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Archive for the ‘ROI’ Category

Yesterday, the above infographic popped up on my radar (thanks, V. Harris). At first, I thought “here we go again: another crap social media ROI infographic.” But then I took a closer look and I got it. It’s actually not bad. Well… up to a point.

Part 1 – Showing that basic business literacy is still lacking in the digital marketing space:

Verdict: Good.

Here’s what this part of the infographic tells us:

1. Marketers still mistake metrics like net followers/fans, web traffic, and social mentions (all essentially reach metrics) for ROI. Less than 30% of them consider sales to be an element of ROI. Still.

2. 73% of CEOs think marketers don’t understand basic business terminology and objectives.

3. Is it any surprise that CEOs think that marketers are essentially dumbasses and that social business is bullshit?

If that part of the infographic doesn’t perfectly illustrate the urgent need for an infusion of actual competence on every level of the social business management scale, I don’t know what does. This situation is absurd.

The silver lining: Over 70% of marketers still haven’t read my book, so we still have a lot of potential sales there.

Okay, all kidding aside, the fact that over 70% of marketers still qualify followers and fans as a measure of ROI is… shocking. Seriously. Web traffic? Social mentions? Here’s a fix: Send these people back to school. It’s almost 2013. We should be over this by now. Anyone who still thinks that way needs an intervention. It might have been acceptable in 2008, but not anymore.

Part 2 – Showing some financial outcomes that can be tied back to social media activity (and budgets):

Verdict: Good.

Here, we see examples of social media activity having a direct impact on sales. The cool thing about it is that if you go back and look at how much that social media activity cost (man hours, technology, etc.), you can assign a specific cost to it. If you have the gain figures and the cost figures, you can calculate ROI.

Thumbs-up. More of that, please.

Part 3 – “Last Touch Conversions” and the problem with last-click attribution models:

Verdict: Last click attribution is too limited a model to illustrate the full impact of social media activity on sales.

Here’s where the infographic runs into a wall. We’ve talked about this: It isn’t so much that last click attribution is wrong in assuming a cause and effect relationship between clicking on a link and making a purchase. Clearly, there’s a strong connection there. There’s intent, if anything, and that’s important, so we need to track that and put numbers to it. But focusing too much (or at all) on last click attribution is a lot like looking at consumer behaviors through a simple, robotic, kind of binary lens that only accounts for a very small fraction of the customer journey. It completely ignores the dozen (if not hundreds) of other triggers that led a consumer to eventually click on that link and decide to make a purchase.

Last click attribution doesn’t take into account the full scope of discovery (that is to say, how a consumer found out about the brand and/or product). It doesn’t take into account the impact of advertising, marketing, PR, media exposure and word-of-mouth recommendations. It doesn’t take into account the months, weeks, days or hours of research done by the consumer before clicking on that link. In other words, the entire decision process that takes place before a purchase (discovery, research, preference and validation) is excluded from the last click attribution model. Months of social interactions: gone. Customer service experiences: gone. We’re down to attributing a transaction to the very last thing a consumer did before pulling out a credit card. That’s a lot like a military unit attributing a victory in battle to the last bullet fired. Focusing only on the final few minutes of a long and complex customer journey is terribly-short-sighted, and that sort of methodology (and mentality) drags us into a ditch of assumptions as to cause and effect that generally leads to poor consumer insights and ultimately investments in the wrong types of activities.

Last click attribution is easy, sure, but since when does easy trump smart or relevant? The truth is that it’s a lazy mode of thinking. That’s right, I said it: It’s lazy.

A couple of weeks ago, we looked at how Ohtootay helps companies move beyond last click attribution (and last touch conversions) to map how consumers actually behave – that is to say how they shop. It’s a good start. We need more of that kind of thinking and more of that kind of insightful application of technology. The objective for businesses and marketing teams has always been this: to understand consumer behaviors and how to affect them in a way that leads them to notice, want, buy and ultimately recommend products. Last click attribution doesn’t do that. It’s a snapshot of the final step in a long transaction funnel. That’s all. You want to measure ROI? You want to know what’s working? You want to fine-tune the way your traditional marketing, social channel activity, customer service, product design, packaging, retail experience and competitive landscape work together (or don’t)? Great. Then you’re going to have to work a little harder to figure out how all the pieces fit, and how to make them fit even better.

Personally, I think that’s half the fun of the marketing profession: figuring out what works and what doesn’t – and why, solving those kinds of problems, fine-tuning and then fine-tuning some more… That’s what marketing is about: making it work. Understanding how to move all of those needles so your company or product team gets what they want, and your customers do too. Do it right and everyone walks away happy. That’s the goal. Happy customers, happy product managers, happy investors, job creation on the back end… That’s the big picture, one piece of the daisy chain at a time.

So a word of caution: If you’re not into asking questions, doing research, or caring enough to bust your ass to do real work, hard work – sometimes tedious work – to kick ass, maybe you shouldn’t be in the marketing business. There’s a reason why 73% of CEOs think that marketers lack business credibility. It’s because of laziness and apathy. Every marketing pro who still hasn’t learned how to explain the relationship between ROI and social media contributes to that credibility problem. Every marketing pro who still uses last click attribution as their go-to metric to gauge the effectiveness of a social channel contributes to that credibility problem. Every marketing pro who isn’t working in concert (hell, in tandem) with a product group and a sales department contributes to that problem.

Give that some thought. And if that isn’t enough to give you pause, maybe this will: If you work in marketing, 73% of CEOs right now can’t figure out why they’re paying you. And you know what? They’re looking for someone better.

Fix that.

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Social Media ROI – Managing and Measuring Social Media Efforts in your Organization was written specifically to teach managers and executives how to build and manage social media friendly business programs and incorporate social technologies and networks into everyday business operations. The book is divided into four parts: social media program strategy & development, social media program operationalization, social media program management, and best practices in measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, fix that too. It makes for a great desk reference.

(Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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As valuable as it may be to peel back the layers of a poorly put-together list of social business ROI examples, let’s now talk about how to do it right. Below is a quick 5-step guide in case you ever want to publish your own report or list of social business ROI examples:

1. Do your research.

This means talking directly with the company or agency involved with the campaign or program, not just bookmarking Mashable  articles and collecting a few white papers. Actually talk with the program or campaign lead. Have a discussion about what worked and what didn’t, what was done and why, etc. Obtain financial data, not just digital and marketing metrics. Without this data, you will not be able to add this campaign or program to your list.

2. Know the difference between writing a list of social business case studies and a list of social business ROI examples.

– Case studies may focus on a breadth of criteria for success or failure. Some may focus on the impact a campaign had on consumer perceptions while others may focus on customer acquisition or nipping a PR crisis or any number of things.

Case studies can focus on ROI but they don’t have to.

Case studies tend to be written in sections: Objective/problem to solve, theory, strategy/plan, tactics/execution, what happened, what we learned. The formula isn’t rigid but for a case study to be written properly, it has to actually study a case, hence the name. It has to have a beginning, a middle and an end. It has to show the connection between intent and outcomes.

Case studies can’t only be about what worked. They also have to be about what didn’t work. There’s value to that as well. Report on both.

– A list of social business ROI examples focuses on just one thing: Listing social business programs or activities with quantifiable ROI.

There are three parts to a social business ROI report: An explanation of the activity’s purpose and nature, the cost of that activity, and the ultimate financial benefit to the company.

The focus here is much more specific than that of a case study.

3. Format your reporting properly. 

Here is an example of how not to format an example of social business ROI:

Electronic Arts. EA was 2nd UK brand to use promoted tweets and trends to promote FIFA 12 video game. Trend engagement level was 11%, well above Twitter’s average ‘benchmark’ for trends, of 3% to 6%. Promoted tweet engagement averaged 8.3% over two-week campaign vs. Twitter benchmark of 1.5%. (Marketing Magazine, 2011) Source: Peter Kim.

Note that in spite of the short formatting the above example does not  include any ROI data whatsoever. It focuses instead on trend engagement levels and promoted tweet engagement. This not what you want your ROI reporting to look like.

Here is an example of how to properly format an example of social business ROI:

Joe’s Pie Factory. JPF wanted to increase QoQ sales of carrot cakes by 25% by the end of Q4-2011. Leveraging its Facebook page, Twitter account, Youtube channel and blog, JPF launched an awareness campaign for its carrot cakes at the start of Q4-2011. Total cost of campaign: $27,391 (for video production and content & community management). Outcome: A 23% boost in QoQ sales resulting in $59,782 in net new revenue. (Add link to case study in case readers want to learn more.)

Note that this example focuses on campaign objectives and includes both cost and net revenue data for the activity. These are the three ingredients needed to properly qualify an example for a social business ROI list or report. (See item 4.)

You could stop there or you could do the math for your readers:

Joe’s Pie Factory. JPF wanted to increase QoQ sales of carrot cakes by 25% by the end of Q4-2011. Leveraging its Facebook page, Twitter account, Youtube channel and blog, JPF launched an awareness campaign for its carrot cakes at the start of Q4-2011. Total cost of campaign: $27,391 (for video production and content & community management). Outcome: A 23% boost in QoQ sales resulting in $59,782 in net new revenue. ROI of campaign: 118%. (Add link to case study in case readers want to learn more.)

