perspectives.

  • Cameron

    The intangibles are so easy to overlook. What is the value of getting candid and passionate engagement in the brand? What is the value of getting REAL customer or employee insights that help to shape product, process and service evolution? What is it worth to have a TRUE two-way relationship with customers and/or employees where the users feel valued and heard?

    If ROI is the concern, trim a few commercials, FSIs or displays from that black hole called traditional media. While their audience and value continues to contract, its time to make an investment in discovering a loyal following.

  • http://www.kdpaine.com kdpaine

    Jason, you knew I had to jump into this one! I think what you’re talking about “not measuring” is eminently quantifiable. You’re talking about improving relationships with customers, stakeholders, employees etc. and there have been established ways to measure relationships that have been in place for a decade. http://tinyurl.com/6azjzh or http://tinyurl.com/2duocz.
    Improved relationships have been shown to yield lower transaction costs, lower legal expenses, lower turnover,and higher net return to shareholders. All things that are very measureable.
    The problem is that too many people in our business want to translate social media into “eyeballs” when we know that is NOT what its all about.

  • http://www.socialmediaexplorer.com Jason Falls

    Cameron – Good point. I would concur that being more efficient with the dollar can open the opportunity for measurement.

    K.D. – Always honored when you stop by. I agree these things can be measured and you know I’m wholly into the practice and need for measurement. But from a philosophical standpoint and to prove a point about the approach to social media, having the mindset that it’s about what you do, not what you did, makes all the difference in the world in a company’s success.

  • http://www.theanalyticsguru.com marshall sponder

    Having just attended the social media roundtable in Toronto wirth Katie on my right and Marcel on my left, whose Radian6 you profiled, or want to…and having spoken to you at Blogger Social, figure I should chime in, while typing with my thumbs on my Sidekick.

    Ok, the fallacy, and you point this out, of Social Media Measurement, and I just posted about Edelman’s paper on webmetricsguru.com, is we’re trying to measure offline activities with online proxies. Social media is really, for me, a way to continure relationships with people I’ve met, or, people I will meet.

    My “influence” is not my pagerank, backlinks, subscibers, Techorati Rank, Facebook Friends, Seesmic followers, Youtube video views, blog posts, Twitter followers, widgets deployed, or any of the countless things , or even a coefficent of those thing, like a rasnking is some else’s meaningless formulas (adage 150, for example).

    For me, influence is simply, who I know and how much I can ask of them.

    That’s an offline thing….so all the stuff people are coming up with, and god bless Steve Rubel and the rest, unless your also willing to give greater weight to the conferences I’ve attended, the people I have personally spoken with and who know me, the books and articles I have written……then, all the rest is just groping, and not coming up with much, I might add.

    By the way, the paper the RoundTabe in Toronto produces will be available in a few months, so I have been told.

    Marshall

  • http://www.socialmediaexplorer.com Jason Falls

    Very well said, Marshall. And thanks for the perspective. But what about the measurement of the conversation about a brand in the online space? That’s what the firms get after. I get your argument from an individual perspective, but there’s still validity in knowing what people are saying about you, not just how many people will hear if you talk. (Both would be cool metrics to figure out, though.)

  • http://www.afhill.com/blog Andrea Hill

    >The core reason social media programs are successful is because they’re about people, not money. Look at the social media buzz words – community, conversation, dialog, sharing – all of them are people-centric, consumer-centric. Social media isn’t about sales.

    Yes, but you can measure things about people, too.. specifically I’m thinking about usability metrics like the SUMI. It may be difficult to pin a dollar value on a pair of eyeballs or a blog post, but that’s not to say that anything that is human-centered can’t be measured.
    I’ve worked in the User Experience field for several years, and there was the same sort of question being bantered about: how can we justify the costs, what is the ROI. If we shy away from offering up those numbers, it’s because we’re afraid to get them wrong, not because they’re not measurable. There has to be some value to everything we do. I am extremely passionate about accessibility, but it’s a hard sell for some. Even if it is about “doing the right thing and providing the user with the best experience”, someone has to pony up and define what that best experience is, and how you can tell if you’ve succeeded..

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  • Dean Westervelt

    Hi Jason,

    Great post with comprehensive commentary.

    I would only add that the challenge of quantifying the ROI of any social media outreach or marketing efforts, especially if companies wish to move beyond core social media metrics such as sentiment and activity trending, rely very much on synthesizing data from disparate sources such as web conversions or unattributed sales. For years, the shangri-la for marketers in mass media has been a media or marketing mix model that statistically estimates the value of each media based on mass advertising inputs. Seems to me the nascent social media channel, and information associated with it, could become another input into this type of model. Of course, the capability of companies to synthesize and execute on this remains a challenge while marketers simply focus on getting through their days!

    Guess I could have said this more concisely – ROI seems difficult but not impossible to back into, especially if marketers are willing to accept an estimate instead of pretending that it’s a rock-hard number that C-level execs hang their hats on.

    Dean
    CI

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  • http://shannonpaul.wordpress.com shannonpaul

    Why has it taken me this long to start reading your blog!?! This is *exactly* what I have been mulling over in my head for days.

    Like everyone else, I was stuck on thinking I had to prove ROI in social media, but then it finally occurred to me that the metrics designed to measure the efficacy of PR have always been murky at best! Ad equivalency? Pish posh.

    Thanks for this — I’m off to write a post of my own!

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