There is no shortage of articles, think-pieces, blog entries (and sales brochures) purporting to answer the ROI question for social media. Most, you have probably discovered, fall some way short of an answer and instead focus on an approach to answering the question.
We’ve distilled these ‘answers’ down into 5 distinct approaches, which we believe pretty well sums up the current state of thinking around social media ROI.
Most of the measurement going on is measuring activity (conversations, mentions, likes) not outcomes – this is, in traditional media terms, like knowing the number of ratings you are deploying, rather than the financial ROI.
The premise of these approaches is: when you can’t measure what matters, measure what you can. Measure intermediate outcomes, proxies that you think will be correlated with ultimate performance, or that are self-evidently good things (e.g. ‘engagement’). Interestingly in one article we saw, the balanced score-card (which did the rounds a few years ago in business circles) was resurrected as a way to approach social media measurement.
Another strand focuses on the process of social media marketing and takes what we call ‘common sense’ approaches. These recommend taking steps that should be common to any marketing programme, such as ‘establish objectives’, ‘set goals’ and ‘specify targets’.
Next, approaches which try to measure social media ROI in a clever, lateral way. One example is a recent MIT Sloan paper which reasons that a measure of ‘return’ is the effort that consumers take to engage with the brand.
At the cutting edges of our field, even of science itself, there are a lot of serious academics working on topics such as sentiment modelling, automated language recognition, network modelling and the like. This field is highly technical in nature, and relatively undeveloped, as one might expect from its academic nature.
The common thing which all these approaches have is that none of them really capture ROI as we know it, and so turn to the other approaches – which are essentially expedients. Ask yourself the question, “What would I do if I couldn’t measure the ROI?” and you would probably come up with the approaches we list above.
All of these approaches fall some way short of the objective of measuring media ROI. Upstream, they don’t make conversations an operational lever; downstream, they don’t link conversations to the bottom line.
Together, these two links are the essence of ‘ROI’. To have ROI you need to be able to invest in something… which needs to reach consumers… and motivate them to think and feel favourably about your brand… which needs to result in a purchase, resulting in additional profit or ‘return’.
Unfortunately, these links aren’t there in social media. And here’s the crux of the matter. Social media really isn’t much different, in principle, to word of mouth. The key difference is in our ability to monitor some of the conversations. What the advent of social media really gives us is a window into the brand-building process. We can now watch our brands being built or destroyed in close to real-time.
Perhaps the problem, then, is the question itself. Are we really right to regard social media as an activity we invest in, and which generates incremental business value in the here-and-now? If not, then we might have to ask a different question to get a meaningful answer instead of another approach.