4. Make sure that all of your social business ROI examples always contain these four pieces of information:

  1. A brief synopsis of the campaign or program.
  2. The cost of that program.
  3. The financial outcome of that program.
  4. A link to the case study / your source for the ROI data.

Anything other than those three pieces of information is unnecessary. Remember that you are writing a list of social business ROI examples and not a list of social business case studies.

Failure to include all four of these pieces of information will result in incomplete reporting.

5. Make sure that your documentation is in order.

Do not rely on anecdotal information to compile your list or report. Ever.

This means: do not assume that because a social business program was in place during a period of lift in sales revenue, the social media program was the cause of that lift. Don’t assume that if a digital marketing manager tells you that he knows customers responded positively to a campaign, they actually did. In fact, don’t assume anything. Back up every hypothesis and assertion with data. Disprove alternative cause-and-effect relationships where they may exist. Make sure you aren’t being sold a big fat lie.

If you cannot prove that a company’s social business program or campaign resulted in positive ROI, do not include that program or campaign in your list or report. Period.

Just to be sure, always document the source of your data so the rest of us can check it for potential errors or foul play.

Three more tips:

Don’t worry about gimmicks. If your list only gets to 23 examples, then that’s fine. Don’t try to stretch it to 25 or 75 or 101 just to have a catchy number that will score good SEO. Just stick to the facts. Everyone would much rather have 23 solid examples of social business ROI than 101 bad ones. Substance before flash. Always.

If you don’t understand how ROI and social business fit, you might not be the best person to compile and publish reports on the subject. If that’s the case, don’t feel bad. Life goes on. Publish stuff you actually understand for now. Someday, when the ROI thing isn’t such a mystery anymore, you can come back to it and give it another shot. Until then, just do yourself (and all of us a favor) and do your homework. Come prepared. Lead with what you know.

If you want to get better at this though, here is a primer on how to calculate ROI in 4 easy steps:

What you’ll need:

  • Campaign cost data and financial outcome data.
  • The ROI equation.

Here is the ROI equation in its most user-friendly format:

ROI = [(Financial outcome of program – Cost of program) ÷ Cost of program] x 100

Step 1: Calculate the financial outcome of the program – the cost of program.

Step 2: Divide that number by the cost of the program/campaign.

Step 3: Multiply that number by 100.

Step 4: Add a % at the end.

That’s it. So simple an 8-year-old at a lemonade stand can do it.

Now go forth and be a force for good and credible business reporting in the world.

Cheers,

Olivier

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In case you haven’t yet, you might want to pick up a copy of #smROI. 300 pages worth of stuff like this in there. A full pound of knowledge.

And if your favorite social business “expert” doesn’t seem to get this stuff yet, don’t feel bad about sending them a copy. Knowledge is never a bad gift.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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How do I write this piece without making Peter Kim hate me? I guess I’m just going to have to give it a shot and hope for the best. It’s important to remember that this post isn’t about him. It’s about a piece of content.

None of this is personal. I even think I like the guy. (We’ve never met in the real world, so I don’t know for sure.) I have a lot of respect for him and for what I think he does. (We’ve never worked together so I don’t know for sure either.) But I have to be honest, the 101 Examples of Social Media ROI list he published this week is crap seriously flawed. Here’s why: Most of these 101 “examples” don’t show ROI at all, “social” or otherwise. Either the title is wrong or the list is wrong for that title. One or the other.

Before I get into specific examples and illustrations of where I think the list fails, let me give you four basic problems I have with it as it stands today:

1. Many of the examples on it could potentially show positive ROI but – as presented – only reference selective gains from social activity and not actual, factual, empirical ROI. If that made no sense, that’s okay. Let me explain:

For something to be ROI, you need two ingredients: The cost of the activity and the gain from that activity. (That cost is the investment. The gain is either revenue or cost savings.) It’s math. Really really really simple math. ROI is an equation and it generally looks like this:

($ Gain – $ Cost) ÷ $ Cost = ROI

or

($ Revenue – $ Investment) ÷ $ Investment = ROI

(You can also multiply the result by 100 to get yourself out of the decimals, but that’s a personal choice. You can do that in your head.)

Anything that isn’t the result of the ROI equation is not ROI.

Note that a gain is just a gain,like cost is just a cost. Neither gain nor cost is ROI on its own. Ever. Not in any known universe.

Put another way, bread and ham  may individually be part of the ham sandwich equation but ham alone is not a ham sandwich. Ham is just ham. The problem we face today: This list pretty much mistakes ham for a ham sandwich. Good thing it was free or we would all be asking for a refund (or a word with the chef).

Take this example:

61. Paramount Pictures. #Super8Secret Promoted Trend created a tremendous spike in conversations: Tweets of the hashtag reached nearly nine million impressions in less than 24 hours and mentions of the movie skyrocketed to more than 150 per minute. Receipts for the sneak preview exceeded $1 million, and Paramount said weekend box office surpassed expectations by 52%. (Twitter, 2011)

Cool story, bro. What was the cost of the campaign?

Yes, this is an example of a successful use of social media (through a “promoted trend” media buy). Awesome. But where’s the bit that compares the $gain and the $cost? That would be an ROI example. This isn’t.

What’s sad is that there is probably an ROI piece hiding in the background but instead of focusing on that, the example dishes out a healthy helping of random gain data: Impressions. Mentions. Tweets. Retweets. Sales too, which is nice but no cost data… so thanks for playing but no. Without the cost piece, you don’t have an ROI example.

Your example needs to include this information or it doesn’t belong on that list:

($ Gain – $ Cost) ÷ $ Cost = ROI

Tip: If you can’t measure ROI or adequately prove it in this instance, that’s okay. Just don’t add it to a list of ROI examples.

(Speaking of proving cause & effect, let’s not forget that Super8 was a well anticipated $50M summer fare from director J.J.Abrams and producer Steven Spielberg. Not exactly a grass-roots indie phenom that would have flopped without a promoted trend on Twitter. Let’s not go crazy over the role that social media really played in opening weekend ticket sales. A little perspective goes a long way.)

More examples of this disappointing absence of actual ROI metrics later. In fact… almost the entire list suffers from this single basic flaw. But hey, at least this type of example makes the effort of including at least a portion of the data that goes into an ROI discussion. Not all examples on the list do.

2. Many of the examples on the list don’t even reference financial gain at all, let alone ROI. I list more later in the post but these will get things started:

“68% of respondents said they were “much” or “somewhat” more likely to purchase post-project.” (Subaru. 80.)

“32,000 video views, 25% regular return visits to the site, and average of almost seven minutes spent on the site per visit.” (UPS. 96.)

Community drove a +20 NPS increase.” (Sage Software. 69.)

“58% higher engagement rate than people coming in from other channels.” (TurboTax. 91.)

These are very cool little successes, great things to celebrate and be happy about, but as valuable as they may be they are not ROI. Not one part of any of those numbers even fit in the ROI discussion. At least other examples on the list make an effort to list one element of ROI: Money saved or money earned. These don’t. Sorry but that’s a little perplexing.

Here’s an example of my own to illustrate how far these examples are from ROI: I love carrot cake and when people compliment me on my impeccable taste in carrot cake, that isn’t ROI either, no matter how much of those interactions happen online.  I could call it ROI and score the number 102 spot on the list, thus:

102. Olivier Blanchard. Increased engagement with carrot cake enthusiast community by 37%. (The BrandBuilder Blog, 2012)

Except… no. It doesn’t work that way. Just because something is a success doesn’t mean it qualifies as ROI. Did my example mention that I even sold carrot cakes? Did I factor in the cost of making them or selling them online? Did I save money in any way by talking about carrot cakes with my twitter friends? Nope, I didn’t think so either.

Again, your example needs to include this information or it doesn’t belong on a list of ROI examples:

($ Gain – $ Cost) ÷ $ Cost = ROI

3. Some of the examples could have been bunched into one but legitimate examples were somehow omitted. Case in point: Cerner’s three examples (15, 16 and 17) are really one program / one example, but IKEA somehow didn’t make the list. (For more details on that particular program, click here.)  Maybe scratching Giffgaff (32.) and replacing it with IKEA would have made sense?  But okay, I’ll back off from this particular point. Lists tend to be incomplete. Someone always gets left out and sometimes you have to stretch yourself a little thin to get to the magic number. It’s no big deal.

4. Because of the source (Peter is well respected in this industry as far as I can tell), a lot of people will naturally accept this list as fact. It will become a template to be shared and passed around and referenced for the next couple of years. When marketing execs and digital agencies look for examples of ROI in social business, they will pull this thing from the Googlenets and use it as a resource for all sorts of things: Training of new social business recruits, client pitches, presentations at conferences, etc. They will do so without questioning the validity of the information they are not only ingesting but also sharing because they trust that Peter vetted the list before publishing it. That’s the unspoken contract of being a respected leader in the social business world.

Except… what if this one time, the information wasn’t properly vetted? What if much of it wasn’t even properly presented (using the right metrics, for instance)? Or what if the title is so wrong for the actual list that you end up confusing “value” with ROI for another 3 years as a result? Then what? No thanks. We can do better.

If you have 10 minutes to really get into it, read on. If not, you get the idea. (By the way, the list isn’t all bad.) Feel free to skip ahead to the end all the same. 😉

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Let’s look at a few of these examples a little more closely.

