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While the new site is being built and I am on a well deserved workation, here is a piece from the vault that you will find just as relevant today as it was when I first posted it. Back by popular demand, Game Change: Moneyball and the reality of social business.

I finally watched Moneyball over the weekend. I’m not a big baseball fan but it held my interest, partly because it was based on a true story and partly because the movie really wasn’t about baseball at all. It was about old thinking vs. new thinking, about industry politics vs. the heresy of innovation, about dinosaurs desperate to hang on to a failing model that sustains their livelihood even when that model is clearly broken, ineffective and no longer relevant.

The scenes in which Oakland As’ general manager Billy Beane (Brad Pitt) locks horns with his cadre of coaches and scouts over how to do more with less, about how to break the cycle of mediocrity plaguing their organization, about how to get results again is brilliant, not because of the writing or the acting but because it is spot on target. How do I know this? Because I have been in that meeting hundreds of times. Well, not that particular meeting, but in others exactly like it. And every week that goes by, I find myself sitting in that meeting again and again and again.

In the US, in Europe, in Asia, the same meeting goes on almost daily. The conference table is always basically the same, the fluorescent lighting too. The players, they’re the same as well, everywhere I go. Only the vocabulary changes, the industry lingo, but the meeting, it’s the same and it goes pretty much like this:


Billy Beane
: Guys, you’re just talking. Talking, “la-la-la-la”, like this is business as usual. It’s not.
Grady Fuson: We’re trying to solve the problem here, Billy.
Billy Beane: Not like this you’re not. You’re not even looking at the problem.
Grady Fuson: We’re very aware of the problem. I mean…
Billy Beane: Okay, good. What’s the problem?
Grady Fuson: Look, Billy, we all understand what the problem is. We have to…
Billy Beane: Okay, good. What’s the problem?
Grady Fuson: The problem is we have to replace three key players in our lineup.
Billy Beane: Nope. What’s the problem?
Pittaro: Same as it’s ever been. We’ve gotta replace these guys with what we have existing.
Billy Beane: Nope. What’s the problem, Barry?
Scout Barry: We need 38 home runs, 120 RBIs and 47 doubles to replace.
Billy Beane: Ehh! [imitates buzzer]

What we see in this scene is a roomful of insiders with a century and a half of industry experience between them, and yet they haven’t figured out that their model is outdated, that their “experience,” is no longer enough to keep moving forward. They carry on day after day, season after season, doing the same thing over and over again, half-expecting a different result, but then again, maybe not. Worst of all, most of them have no idea what the problems plaguing their organizations actually are. A lot of it is just operational myopia. Some of it is also ego: they couldn’t possibly be wrong. All that experience and intuition, the entire industry’s decades-old model… how could things have changed that much, right?

And yet they are wrong, the model isn’t working anymore, and instead of listening to the guy in the room who sees it and knows how to fix it, they treat him like a punk. When he wants to do something about it, they push back. Hard. In Moneyball, he’s their boss. Imagine when he is just a Director or a VP, or even just an account manager. Imagine how quickly he gets overruled then. I’ve seen amazing people get shut down and pushed out of organizations over this sort of thing. I could give you names and dates. I could make you ill with true stories of stupidity and petty politics, of wasted opportunities and complete operational failures that turned what could have been huge wins for companies that needed them (and customers who demanded them) into case studies in wasted potential. And as tragic as  these stories would be, they are no different from the opportunities that will be wasted this week, and the next, and the one after that, always for the same reasons, always because of the exact same thinking and business management dynamics.

I see that scene, that meeting, that discussion being played out almost everywhere I go, especially when it comes to social media and social business: guys sitting around a table, treating social like it is just an extension of the same old traditional digital marketing game they all understand and desperately want to stick to. And so they make strategy decisions based on models that don’t apply at all to the social space, they insist on using measurement schemes that aren’t the least bit relevant to it or the business as a whole, and worst of all, they make hiring decisions that absolutely make no sense at all for the new requirements of social communications. Why? Because even though the game has changed, no one in the room wants to accept that it has. No one in the room wants to adapt. No one in the room wants to look reality in the eye and do what needs to be done to actually win. Talk about it, sure. Use cool new words like earned media and engagement, definitely. But actually change anything and adapt to a new model? Nope. Not happening. The change management piece that comes with social business integration, the piece that is absolutely vital to it actually working, that piece is still DOA.

