There’s an awful lot of talk these days about social media and how it should be embraced by businesses. One of the key issues often raised is the return on investment, or ROI.
The obsession with ROI has a lot to do with the need to measure what companies are getting from their social media efforts. There’s a feeling that many companies won’t implement social media until they can accurately measure ROI.
There are a couple of problems with this approach.
The first issue is social media is in its infancy. This means the services being used to launch social media programs and the tools used to measure campaigns are still being developed. To demand, there be definitive metrics at this stage is game is unrealistic.
The second issue is ROI can be defined differently for different companies.
While some companies are looking for higher sales, others may want to use social media to enhance their brands, establish a stronger online presence, attract more traffic, compete with rivals, or connect with customers, employees, supplier or investors. How you measure these different goals is obviously different and, sometimes, difficult.
At this stage in the game, the obsession with social media ROI is unhealthy because it could deter companies from experimenting with social media, which is exactly what they need to be doing right now as the tools and services evolve.
While not to suggest companies spend on social media with little interest in what they are getting out of it, the focus on ROI shouldn’t be first and foremost. In time, ROI will be a lot easier but, for now, forget about ROI, and focus on getting into the social media game.
More: Tom Smith has a post on Mashable looking at why many companies haven’t jumped on the social media bandwagon, including the fact that “metrics are new”.
Technorati Tags: ROI, social media
10 Comments
Nice post Mark. The thing is, with more and more companies hopping on the social media bandwagon, you would think that measuring ROI would be keeping up with the pace. There’s a huge demand to track and measure the impact of social media – but it’s also a fairly new phenomenon and a complex one at that. As communicators/ marketers we’re obsessed with validating the work we do on behalf of our clients. This should make effective measurement a reality soon enough.
I dunno Mark, your other post for October 2008 sees you making a case for more grounded business models. I understand both can co-exist, but in general when people here “Web2.0 needs a business model” they think it refers to USING Web2.0 tools as well, which then gets you into ROI.
Personally, I see the value in social media is through establishing thought leadership and quickly responding to those who are already engaged with your brand.
It costs nothing to run tweetdeck in the background checking if anybody has mentioned your site/company every few hours. And the benefit of a near-instant response is worth its weight in gold. D’oh… I think I just did an ROI analysis there
ROI on marketing spend is not new or specific to social media. In times of recession, companies scrutinize all areas of spending and certain marketing spends are simply hard to evaluate. Social media falls into that category. When times improve, companies are willing to experiment more with less of a need in justifying expenses.
It is unrealistic to assume companies facing declining sales, increasing costs to maintain existing sales, potential layoffs etc to experiment with an unproven marketing spend in social media.
The answer to this issue is not to say “unrealistic to demand ROI on social media” but to change the positioning or structure of social media initiatives such that companies are willing to engage.
Omar,
Thanks for catching me in a philosophical conflict.
I think there’s many things companies can do with social media that costs little – other than time and energy – and there’s huge ROI on that kind of thing.
cheers, Mark
Hey Mark,
I prefer the term ROE: Return On Engagement. It takes the fiscal aspect out of the equation.
Cheers,
@johncarson
p.s. Nice to briefly meet you at PodCamp Toronto, hope we can chat more in the future.
John,
I like return on engagement! Looking forward to talking more soon.
Mark
Hi Mark,
I think there is some confusion around your reasoning b/c at the end of the day your points (listed below) are there to increase sales and drive profit. It is the only reason a company exists – to make a profit!
“enhance their brands, establish a stronger online presence, attract more traffic, compete with rivals, or connect with customers, employees, supplier or investors”
Gilligan,
You’re right – the end goal is more sales and higher profits. But I think companies also need to think about how it’s important to be part of the conversation and be able to engage with customers. If that leads to more sales and profits, that’s great too!
mark
Hi Mark, interesting points and valid when applied to *business*, but obsession with ROI changes when applied to the not-for-profit sector, where resources are even tighter, no?
The Red Cross has been using Twitter (http://twitter.com/RedCross) for awareness and support. How they measure success in that media, ROI, is much different than a for-profit business would, as would justifying the resources in that environment be different.
If the goal is met by the media, then the resources allocated are justified. ROI is achieved.
– Brad
I see the true potential of social media in the ability to monitor, identify and engage conversations about brands in the marketplace.
How do we approach this from an ROI viewpoint? How have corporations ever measured the effectiveness of good PR.
In my opinion, aren’t things more easily measureable than ever before?
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