We’ll get to more obvious cases of “no, this isn’t ROI at all” a bit later. I want to start with some of the more subtle “maybe this could be ROI” examples first because a) they’re tricky and b) they illustrate pretty well some of the common traps people fall into when trying to establish ROI too quickly:

1. Aflac. Community drove online payments increase of 3% led to $95,000 in savings. (Lithium Technologies, 2011)

Q: What’s the problem with this one, Olivier? It looks legit to me. What’s your deal?

A: Yes it does look legit. And it might be. But do we know anything about other activity from Aflac that might have contributed to that 3% increase in online payments?

Could a concurrent email or advertising campaign have triggered a significant portion of that shift? Could the addition of a flyer in the mail to existing customers prompting them to make online payments have been the real cause of the shift? We can’t attribute the success of “the community” until we have ruled those out. If we know for a fact that this was 100% the result of community engagement, great. Roll on. If not, we need to find out before we high-five the community management team.

Lesson #1: Assumptions are dangerous and attribution is tricky. If you are going to present an ROI example, make sure it is rock solid. Don’t assume that social business was the biggest (or sole) cause of your success.

A better way of presenting this one would have been to maybe connect the 3% lift in online payments to the $95,000 in processing costs (context here would be nice so we know how the two might be connected). Tying these metrics to a specific campaign or activity on social channels wouldn’t be a bad thing too. Connect the dots a little bit: +3% in online payments isn’t ROI unless it results in $x savings. None of it is an outcome of social business unless you also show how “the community” helped you get there.

Not saying this isn’t a potential ROI win, but as presented, we can’t know for sure. Not yet. We’ll give that a cautious MAYBE. Just watch those assumptions though.

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2. Alberta Common Wealth Credit Union. Blog, YouTube, Facebook – 2 million impressions, 2,300 new accounts, and $4 million Canadian in new deposits. (Forrester, 2008)

First, scratch the 2 million impressions bit. It’s a distracting metric and not super reliable (or even relevant to this discussion).

$4 million in new deposits sounds like a great outcome for the program though. Here are the three problems with that:

Assumptions again: How do we know that these 2,300 new accounts and resulting $4 million in new deposits were tied to the social media program (Blog, Youtube, Facebook) and not a combination of social and other factors (traditional marketing, advertising, PR, etc.). Can ACWCU realistically assign the 2,300 new accounts and $4M in net new deposits to the social media program?

If the answer is yes, great. They’re on the right track. Time to back that up. Show me how that happened.

If the answer is no, then we have a problem right off the bat. Remember that thing about assumptions.

– What about costs? What was the cost of the program? This example (and many others) don’t mention cost at all. They only mention gains. The ROI equation also factors in costs.

Here’s why this is kind of important in an “ROI examples” discussion: if the program or campaign cost $4,000,001 and the net new deposits amounted to $4,000,000, then your ROI was actually negative. Just sharing the gain from the campaign or program doesn’t give us any idea of what the ROI actually was.

Lesson #2: Don’t confuse ROI with gain. ROI is the ham sandwich, not just the ham. (Google the ROI equation, print it and tape it to your office wall. Before you tag something as ROI, make sure it fits the definition of ROI.)

– No benchmarking: What the example doesn’t tell us is what the time period for this gain was, and how the credit union normally trends for similar time periods. What if ACWCU usually sees the same amount of new accounts and deposits for the same time period even without social media? Say that ACWCU saw 2,300 new accounts for the exact same period preceding the start of their social media program? Wouldn’t that mean that the social media program might have had no impact at all? You have to factor in time frames and set up benchmarks before you can weigh gains before and after the launch of a program.

Result: As presented, we have no way of knowing if the program perpetuated a trend or brought in new business above and beyond normal performance trending.

Lesson #3: Without adequate benchmarking, your ROI “reporting” is incomplete and doesn’t stand up to scrutiny.

File that one under MAYBE. (As presented: An incomplete report of gain but not an example of ROI.)

Way too many of this kind of anecdotal “example” on this list to make me comfortable with it. Sorry.

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8. Blendtec. Viral videos increased company sales +700%. (Barnraisers, 2010)

That one actually does stand up to scrutiny. BlendTec’s hilarious videos (and live demos at trade shows) a) became such a hit and b) demonstrated the effectiveness of the blenders so well that orders for the blender increased almost overnight.

The reporting here is still pretty incomplete though: 700% over what time period? What else could have caused the increase? That’s a gain but not an ROI figure: What was the cost of the program vs. that 700% net gain in sales?

File that one under YES: ROI but with reservations. (As presented: another report of a successful gain but not an example of ROI.)

I really wish the legitimate ROI examples on this list actually focused on ROI instead of using disjointed metrics.

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10. Bonobos. Exclusive sale on Twitter generated 1,200% ROI in 24 hours on promoted tweet. (Twitter, 2011)

First, proceed with caution if the list is about Social Business and you are just talking about a one-time media buy on a social channel. Social business is a little more elaborate than buying the odd promoted tweet for a one-day promotion.

Second, we have absolutely no idea how that 1,200% ROI figure comes from. What is it based on? Could the figure erroneously reference a 1,200% increase in sales rather than ROI? As presented, we don’t really know. Red flag.

Third (and perhaps most important) we have no idea what the cost of that promoted tweet was in relation to the gain in net sales.

Knowing nothing about this one, I want to give it the benefit of the doubt. Filing it under MAYBE. (I can’t believe I am being so nice. This would never pass muster during a legitimate business audit.)

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13. Burger King. Subservient Chicken video increased chicken sandwich sales 9% per week a month after launch. (Adweek, 2005)

Again: At a cost of…?

If the 9% increase in chicken sandwich sales amounted to less revenue than the cost of the campaign or program, then the ROI was negative. This example (like most on the list) mentions gain without factoring in cost. This is the list’s biggest problem.

Footnote: Subservient chicken wasn’t just a social media campaign. Subservient chicken was an advertising campaign with interactive digital components. This is very different from a business like Best Buy or Ford engaging with people via social channels to grow mindshare, improve the brand’s image and ultimately increase preference in the minds of x% of car buyers. When looking at this type of hybrid model of social and traditional media, you cannot legitimately talk about the ROI of “social”.

Lesson #4: When a campaign (note my choice of the term campaign and not program) is as much social marketing as it is traditional marketing, you cannot attribute its success to “social media” or even “social business.” An advertising campaign, even with social channel components is still an advertising campaign.

Effective, sure, but still just advertising.

File that one under a cautious and suspicious MAYBE. (As presented though: No ROI was actually demonstrated here. Value: yes. ROI: nope. Again.)

Let’s move further down the list.

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Let’s leave the gray area of “maybe” for a minute and look at a few examples that don’t fall anywhere near ROI (as presented):

15. Cerner. Community resulted in 13% fewer customer support issues logged. (Jive Software, 2011)

16. Cerner. Community resulted in 70% decrease in internal HR issues logged. (Jive Software, 2011)

17. Cerner. Community resulted in shorter approval cycles for writing technical documentation, from 2-6 weeks to hours or days. (Jive Software, 2011)

19. Charles Schwab. Online community drives 56% increase in Gen X customer base versus year ago. (Communispace, 2007)

20. Cisco. Community deflects 120,000 support cases each month. (Lithium Technologies, 2011)

24. Electronic Arts. EA was 2nd UK brand to use promoted tweets and trends to promote FIFA 12 video game. Trend engagement level was 11%, well above Twitter’s average ‘benchmark’ for trends, of 3% to 6%. Promoted tweet engagement averaged 8.3% over two-week campaign vs. Twitter benchmark of 1.5%. (Marketing Magazine, 2011)

25. Elsevier. Wiki drives 80% reduction in interdepartmental e-mail volume. (Socialtext, unkn)

28. FICO. Community: 850k customers served, resulting in 10% improvement in call deflections annually. (Lithium Technologies, 2011)

30. FONA International. Wiki eliminated almost 50,000 e-mails a year from one specific process. (Socialtext, unkn)

32. giffgaff. 100% of questions answered by community members in average time of 93 seconds. (Lithium Technologies, 2011)

34. Hershey’s. House party: 10,000 parties, reached 129,000 people, and say their campaign was seen by 7 million people. (Forrester, 2008)

35. Honda. Friending Honda campaign increased Facebook fans from 15k to 422k, generated over 3,500 dealer quote requests. (RPA, 2010)

36. HP. More than 4.6 people have told HP that the forum solved their support issues which HP says makes customer happier and saves the company millions in support costs. (Forrester, 2010)

42. Intuit Quickbooks. Business owners engaged with rated ProAdvisors 555% more often than unrated counterparts. (ratings and reviews). (Bazaarvoice, 2011)

No ROI in any of those examples whatsoever. There are more but I will let you find them all on your own.

Lesson #5: If it isn’t a $cost vs. $gain equation (or whatever currency you need it to be), it isn’t ROI. Customer base, leads, referrals, links, clicks, retweets, HR issues logged, email volume, estimates of future sales, deltas in NPS, quote requests, parties reached, impressions, engagement, etc. = not ROI.

Note: Too bad HP (36.) didn’t lead with the “saves company millions in support costs.” That looked like a legitimate ROI example. (Right company, wrong metrics to illustrate the ROI piece.) It matters that 4.6… wait. 4.6 people?

Maybe it was 4.6 million? Or 4 out of 6?

