David Meerman Scott had a little rant on the ROI of social media on a podcast the other day. He feels that business people asking for the ROI on social media are asking an invalid question. I tried to leave a comment on the blog, but for some reason it wouldn’t post.
David makes an argument that I’ve heard multiple times- that you can’t calculate the ROI on social media. He doesn’t outright say it is impossible, but he seems frustrated that executives don’t question the ROI of billboards or silly things like ‘putting on your trousers this morning’. He boils asking for ROI to be an excuse for fear. He properly assesses that most TV commercials and traditional advertisements aren’t well measured, but pushes against the ‘MBA calculation of what ROI is’.
What is ROI
ROI is ‘Return On Investment’. Generally investment is made in money, but can also be time or other resources. This is why when someone says, “social media is free” they are incorrect. It takes investment of time, resources and efforts that you could be putting into other things. The return itself, while generally defined in monetary terms, doesn’t always have to be money upfront. It can be another defined goal. At the end of the day however, everyone does want to know how much money they will get out of an investment.
Businesses aren’t afraid- Marketing Is
I don’t think businesses are the ones afraid of social media. If it shows a positive return consistently, then they are more than willing to put money into it. However, not every business experiences the same results that Dell did when they launched their Twitter account.
Marketers however are terrified that the ROI would calculate to not be positive. Often, they don’t have the conclusive results to show it as positive results. Marketers only want to speak about positive results. David himself does this with his case studies on his website. They never mention the millions of Facebook Groups that never go anywhere, the thousands of blogs with decent content that go unread, the Twitter contests that only have a dozen bots RT the campaign, or the ‘authentic people’ that go overlooked because someone else who is inauthentic but pulls tricks to get publicity get big.
The assessment that social media only returned a 5% ROI, or worse yet, generally lost money, would crush many of these experts extolling the values of social media and charging high consulting and speaking fees.
Quite simply put, the Emperor may be wearing no clothes, but everyone is too afraid to look- so they assume he is clothed.
Advertisers Don’t Like Measuring Either!
Advertisers (and marketing by proxy) has always enjoyed being able to say, “But what about the mind share? You can’t measure that!” and dodge questions about direct impact. Television and print have built a multi-billions dollar industries from this. Since there is such a severe disconnect between what appears on your TV screen and a direct attribution to sales- they are able to continue extracting dollars from companies regardless of actual effect on sales or the company’s bottom line!
Online advertising changed a great deal of this, and advertising rates have plummeted. Once people started doing hard measurement and realized the supply of ad space available rates fell through the floor. Maybe a banner on the front page of a site isn’t worth $20CPM afterall…
Why can’t they measure?
If measuring definitively would be of assistance however, why can’t they measure? Because they don’t know how and lack the tools.
Social Media consultants are generally non-technical people. Yes, know more about computers than the average bear, but if you confront one of them with the concept of a pointer they will likely find someone else to speak with quickly. They probably struggled in their statistics classes, but rocked at English and public speaking. Most of them went to school for business and marketing and really lack the crossover skills to excel in technology. They are very good at using pre-made tools like Wordpress, Excel and Google, but they cannot make their own.
These are somewhat broad generalizations, but overall true. These aren’t stupid people- just marketers. When I was at the first 140Conf in NYC I was working on some Twitter API hacking and someone beside me glanced over with amazement and said, “Wow, are you programming?” as if they had just seen a unicorn enter the room. Compare a Podcamp to a Barcamp and you’ll notice a severe lack of code on the social media side of things.
The tools haven’t really matured for measuring social media well. Some companies like the Web Ecology Project and Rapleaf have done solid work the field, but there are still many unanswered questions that require you to break out the coding skills to make happen.
Measurement is possible!
There is a difference between saying that measurement isn’t possible, and measurement is difficult are two very different things. The Heisenburg Uncertainty Principle says that it is not possible to know both the momentum and position of a subatomic particle, and the more you know about one, the less you will know about the other. This isn’t the case in marketing. Just because it is ‘hard’ doesn’t make it impossible. And it is an entirely other issue if the measurement simply doesn’t turn out the way you like!
How to Measure
To measure you need to clearly define the goals that the company has for the campaign. Once you have those and you enact the campaign there may be positive side effects that were unexpected, which is great and counts toward return, but it doesn’t mean that the goal was completed either. Timeframes should also be understood. Since there is a long term effect often of things online, some things don’t contribute toward instant value, but to long term value.
Sometimes you’ll find that you need a piece of data that isn’t easily accessible. Not everything in the world is pre-made through a web-app or can be done through Google instantly. Some things require massive amounts of data. That’s where a team of competent programmers come in. Of course, this can increase your costs, which can factor against you, but can also reveal other very interesting and helpful data.
What about negative ROI?
You may find that the campaign fails to meet defined metrics. You tweeted a ton, and ran a contest, but it didn’t take off. You should still honestly measure it and what happened. Don’t instantly blame the product, but show data that traffic was being delivered to it. Perhaps some things there could be changed. What customer feedback can you take to them for revision?
This doesn’t mean that they shouldn’t run a campaign again, but that maybe some things need tweaked. Redefine goals, do the things that worked well again and keep trying.