Here’s another conversation that also goes on “offline” at every company (agency or brand) around the world right now in regards to hiring decisions that touch on social media management. Here it is again, through the filter ofMoneyball:

Peter Brand: There is an epidemic failure within the game to understand what is really happening. And this leads people who run Major League Baseball teams to misjudge their players and mismanage their teams. I apologize.
Billy Beane: Go on.
Peter Brand: Okay. People who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs. You’re trying to replace Johnny Damon. The Boston Red Sox see Johnny Damon and they see a star who’s worth seven and half million dollars a year. When I see Johnny Damon, what I see is… is… an imperfect understanding of where runs come from. The guy’s got a great glove. He’s a decent leadoff hitter. He can steal bases. But is he worth the seven and half million dollars a year that the Boston Red Sox are paying him? No. No. Baseball thinking is medieval. They are asking all the wrong questions. And if I say it to anybody, I’m-I’m ostracized. I’m-I’m-I’m a leper. So that’s why I’m-I’m cagey about this with you. That’s why I… I respect you, Mr. Beane, and if you want full disclosure, I think it’s a good thing that you got Damon off your payroll. I think it opens up all kinds of interesting possibilities.

Every company has a Peter Brand either on staff or sitting in a stack of CVs. Not necessarily in the sense that they are geniuses with statistics  but in the sense that they see the forest from the trees, that they see what needs to be done, but every time they open their mouths, they get shot down. Worse, if they open their mouths too much, they’re gone. And if their CV doesn’t have the bullet points and keywords that hiring managers were trained twenty years ago to find relevant, they don’t even get considered for the position.

If I see one more social media leadership position go by default to candidates with “big agency digital experience” or “big brand digital experience,” I am going to throw my pencil at somebody’s head. There is the medieval thinking in action, right there. There’s the primary reason why almost every social media program on the planet is failing to produce results, why three fourths of companies still can’t figure out how to calculate the ROI of their social media programs, why most brands see less than 1% of engagement from their followers and fans after the first touch, why “content is king” is failing, and why increasingly, “social media” strategy and budgets are shifting to ad buys on social networks. That’s right: For all the talk about earned media and engagement and conversations, social media account roles are starting to go to media buyers now. (Here’s some insight into it.) Everyone loves to talk the talk. Almost no company is willing to actually walk the walk. That sound you’re hearing is the banging of traditional marketing hammers pounding nails into social business’ coffin.

You want to know why most big brand social media programs aren’t gaining real traction? Why they don’t work without a constant influx of ad spending? Why nobody sticks around when the “free iPads for likes” promotions are gone? Start there: no one in the room gets it. No one in the room wants to get it. And when someone in the room does get it, he or she doesn’t keep their job for very long. You think most companies are going to hire, promote and support change agents all on their own?

So the real question is this: Do you want to actually score some real wins or do you just want to spend big marketing budgets and play at being a digital big shot?

It’s a real question. In fact, it’s the most important question you might ask yourself all year. Because the answer to that question will determine whether or not you still have a job in two years. No wait… I misspoke. The answer to that question will determine whether or not you have the job you want in two years, and yes, there’s a difference. A big one.

When you find yourself looking for your next gig (and you will eventually,) do you want to just be the guy who was SVP digital at (insert big brand/agency here) or do you want to be the guy who took (insert big brand/agency here)’s theoretical social media and social business programs, and turned them into the new industry standards, into the business model that everyone will be copying and basing theirs on for the next decade? It’s a real question. Which guy do you want to be? The dinosaur or the pioneer? If the answer is the latter, then are you going to have the huevos to go against the grain? To take chances on whom you hire, what kinds of programs you launch, where and how you invest your budgets? Are you willing to stick your neck out and do it right? Or is it more likely that you’ll just play it safe, hoping that the system will just carry you for another decade or two, that the CEO or CMO you will interview with next won’t notice that your job was basically to spend ad dollars and shuffle digital board pieces for the CEO’s monthly show-and-tell meeting?

Who do you want to be? What do you want to build? Do you want to just wear the jersey or do you want to win? Hold that thought. Here’s another key piece of dialogue from the movie, after Billy Beane’s gamble has paid off, after he has started turning some wheels in a big way. He responds to an invitation from John Henry, owner of the Boston Red Sox, who tells him this:

John Henry: I know you’ve taken it in the teeth out there, but the first guy through the wall. It always gets bloody, always. It’s the threat of not just the way of doing business, but in their minds it’s threatening the game. But really what it’s threatening is their livelihoods, it’s threatening their jobs, it’s threatening the way that they do things. And every time that happens, whether it’s the government or a way of doing business or whatever it is, the people are holding the reins, have their hands on the switch. They go bat shit crazy. I mean, anybody who’s not building a team right and rebuilding it using your model, they’re dinosaurs. They’ll be sitting on their ass on the sofa in October, watching the Boston Red Sox win the World Series.