Anyway, whatever the number is, it matters but it is irrelevant to the ROI discussion. What would have been relevant would be how many millions in savings HP enjoyed as a result: The cost of implementing and managing the program vs. the $x million savings would have been a perfect way to illustrate ROI here. Missed opportunity #36 on the list so far.

Speaking of how to properly present ROI “examples,” here are a few quick tips on how to turn these examples into legitimate ROI stories:

It would have been great for the three Cerner examples to talk about actual cost reductions from the drop in customer service and HR issues, for instance, but they didn’t The metrics used had nothing to do with ROI. Financial gains (either via revenue or cost savings) were never mentioned. The cost of implementing and managing the program(s) was also never mentioned. Why? Those are far more relevant metrics than the ones presented.

Same with Elsevier: An 80% reduction in email is great but what is the impact on operational costs? That would be a potential ROI story.

Honda (35.) would have a great ROI story to tell if it could show the net number of sales from those 3,500 dealer quote requests and then scrubbed from that list every buyer who was going to buy a Honda anyway, regardless of the company’s social media activity. Presenting the example with “likes” and “dealer quotes” as the two principal KPIs (key performance indicators) instead of net sales (for example) puts the example squarely outside of a legitimate ROI discussion.

Intuit is another example of a company listed here with a legitimate ROI story to tell, but the description references a KPI that has nothing to do with ROI whatsoever. “555% more engagement resulting in net new $… versus a cost of $…” would have scored a bullseye. “555% more engagement” alone doesn’t.

Is it too much to ask for a list of ROI examples to actually use cost vs. gain numbers? As in… the actual ROI equation? Because that would be simple, clear and nice… and relevant. Instead of…

19. Charles Schwab. Online community drives 56% increase in Gen X customer base versus year ago.

… try this:

19. Charles Schwab. Online community cost: $X. 56% YoY increase in Gen X customer base attributable to online community resulted in net new revenue of $Y FY2011. ROI: $Z.

Simple. That’s how it’s done.

Perhaps there is an ROI story hiding somewhere in the background of every single example here. In fact, there probably is. But these examples, as presented, don’t talk about ROI at all. They reference non-financial gains without establishing any link whatsoever to ROI. So… Sorry, that’s a big zero on all of those.

Filing these under: NO ROI ANYWHERE (except for the vague afterthought in number 36).

My thinking: Far too many of these on this list as well.

*          *          *

Okay… I’m starting to feel bad about this so let’s look at a legitimate example on the list. #22: Dell.

22. Dell. @DellOutlet on Twitter generated $2 million direct sales, influenced $1 million addt’l (2007 – 2009). (Direct2Dell Blog, 2009)

Yes. Tweets linked to offers were tracked and a direct path of tweet-to-purchase was clearly established. Empirically.

File that one under YES: ROI. (But it would have been nice to see it as an ROI example and not as just another example of gain.)

Cost of program vs. $ in net sales from the program. Simple. Another missed opportunity to demonstrate ROI properly.

Moving on…

*         *        *

27. Epson. Reviews drove 98% higher revenue per visitor for Epson. (Bazaarvoice, 2011)

First, I have absolutely no idea how one leads to the other. How do we know that “reviews” drove higher revenue per visitor? Show me how you came up with that figure.

Second, what does that have to do with ROI? (Gain from reviews – Cost of reviews) ÷ Gain from reviews = … oh wait. What was the cost of those reviews again? #Fail. Value: Yes. Correlation between A and B: Maybe. ROI: Nope.

Sorry but I have to file this one under NO. Interesting but not ROI.

*          *          *

Dancing back into ROI territory now. (I still feel guilty about pointing out the problems with this list.)

See? It isn’t all bad.

37. IBM. developerWorks community saves $100 million annually from people who use this resource instead of contacting IBM support. (Forrester, 2010)

38. IBM. Crowd-sourcing identified 10 best incubator businesses, funded for $100 million, generatiung $100 billion in total revenue for a 10-to-1 ROI with a 44.1% gross profit margin. (Barnraisers, 2010)

Now we’re talking. ROI can come from cost savings, not just net new revenue. Well done, IBM.

Filed under YES: ROI.

*          *          *

45. Jewelry TV. Customer reviews boost mobile sales by 30% (ratings and reviews). (Bazaarvoice, 2011)

Aside from the obvious problems already encountered with previous examples, this one introduces us to a new one: The 30% boost in mobile sales. Is this 30% net new sales or simply a shift from non-mobile sales to mobile sales? Whether someone buys from a mobile device or their land line, is there really a difference? Does it have anything to do with ROI?

53. Mattel. Despite product recalls, online community helped support Q4 2007 sales increase of 6%. (Forrester, 2008)

How do we know that the online community helped support a Q4 2007  sales increase of 6%? isn’t it more likely that back in 2007, advertising, product placement and good PR might have been more responsible for that 6% increase than an online community?

Also, 6% versus what? Is this YoY or QoQ? Was it normal for Mattel to expect 6% growth in Q4 of 2007 with or without an online community?

Too many unanswered questions = too many assumptions.

Filing these and others like them under NOT SURE WHAT THAT WAS. MAYBE.

Another reason why benchmarking matters. Just throwing numbers around without establishing a context for them doesn’t really tell you anything. Data can be manipulated to tell wonderful stories when no one is there to ask hard questions like “prove it.”

*         *        *

I want to end on a positive note, so here are several examples that either have potential or are clear examples of ROI (in no particular order):

11. Bupa. Community drove £190,000 savings through collaboration, online events. (Jive Software, 2011)

100. Vistaprint. Community tracked $30,000 in social revenue in 2009. (Lithium Technologies, 2011)

23. Domino’s Pizza. Foursquare drove 29% pre-tax profit through promotions. (Barnraisers, 2010)

71. SAP. Community drive 5% increase in partner sales. (Jive Software, 2011)

57. National Instruments. Community resulted in 46% of all support questions answered by peers instead of support. (Jive Software, 2011)

84. TomTom. In one month, community handled 20,000 cases resulting in $150k of savings. (Lithium Technologies, 2011)

65. Precyse Technologies. $250,000 savings in crowdsourcing new product design. (InnoCentive, 2010)

92. TVG. Community members spend 36% more than average. (Lithium Technologies, 2011)

67. Rhapsody. 50% decrease in support costs and 53% decrease in weekly support contacts via sCRM solution. (GetSatisfaction, unkn)

60. Orange. Listening: saved a few million euros in support costs and helped avoid several potential PR problems. (Forrester, 2010)

75. Secret. Among women viewing the video, 57% said their impression of the Secret brand improved and purchase intent among women who participated on Facebook went up by 11% (33% for teens). Clinical sales increased 8% despite a 70% decrease in TV support. (Forrester, 2010)

85. Toshiba. Saved $213,000 by adding online component to 5 events, doubling attendance. (Jive Software, 2011)

95. University of London. Internal social network allows students to collaborate remotely, expected to deliver future savings in the region of £300,000 per year in print, courier and administration costs alone. (IBM, 2008)

While examples like Secret (75.) and SAS (71.) require you to make leaps of faith (as presented) and don’t actually give us ROI data (not just gain but relative cost of the new activity vs. traditional spend), you can see an ROI story forming in the background. It’s still vague but you can tell it’s there.

Let’s file those in the “PROBABLY ROI (if we dig a little more)” folder.

Examples like Orange (60.), Precyse Technologies (65.) and TomTom (84.), on the other hand, are cut and dry: The cost savings are empirical. You can tie the cost of the activity to the financial gain to the company.

We’ll file those in the “YES: ROI” folder.

Special mention for actually listing both gain and cost:

88. TransUnion. Estimated $2.5 million in savings in less than five months while spending about $50,000 on a social networking platform. (Socialtext, 2009)

If only all 101 had done that.

*        *       *

(If you skipped ahead, pick up the post here. You’re almost done.)

Conclusion:

If you look at the list from the perspective of “these are 101 examples of where social business has benefited or added value to a company” then it is solid. Kudos to Peter and his team. Great title, lots of value there, please share with the world. Just make sure you scratch out the title or petition Peter to change it.

If you look at the list as a collection of “101 examples of social business ROI,” then the list is almost entirely wrong. Back to the drawing board. Sorry. It doesn’t work.

I don’t want to just point out the flaws without offering Peter a way to fix it, so here are the only two options:

1. Change the title to something along the lines of “101 examples of successful Social Business campaigns”. (Remove the ROI bit from it if you aren’t actually going to focus on ROI.)

2. Include actual ROI numbers for each of the 101 examples. (Those can just be the cost and the gain from activity figures. Real simple.) Even if some of those ROI numbers turn out to be less than impressive, the list will still be factual and valuable.

Oh, and 3. Include IKEA. It deserves a nod.

*         *        *

I almost forgot…

Lesson #6: Ask the hard questions. Don’t assume that information (or insight) from anyone in any industry that touches marketing in any way is accurate. Not even mine. Put everything through your own stink test. Use your noggin’. Challenge everything that raises a red flag. Learn the definition of business terms too. They matter. Worth keeping in mind next time a list like this pops up (and there will be more like it).

Or your could just Google “R.O.I. calculation” for crying outloud. Every kid with a lemonade stand grasps that math. Why can’t social media gurus? It boggles the mind.

Cheers,

Olivier

CEO-Read     –     Amazon.com    –     www.smroi.net    –     Barnes & Noble    –    Que

PS: Everything in this book could also be dead wrong. It could all be pure BS. Scrutinize it as well. I’m not immune to the occasional wrong conclusion either. You never know. 😉

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Maybe I should just republish this post every day for the next ten years (or however long it takes for content bloggers, social media “gurus” and marketing authors/speakers to get this).

With a little repetition – and surely with enough time – even the dumbest and most obtuse of them will eventually get it.

Maybe.

As annoying and curious as it was, back in 2009, when so many so-called “experts” and “gurus” couldn’t figure out how to explain, much less determine the ROI of anything relating to social media, it is inexcusable today, less than a month from 2012. We’ve talked about this topic how many times? I and others have presented on the topic in how many countries? On how many continents? For how many years now? How many times has this simple business 101 topic been explained and explained and explained? Even if somehow, some social media “experts” have managed to miss the presentations, the conversations, the podcasts, the interviews, the decks on slideshare and the blog posts, there’s a book now that spends 300 pages on the topic. At the very least, they should have heard a rumor that the “question” had been answered. Right? Bueller? Bueller? Anyone?

What else can we do? Take out full page ads in the New York Times? Take over Mashable for a month? Buy a banner ad on Klout’s home page? What will it take for the asshats pretending to be experts to stop talking about ROI as if it were some arcane mythical metric?

Seriously, you have to be either completely disconnected from the channels you claim to be an expert participant in, or purposely avoiding this stuff to still get it wrong. Is social media ROI to be the the clitoris of the “guru” world then? Will some so-called “experts” really live out their lives without ever finding it? If so, isn’t that a sign that perhaps they need to go try their hands at being experts in another field?

It makes you wonder about these people’s qualifications, doesn’t it? What makes them experts again? A few hundred blog posts and some keynote presentations? A “personal brand?” A lot of followers? Is that all it takes now?

Here’s a simple litmus test for you: Experts know their shit. A self-professed expert who doesn’t know his shit is just a windbag. If you don’t want to be categorized as the latter, immerse yourself in the field you aim to be an expert in. Commit to it for years and years and years. Writing a few blog posts about something doesn’t make you an expert in it, no matter how hard you want to believe it does.

Utterly ignorant nonsense: The battle-cry of new religion of digital windbags?

First, this gem from @CopyBlogger‘s CFO, Mr. Sean Jackson. (A few of my favorite quotes from that post):

“Marketing ROI has become so important that no one questions its validity, but the truth is, marketing will never produce an ROI. […]  The problem for marketing professionals is that marketing activity is not an investment. An investment is an asset that you purchase and place on your Balance Sheet. Like an office building or a computer system. It’s something you could sell later if you didn’t need it any more. Marketing is an expense, and goes on the Profit & Loss statement.”

WHAT?! Are you kidding me?!

And yet in the same interview, Mr. Jackson continues with this:

“Sales generate revenue. Marketing generates profits.”

WHAT?! Sure, it sounds pretty, but how does that work, exactly? How do you calculate profits if… Oh, never mind…

“Marketing, including social media marketing, is about efficiency. Marketing is a process of decreasing the time, money, and resources required to communicate with customers and make it easy for them to buy products and services. The more efficient your marketing is, the more profit you make. That’s what you want to optimize for. By defining marketing as a function of profits, you create a new perception within your organization about the value of marketing.”

Since Sean is a CFO, I have to assume that he knows how to calculate profit on a balance sheet. … The very balance sheet as the one on which Marketing is nothing but “an expense”?

Look, if marketing can’t produce ROI, then it can’t generate a profit. A profit is a function of ROI. Profit is the very manifestation of the expectation of ROI: You invest in something, use it, and hope it generates enough revenue to cover your investment and other operational costs, and… wait for it… turn a profit.

This is Business 101 stuff. Seriously, it is. Little kids running lemonade stands know this.

If you are going to claim that marketing is about profits, then you have to concede that marketing plays a part in cutting costs or generating revenue. Once you realize that, ROI becomes obviously relevant to marketing spend. Marketing does generate ROI, and it doesn’t take a genius to figure that out. And yet, shit like this gets published. (Yes, shit.)

Example #2: David Meerman Scott’s piece entitled “Social Media ROI Hypocrisy.”

The post’s elegant tag-line:

“New research – published here for the first time – proves that executives who demand that Social Media ROI be calculated are hypocrites.”

Nice. Here’s more:

“It’s ridiculous that executives require marketers to calculate ROI (Return on Investment) on one form of real-time communications: Social media like Twitter, Facebook, or YouTube. Yet they happily pay for other real-time communications devices for employees like Blackberrys, iPhones, and iPads without a proven ROI.”

And my favorite:

“My recommendation to you when faced with executives who demand that you prove social media ROI is to point out the hypocrisy by asking them to show you the ROI of their Blackberry.”

Here’s my recommendation to you: Don’t answer an executive who asks you about ROI with “what’s the ROI of your blackberry?”

Why? Because it’s rude, unprofessional, and it only serves to prove two things: 1. You’re an asshole, and 2. you have no idea what you’re talking about.

Here’s a better way: If an executive bothered to ask you a question that matters to his or her business, answer it. If you can’t, recommend someone who can. It’s the least you can do. The idea being to help the client, not show him how much of a smug smartass you are.

Speaking of questions: Either answer them or go home.

I have heard it suggested that many corporate executives use the ROI “question” as an excuse to object to social media spend. Let’s talk about that for a minute.

Corporate execs have very busy schedules. Believe it or not, they don’t waste their time listening to your sales pitches knowing, before they walk into the room, that they are going to turn you down. Do you really think they sit around all day hoping someone will come in to talk to them about social media just so they can use their favorite “ROI objection” trick on them? They have companies to run. Either  produce a way to help them do that or stop wasting their time.

Here’s a double dose of reality for you: When corporate executives ask you about ROI with respect to social media, they are motivated by 2 things:

1. They want to know how social media spend will benefit them so they can justify the expense. Understanding the potential value of an investment is pretty basic business practice, and a sound one. What did you expect? A blank check and a 5-year consulting contract just because you spoke at Blogworld and your Klout score is awesome? What world do you live in?

2. They want to know if you know your shit or if you are just another windbag blogger “guru” with no business management acumen. They get pitched by two dozen bullshit social media experts per week. This is their test. Either pass it or fuck off.

Four final thoughts:

1. When business executives take the time to meet with you, reward their time investment by not being an asshole. (i.e. Not asking them about the ROI of their blackberry is a good start.) Answer their questions. That’s why you’re there in the first place.

2. If you don’t know how to answer an executive’s ROI questions, guess what: You aren’t qualified to advise them on the matter. Sorry. Admit it and carry on.

3. Whether or not you believe that ROI is a relevant topic of discussion when it comes to integrating social dynamics and platforms into a business doesn’t matter. You are mistaking a philosophical discussion with a practical one. Explain the principles first. Answer their questions. Help them get through that first phase (justification). Once the ROI question has been laid out and everyone gets it, THEN discuss with them the positive intangibles of building a more social company (see #6 below). They are testing your knowledge, not your religion. Stop evangelizing and start getting down to brass tacks.

4. If the same executives aren’t measuring the ROI of other things (like advertising campaigns, product development, websites, or even marketing in general,) show them how. It’s a hell of a lot more valuable than calling them hypocrites for not having done it until now. Be a positive agent of change, not just another smug asshole trying to weasel his way onto their payroll.

Doing something a lot teaches you how things work and don’t work. So do more. Talk less. You want to advise companies on how ROI fits into the social media world? Learn how to connect spend to outcomes (results). Once you grasp that the way a baker grasps the baking of bread, then you’ll be qualified to advise companies and other professionals on the matter. Not before. This isn’t theory. It isn’t about opinions. It’s practical everyday business knowledge. You either have it or you don’t.

Moving on…

The rest of this post won’t make you an expert, but it will at least give you the basics.

If you are still having trouble explaining or understanding the intricacies of social media R.O.I., chances are that…

1. You are asking the wrong question.

Do you want to know what one of the worst questions dealing with the digital world is right now? This:

What is the ROI of Social Media?

It isn’t that the idea behind the question is wrong. It comes from the right place. It aims to answer 2 basic business questions: Why should I invest in this, (or rather, why should I invest in this rather than the other thing?), and what kind of financial benefit can I expect from it?

The problem is that the question can’t be answered as asked: Social media in and of itself has no cookie-cutter ROI. The social space is an amalgam of channels, platforms and activities that can produce a broad range of returns (and often none at all). When you ask “what is the social media or ROI,” do you mean to have Facebook’s profit margins figure in the answer? Twitter’s? Youtube’s? Every affiliate marketing blog’s ROI thrown in as well?

The question is too broad. Too general. It is like asking what the ROI of email is. Or the ROI of digital marketing. What is the ROI of social media? I don’t know… what is the ROI of television?

If you are still stuck on this, you have probably been asking the wrong question.

2. To get the right answer, ask the right question.

The question, then, is not what is the ROI of social media, but rather what is the ROI of [insert activity here] in social media?

To ask the question properly, you have to also define the timeframe. Here’s an example:

What was the ROI of [insert activity here] in social media for Q3 2011?

That is a legitimate ROI question that relates to social media. Here are a few more:

What was the ROI of shifting 20% of our customer service resources from a traditional call center to twitter this past year?

What was the ROI of shifting 40% of our digital budget from traditional web to social media in 2011?

What was the ROI of our social media-driven raspberry gum awareness campaign in Q1?

These are proper ROI questions.

3. The unfortunate effect of asking the question incorrectly.

What is the ROI of social media? asks nothing and everything at once. It begs a response in the interrogative: Just how do you mean? In instances where either educational gaps or a lack of discipline prevail, the vagueness of the question leads to an interpretation of the term R.O.I., which has already led many a social media “expert” down a shady path of improvisation.

This is how ROI went from being a simple financial calculation of investment vs. gain from investment to becoming any number of made-up equations mixing unrelated metrics into a mess of nonsense like this:

Social media ROI = [(tweets – followers) ÷ (comments x average monthly posts)] ÷ (Facebook shares x facebook likes) ÷ (mentions x channels used) x engagement

Huh?!

Equations like this are everywhere. Companies large and small have paid good money for the privilege of glimpsing them. Unfortunately, they are complete and utter bullshit. They measure nothing. Their aim is to confuse and extract legal tender from unsuspecting clients, nothing more. Don’t fall for it.

4. Pay attention and all the social media R.O.I. BS you have heard until now will evaporate in the next 90 seconds.

In case you missed it earlier, don’t think of ROI as being medium-specific. Think of it as activity-specific.

Are you using social media to increase sales of your latest product? Then measure the ROI of that. How much are you spending on that activity? What KPIs apply to the outcomes being driven by that activity? What is the ratio of cost to gain for that activity? This, you can measure. Stop here. Take it all in. Grab a pencil and a sheet of paper and work it out.

Once you grasp this, try something bigger. If you want to measure the ROI of specific activities across all media, do that. If you would rather focus only on your social media activity, go for it. It doesn’t really matter where you measure your cost to gain equation. Email, TV, print, mobile, social… it’s all the same. ROI is media-agnostic. Once you realize that your measurement should focus on the relationship between the activity and the outcome(s), the medium becomes a detail. ROI is ROI, regardless of the channel or the technology or the platform.

That’s the basic principle. To scale that model and determine the ROI of the sum of an organization’s social media activities, take your ROI calculations for each desired outcome, each campaign driving these outcomes, and each particular type of activity within their scope, then add them all up. Can measuring all of that be complex? You bet. Does it require a lot of work? Yes. It’s up to you to figure out if it is worth the time and resources.

If you have limited resources, you may decide to calculate the ROI of certain activities and not others. You’re the boss. But if you want to get a glimpse of what the process looks like, that’s it in its most basic form.

5. R.O.I. isn’t an afterthought.

Guess what: Acquiring Twitter followers and Facebook likes won’t drive a whole lot of anything unless you have a plan. In other words, if your social media activity doesn’t deliberately drive ROI, it probably won’t accidentally result in any.

This is pretty key. Don’t just measure a bunch of crap after the fact to see if any metrics jumped during the last measurement period. Think about what you will want to measure ahead of time, what metrics you will be looking to influence. Think more along the lines of business-relevant metrics than social media metrics like “likes” and “follows,” which don’t really tell you a whole lot.

6. R.O.I. isn’t always relevant.

Repeat after me: Not all social media activity needs to drive ROI.

Technical support, accounts receivable, digital reputation management, digital crisis management, R&D, customer service… These types of functions are not always tied directly to financial KPIs. Don’t force them into that box.

This is an important point because it reveals something about the nature of the operational integration of social media within organizations: Social media isn’t simply a “community management” function or a “content” play. Its value to an organization isn’t measured primarily in the obvious and overplayed likesfollowers, retweets and clickthroughs, or even in impressions or estimated media value. Social media’s value to an organization, whether translated into financial terms (ROI) or not, is determined by its ability to influence specific outcomes. This could be anything from the acquisition of new transacting customers to an increase in positive recommendations, from an increase in buy rate for product x to a positive shift in sentiment for product y, or from a boost in customer satisfaction after a contact with a CSR to the attenuation of a PR crisis.

In other words, for an organization, the value of social media depends on two factors:

1. The manner in which social media can be used to pursue a specific business objective.

2. The degree to which specific social media activity helped drive that objective.

In instances where financial investment and financial gain are relevant KPIs, this can turn into ROI. In instances where financial gain is not a relevant outcome, ROI might not matter one bit.

Having said that, you still need to understand these mechanisms in order to make good business decisions, so learn them.

*          *          *

By the way, Social Media ROI – the book – doesn’t just talk about measurement and KPIs. It provides a simple framework with which businesses of all sizes can develop, build and manage social media programs in partnership with digital agencies or all on their own. Check it out at www.smroi.net, or look for it at fine bookstores everywhere.

Click here to read a free chapter.

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Very cool promo by Zoetica this week to celebrate the launch of both Social Media ROI and Katie Paine’s “Measure What Matters”:

Please join Zoetica in celebrating the release of two books, Katie Delahaye Paine‘s Measure What Matters and Olivier Blanchard‘s Social Media ROI. Zoetica is giving away five free copies of each book today to the first 10 people who answer the question, “Why will ROI never die?” If you want to win a copy, please leave your answer in the comments section (responses that do not address the question seriously will not win). Congratulations, Katie and Olivier!

Read all of the comments it generated here. Good stuff.

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Great news: “Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization” (Que Biz-Tech / Pearson) released almost two weeks early.

It is available now in the US and Canada on Amazon.com (paperback & Kindle) and BarnesAndNoble.com (paperback and Nook), and should be available in the EU and the rest of the world in a few days. If you enjoy bucking convention, you can also buy it directly from the publisher by clicking here.

The book will soon have its own website with additional content, news and other cool stuff, but for now, feel free to check out its Facebook page for discussions, news, photos, videos (soon) and other goodies: Facebook.com/SocialMediaROI. Feel free to share pictures of your shiny new copies with the rest of us, videos, reviews, etc.  A few of the early entries (Amazon doesn’t waste any time):

From @RickCaffeinated

 

From @Maggielmcg

From John Hoyt

Speaking of reviews, I encourage all of you to post yours on Amazon.com (or even BarnesAndNoble.com). especially if you found the book helpful.

You can also follow discussions about the book and many of its topics by searching for #smROI on Twitter, and check into the book using GetGlue.

I can’t wait to hear from all of you.

Oh, and thanks for Geoff Livingston for being the first to give the book a home on Flickr:

Now go forth and recommend this book to every business owner and manager you know: CEOs, COOs, CMOs, CFOs, Advertising execs, PR managers, Customer Service managers, Sales managers, Corporate Communications, HR, Legal… It will help them all understand how to plug social media into their business (and their clients’ business).

More soon.

Cheers.

 

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And here its is. The Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization book cover. Looks like the entire series by Que (Pearson) is changing the look of its business books to this format, which I actually like. The cover is clean and to the point, which makes it easy for its readers to find on a shelf. As fun as pretty conceptual covers may be, the goal here is to get this book in the hands of as many businesspeople as possible. So… no Chico and no orange this time around. Don’t worry though, there will be more.

By the way, #SMROI part of a series of books that focus on many different facets of marketing, communications, business management and social media know-how, so look for other covers just like this one in the business books section of your Barnes & Noble bookstores soon.

A few more little details of note –

A kind word from Chris Brogan:

And a pretty fly contribution from Brian Solis:

Won’t be long now. March will be here soon enough. 🙂

In the meantime, feel free to pre-order it from Amazon or Barnes & Noble today:

And yes, this is just the first of many little sneak peeks. Stay tuned.

 

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Last week, I had the pleasure of presenting at Smartbrief and SocialFish’s final #Buzz2010 workshop of the summer.

Before I get to the presentation, why not get warmed up with…

Making Sense of Social Media R.O.I. (Smartbrief)

by Rob Birgfeld

The chatter around ROI seems to be as loud as ever. What would you attribute this to? Are we at a pivotal moment for business proving value for social media activities?

The chatter around social-media ROI is as strong as ever for two reasons: The first is simply because ROI [points to] one of the most important questions an organization can ask before green-lighting a social-media program: I could spend this budget somewhere else — Why should I spend it on social media? Before any other questions can be asked, you have to start with “why.”

The second is that most social-media “experts” seem incapable of… (more)

and…

Does your Social Media Campaign Pass the F.R.Y. Test? (Smartbrief)

by Jesse Stanchak

“Money is money.”

That might sound like the simplest business lesson there is — the kind of thing most people understand before they even learn to read. But as  Olivier Blanchard noted at the Buzz2010 event (full disclosure: SmartBrief helped organize the event) it’s often the first business principle people ignore when they start talking about social media. Social-media gurus love to pretend that ROI stands for “return on involvement” or “return on innovation.” But it doesn’t. It’s return on investment — as in money.

Word of mouth is not money. Engagement is not money. Buzz is not money. Those things can all be gateways to money, but unless you can make the conversion, they’re all ultimately worthless. Only money is money.

Social media isn’t free. The time it takes to run a social-medial campaign diverts resources (time, talent, technology) from other activities. So it needs… (more)

and even the piece from Maddie Grant, over at Social Fish,

and the one from Maggie McGary.

Also check out the sort-of complete Twitter transcript of the event here.

Okay, so now, the presentation. The Social Media R.O.I. part starts on page 31, I think. Everything leading to that builds context. Not every slide will be clear without me narrating, but you should still be able to follow pretty easily.

The twist here is this: The presentation takes the Social Media R.O.I. narrative you have already seen and heard from me, and applies it to NFPs (not for profit organizations) and Associations.

Ah, so.

If the presentation doesn’t work with your browser, here is the link to the deck on slideshare.

I hope this helps. Feel free to share this with all your NFP friends and clients.

Disclosure: Social Fish and SmartBrief are clients – they hired me to speak at their event. I also sit on Smartbrief’s Social Media Advisory Board.

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No blog post today as I am in Washington DC for this summer’s final #Buzz2010 event. Here is the link: http://www.buzz2010.org/

The event takes place on the morning of the 18th, so if you read this before then, it probably isn’t too late to register. My predecessors this year were Groundswell author Charlene Li, nationally syndicated columnist Alexandra Levit, American Red Cross Social Media manager Wendy Harman, and Mark Story – adjunct professor of public relations at the University of Maryland and director of New Media at the S.E.C.

In other words, the smart kids went first.

I will speaking about… you know it: Social Media R.O.I., but this time with a twist. We’re taking the R.O.I. bit into the realm of non-profits, which should be interesting.

If there’s still time on the clock, find out the details here, and feel free to register.

See you in DC.

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I was inspired by Chris Brogan’s post today in which he discusses confidence and conviction. Before you read my comment (below), go check out his post and come back. Here are some highlights:

The guest at the table next to mine asked their server, “What do you think of the halibut special?”

The server replied, “I’m not really sure. What did you have in mind when you came in? You know, people really are much happier when they have something in mind. I think it’s okay. I’ve sold a lot of it. I haven’t personally tried it, but it looks good.”

All I was thinking was, if I were the server, I’d say this:

“It’s a great presentation: crispy top and served over our lime rice. I’ve sold lots of it today.”

[…]

No waffling allowed.

Confidence and conviction are the key to many things in life.

A frequent critic (and someone I admire a lot), Ben Kunz, once said something like this about me (not his exact words): “What I hate most about you is that you always sound like you know exactly what you’re talking about, and that’s dangerous.”

I took this to be a great compliment. Again, I admire Ben a lot. He doesn’t let me rest on my laurels.

I take great pride in my confidence and conviction in matters that are important to me. I use confidence as a leadership trait all the time. And I admit when I’m wrong as often as is necessary to make those two traits worth a damn.

This got me thinking. This is a pretty important topic, especially given Ben’s “dangerous” comment thrown in. It may not seem like it, but confidence and conviction are two of the most important building blocks of professional competence. And in an “industry” (Social Media) drowning in incompetence, the danger isn’t that someone should speak with conviction about what they are competent in. Incompetence posing as competence is the danger, not confidence and conviction. Here is my response to Chris’ post:

Reminds me of rule #3: Know your sh*t. As a waiter, an executive, a cultural anthropologist, a politician, a teacher, a doctor or whatever. Just know your sh*t. A waiter who hasn’t tasted everything on the menu isn’t taking their job seriously.

Knowing exactly what you’re talking about isn’t dangerous. It just means that when you bother to open your mouth, you aren’t just making monkey noises for the sake of getting attention. You speak with purpose about something you know about. I’ve watched you in action, Chris. If the common advice is to listen 80% of the time and talk 20% of it, you have the uncommon trait of pushing the ratio to its limits: You listen about 95% of the time and talk 5% of it, if that. That tells me that when you DO say something, I had better listen. And so far, even what you think is just improv is still seeped in insight. You have good instincts, Chris. It’s why you rarely say something dumb.

Likewise, when you don’t know something, you have no problem saying “I don’t know but let’s find out,” which takes confidence as well, and lays the foundations for conviction when someone asks the question again next time and you actually know the answer.

With all due respect to Ben, the danger isn’t to speak with confidence and conviction about things you know. The danger is to speak with false confidence and a facade of conviction about things you don’t know well enough. Too many people choose the latter as their MO. You don’t. It’s why I read your stuff.

We saw this last year with the Social Media R.O.I. debacle, which few of the self-professed “experts” and “gurus” who blabbed about the “mysterious” acronym bothered to even look up in wikepedia, much less learn about from a business class or an actual management job. Instead of either learning how to define R.O.I. or (god forbid) tie to a P&L, many just made up their own versions. Others dismissed the need for R.O.I. completely. Precious few admitted that R.O.I. was outside of their expertise, which was the right thing to do. The professional thing to do.

Here’s a tip: Community managers don’t necessarily need to be experts in R.O.I. – Case in point: If you’re an expert in customer service on Twitter, or community management, or online reputation management, speak with confidence and conviction about that. The guy responding to negative comments on facebook doesn’t need to be an expert in doing anything but creating content and managing positive and negative comments. The R.O.I. piece, let it go to someone better equipped and trained to deal with it. Leave the stuff you don’t know to people who DO know. Businesses need real expertise, not smoke and mirrors and made-up “expertise.”

As an aside, you will get a lot further in life by learning how to get good at something than pretending to be good at something you suck at.

Don’t lie. Don’t make it up, hoping you won’t get found out. Learn what you can, be honest about what you know and don’t know yet, and make sure that you know what you’re talking about before opening your mouth. In other words, just know your sh*t.

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Time to bring this post back for a second round.

This post is the continuation of a discussion started on Marketing Profs’ LinkedIn group on July 7th. (If you don’t yet subscribe to the group, consider becoming a part of it.)

Today’s video is actually two videos in one:

The first half (Part 6 of our Social Media ROI series) deals with defining ROI once and for all.

The second half (Part 7 of our Social Media ROI series) starts touching on the “how” of calculating the ROI of Social Media by outlining the investment-action-reaction-impact-return narrative.

If the video doesn’t load for you, you can go watch it here.

Let me start today’s post with a confession: Like many people in the business world, I have abused the term “ROI” from time to time. Yes, I admit it, even I have used “ROI” as a relative term on a number of occasions in the past. I’m not proud of it, but there it is.

Here are some examples of what I am talking about:

  • Q: What’s the ROI of adding 100 miles to my weekly cycling training?
  • A: Faster race times.
  • Q: What’s the ROI of writing better blog posts?
  • A: More traffic on my blog.

It’s easy to do, especially since sometimes, what you invest into something isn’t necessarily $$$. Perhaps you invested sweat. Perhaps you invested time. Perhaps you invested emotions. It doesn’t really matter. The point is that when the currency is variable, how you measure the “I” in ROI becomes variable as well. For lack of a better term, you start to refer to any kind of positive outcome as “ROI” even when you shouldn’t. It’s an easy habit to fall into, and if you aren’t careful, your definition of ROI can begin to get a little fuzzy. So I get it: I understand why this is confusing to so many folks, especially when it gets thrown into the world of Social Media.

But I’ve also spent enough time with executives (on the client side) to know that when THEY talk about ROI, the currency is NOT relative. In business terms, the currency implied in any ROI question or discussion is cold hard cash. Period.

Marketing professionals need to understand this: If the investment (the “I”) is $$$, then the return also has to be $$$. It can’t be eyeballs or impressions or clickthroughs. You have to tie your results to a $ amount. Anything short of that, and you’re not proving your value to your boss or client.

It isn’t to say that eyeballs, impressions and clickthroughs aren’t important. They are. But they’re one link (of the action-reaction-outcome narrative) shy of ROI. (They don’t tie the investment to the actual return.)

The best way to explain that narrative is this way:

$ Investment by company –> Action –> Reaction –> Non-financial impact –> Financial impact $

As explained above in the video, the relationship between a company’s investment and the return on that investment pretty much looks like this:

roi2

What happens between the investment and the financial impact (the return on that investment) is VERY important. And we’ll talk about the importance of monitoring and measuring it in order to tie the investment to the associated financial impact (and ROI) in future posts. But for now, I want to focus on the fact that eyeballs, impressions, positive WOM and social mention, even click-throughs and net new visits to websites do not constitute relevant currency when we are talking about ROI. Social media is no different here than any other business endeavor in this regard.

Impressions, eyeballs, net new visitors, etc. are forms of non-financial impact. In order to determine ROI, you have to take them to the next step: How they affect financial impact. THEN and only then can you tie the original investment to the return (financial impact/outcome).

roi1I know that bringing “media” measurement into the ROI equation is tempting , especially for folks with agency or media measurement backgrounds. That’s what the model has been for PR, Advertising and other marketing-specific firms for decades. And again media measurement is vital here, but when it comes to calculating ROI, that type of measurement is a lot like calculating a crop’s yield by estimating how many of X number of planted seeds will germinate come harvest time. It doesn’t work that way. You have to roll up your sleeves come harvest time *and physically count what the actual yield is. You actually have to do the work. ROI isn’t about potential. It’s about actual performance.

(*Luckily there is no seasonal constraint like a “harvest” in the business world, so ROI measurement – like most performance measurement – can be continuous.)

In order to adequately determine ROI, you must first understand how all the pieces fit. You have to see the entire equation, from start to finish. There is an order to how things happen, how, and why. You have to see how A leads to B leads to C in order to understand how an investment turns into a success or a failure, and to what degree. You also have to understand that the value of a pair of eyeballs, of an impression, is subjective until that pair of eyeballs actually does something. Then the body attached to that pair of eyeballs becomes one of three things: A browser, an influencer or a transacting customer. The first two don’t actualize a financial impact (yet). The third does. That’s where we want to focus when dealing with ROI.

Though we can infer and assign an estimated $ value to browsers and influencers, these values are subjective at best , usually measured in hindsight, and subject to change at any moment for any reason. So their value still falls into the category of non-actualized potential for now. (We will look at the financial impact of influencers in an upcoming post. No worries.) For the purpose of ROI calculation, however, you want to work with cold hard numbers. Not estimates, not potential, not yet-to-happen transactions, but “actualized dollars.” Real revenue from actual sales. Financial returns you can take to the bank and tie step by step through the above chain back to the initial investment.

(Incidentally, financial impact (ROI) manifests itself either as increased revenue or cost savings. Sometimes, ROI is revenue-neutral but cut costs internally. The model I just described above applies ti revenue-generated ROI.)

All of this to say that we have to be VERY careful not to a) mistake non-financial impact with ROI, and b) not to try and redefine “ROI” when dealing with business execs. (They won’t buy into “Return on Influence” or “Return on Interest” for very long, and anyone using these terms runs the risk of losing credibility with pragmatic decision makers in the C-suite.) Social Media is fun, but this is not a game. If a client doesn’t ask about ROI, great! Awesome. They probably get how Social Media is going to help them build relationships with customers and improve everything about their business. So to them, ROI is implied. It’s understood. It isn’t something they are going to worry about anytime soon. But when a client DOES ask about ROI, you have to a) understand what they are asking, and b) know how to adequately answer their questions and put measurement systems in place that will suit their needs and particular culture.

I hope this was helpful. Next, we’ll talk about the importance of timelines in the ROI determination process. (The next piece of the puzzle.)

By the way, if the video didn’t load properly for you or if you are accessing this post from a mobile device, you can go watch the video here (thanks Viddler).

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Answering questions at #LikeMinds -Exter, Devon, UK

If you’ve missed seeing videos on the blog these past last few weeks, you’re in luck: I have some video for you today.

By now, you’ve probably seen the full version of the “intro to Social Media R.O.I.” deck I presented at SoFresh this summer, right? (If not, go check it out here.) You can also browse through most of the videos from my F.R.Y. and R.O.I. blog posts on www.smroi.net (which puts everything in one convenient place for you). And then there’s this recent piece by Mashable on the subject (which I highly recommend, by the way).

So what’s the latest? My presentation and ensuing panel discussion at the inaugural LikeMinds conference in Exeter, Devon, UK on October 16th.  We’ll be talking a lot more about Like Minds in the coming days (and weeks, and months) but for now, let’s focus on these two videos, which are essentially captures of the live feed provided during the conference. In these videos, the panel and I clarify what Social Media R.O.I. is and isn’t, and answer well crafted and at times difficult questions from the crowd.

Catch Part 1 here.

Catch Part 2 here. (That’s the one with the panel discussion. Very good stuff from the crowd and panelists.)

I also recommend that you take the time to watch Scott Gould’s intro, Trey Pennington’s keynote and Maz Nadjm’s presentation among other solid video content from #LikeMinds.

Cheers,

Olivier

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nuclear-explosion

Let’s go over a few things:

1. Social Media is good for you, you know it, and you know why.

2. Social Media alone can’t save your business, but you know that your business can no longer be a market leader without an effective presence in Social Media.

3. Without resources to put behind a social media program or practice, you’re nowhere. It’s kind of like trying to drive  a car without gasoline. Sorry. It isn’t going to happen.

4. Without capital, you can’t put resources behind your Social Media program. So… you have to be able to justify that expenditure. That investment.

5. In order to be able to justify an investment in a Social Media program (from your boss, your client, your peers) you need to understand how to show the value of such a program to their organization.

6. Hits on your website, banner ad clickthroughs, impressions, KPI and whatever other types of measurement your marketing people love to throw at you are nice, they’re important, but they don’t justify a whole lot. They’re a lot like hugs: Everyone knows hugs are nice, but they don’t pay anyone’s salaries and bonuses. You have to take that game a little further.

7. The P&L is not an arcane accounting document. It is where business decisions are put to the test. Every business manager on the planet watches it daily. If you have never been responsible for one, at least get familiar with its mechanics and importance.

8. If you want to justify a budget, a program, a salary, a raise, a bonus, show your boss and your client how your idea will generate more revenue, more dividends or more cost savings. Or how it already has. That will ALWAYS get more priority than schemes to get attention or earn hugs. Money is not an abstract notion. You could get lucky and never be asked to tie your activities to financial impact, but that’s no excuse not to learn how to do it.

9. If you are not able to do this, if you cannot justify the value of a Social Media program, practice, presence or endeavor, the budget you needed to make it happen will go to something else. Like email blasts, efficiency consultants, or that new executive bathroom your boss has really been jonesing for.

10. If you cannot convince your boss or client to invest resources, time and faith in Social Media, they (and you) will get left behind by those of us who can and do. (And I assume you don’t want that.)

11. There are solid measurement and R.O.I. Best Practices and case studies being developed right now. They will pave the way for very, very VERY good things. If #10 (above) resonated with you, you probably want to learn from them so you can apply them to your business. Hence my proposal to SxSW ’10.

12. The nonsense and B.S. need to stop. They really do. For everyone’s sake.

You have a choice: You can continue to ignore the topic of Social Media measurement and R.O.I. Best Practices and pretend that talking about web conversions and the influencer index and brand lift will keep things going (which they won’t), or you can get serious about this stuff, learn how to do it right, and be a hero with every company you work for for the next ten years.

Your choice.

If you want to learn this stuff, if you want to bring this discussion to the table, please vote for my session at SxSW asap. The voting ends on Friday at midnight, so I really need you guys to act now.  Spread the word, show people my latest  R.O.I. presentation if you have to… whatever works. It’s up to you. Know that if the session doesn’t get enough votes and isn’t accepted, I am 100% fine with that… But it would be a shame: The sooner we put the R.O.I. “discussion” to rest, the sooner we establish these best practices once and for all, the sooner we can get back to doing more important work.

If you haven’t voted yet, click here now, and thanks in advance. Pass it on. 😉

(You guys rock, by the way!)

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presentation

I have to send out a big thank you to Kipp Bodnar and Jeff Cohen for shooting and posting (respectively) bootleg video from my Social Media R.O.I. presentation at #sofresh last week. You guys rock!  Video is definitely not as fun as being there, but in this case it’s pretty damn close.

Check it out here. (If you’re using a smart phone to watch it and the video doesn’t play, go here.)

Incidentally, though conferences don’t always like to see some of their content turn up on YouTube, Viddler and Vimeo for all (non-paying non-attendees) to see, I encourage all of you to bootleg videos of all of my presentations whenever applicable anyway. How you use the videos is your business. (Tip: Don’t forget to give the conference credit and allow a few days to pass, just… you know… to be nice.) Either way, you have my blessing. 😉

Note: Concerning the caption at the top of the video, I am actually @thebrandbuilder, not @brandbuilder. (I wouldn’t want you to follow the wrong dude.) 😀

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Part 1: The definitive Social Media R.O.I. presentation

So there it is. The Social Media ROI (#smROI) presentation many of you were waiting for. Sure, I still have a few videos to shoot to complete the series, but a lot of the content and methodology is right here in this simple deck – from what ROI is and isn’t, to the basic methodology to link ROI (financial outcomes) to specific social media activities.

Think of this as a Social Media R.O.I. proof of concept methodology, that you can use as a foundation for social media measurement from a real business perspective.

What you will find in this presentation:

The business definition of R.O.I., the case for business justification of social media, the actual R.O.I. equation, a step-by-step method for creating a Social Media R.O.I. proof of concept, and real world no-nonsense advice.

What you will not find in this presentation:

The typical BS spewed by social media and media measurement “gurus” who obviously have no idea what they are talking about.

If your boss or client is still not getting the answers they want when it comes to the Social Media R.O.I. question, point them to this presentation and see if it strikes a chord.

If the presentation doesn’t launch for you properly, you can go check it out on slideshare here.

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Part 2: Social Fresh recap

I can’t list all the great people I met Monday at Social Fresh, so I apologize if I’ve omitted your name in this post. Leave me a comment to slap me upside the head if I forgot to include you here, and I will rectify my omission pronto. Anyhoo, I am pretty stoked to have finally met @keithburtis @gialyons @gavinbaker @smashadv @wendywells @nathanrichie @ENDsessions @cammicam RichTucker @beccabernstein @theRab @ryamstephens @djwaldow @gilliatt @waynesutton @gregcangialosi @areich @waynesutton (@armano @abellmas @amywood @spikejones and @tinkhanson I already knew. You don’t count.)

IMG_1719b

I missed all of the morning sessions (I was being Mr. chatterbox in the lounge) but killer presos from @armano @gialyons and @spikejones in the afternoon. You couldn’t ask for a better afternoon lineup. Seriously, for a relatively small conference, the content was super solid.

IMG_1735b

I really have to commend Jason Keath and his army of volunteers for pulling of this pretty awesome conference.

Yeah, maybe the SxSW’s of the world get all the press, but sometimes these small conferences pack a hell of a punch too. (Good things do come in small packages sometimes.)

It’s pretty much a given that SoFresh will be back (and I’m hoping it will spread to other cities, for that matter). Looking forward to the 2010 edition!

Note: I will post links to other presentations, flickr galleries and videos as soon as I have the urls.

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