And a couple of years later, they did.

So let’s talk about our world again for a minute. Let’s talk about what’s coming, about tipping points, about momentum: Ford not only hired the right guy (Scott Monty) a few years back but gave him the authority to build a solid program there. The result: some serious wins on just about every front, from customer perceptions to purchase intent to customer loyalty and recommendations. Evencar design was impacted in 2010 by the importance of social communications in the Ford organization. Edelman Digital seems to be doing something similar (I keep running into some pretty solid folks there, notably Michael Brito and David Armano). Want to see something cool? This is one of the things they’re working on. Starbucks caught an early train with that too. So did Dell. What sucks is that in 2012, virtually no one else has even tried to keep up with them. For all the money being spent and all the “case studies” being pushed around the conference circuit, most companies are still fighting it, still refusing to accept that the game has changed – worse, trying to keep playing with old methods, with old thinking, with old, outdated skills and CV bullet points. But there will come a day when someone will be given the authority to build out this new model, when it will blow everyone out of the water, and when the blindfolds will have to come off. That day is coming. What side of change do you want to be on then?

Old thinking will not score wins here. Old tactics, old hiring, old measurement, they’re all wrong for these new marketing, communications and business models. They just don’t work anymore. If you don’t believe me, that’s fine. Keep watching your margins erode. Keep watching your digital dollars go to waste. Keep laying people off and outsourcing every last business function you can’t afford to keep in-house anymore. Keep pretending the world is the same today as it was five years ago, and that what you were doing five years ago will still be relevant five years from now. Whatever makes you feel better. Keep doing the same old thing that used to work, back before people carried smart phones and iPads. Keep thinking that the guy you just hired because he spent ten years managing digital for a fast-food brand knows fuck-all about building capacity and traction for a social media program, let alone produce concrete business results for you. Keep coloring the same old boxes with the same old crayons and see how far you’ll get.

_ Okay good. What’s the problem?

We need to fill a VP Digital role.

_ Nope. What’s the problem?

All right… Whatever. We need to fill a VP social media strategy role.

_ Nope. What’s the problem?

We need to hire someone with proven global digital management experience, Billy. Someone with Disney or Nike on their CV. Someone with serious digital campaign experience.

_ Nope. What’s the problem, Barry?

The problem is, we’re not growing our Facebook community fast enough, and our content isn’t seeing the numbers we want. We need a…

_ Nope. [Imitates buzzer]

Get unstuck. Watch Moneyball and let the light bulb go off in your head. Then go find your Peter Brand and hire the shit out of him before someone else does. If you’re lucky, you’ll save both your career and your company in the process.

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Here it is. A whole book on how to make social media work from a business standpoint. ROI is covered, along with a lot of process elements that tie back to it. 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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My post today is over on the Tickr blog and quickly explains how fashion labels are using social media to earn attention, create relevance and drive sales. Or you can just look at the above infographic sans-commentary, but you’ll certainly be missing out.

Bonus: the piece briefly mentions the Democratic Republic of Catistan, but you’ll never know why unless you go read it.

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Don’t forget to pick up your copy of Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization. The book is 300 pages of facts and proven best practices that cover many of the points I will be talking about in Austin. (Don’t take my word for it though: go to smroi.net to sample a free chapter first, just to make sure it’s worth the money.)

And if English isn’t your first language, you can even get it in Spanish, Japanese, German, Korean and Italian now, with more international editions on the way.

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

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I probably won’t be able to stay for the rest of SxSW, but if you plan on getting to Austin early, I’ll be there on March 7th to speak at the Social Business Summit (#SBS2013) being put on by Dachis Group and Oracle. For more info, click here.

Some of the speakers announced already:

Doug Ulman – President and Chief Executive Officer of LIVESTRONG Foundation. Oversees the strategic vision and direction of the company.  Doug has earned a reputation as the “Most Savvy Health Care Leader in Social Media” for his innovative use of social media to create awareness and knowledge about cancer. His online community includes a Twitter following of more than one million.

Tony Hsieh – CEO of Zappos. Author of the #1 New York Times Bestseller,Delivering Happiness.  Tony has helped Zappos grow from almost no sales to over $1 billion in gross merchandise sales annually, while simultaneously making Fortune Magazine’s annual “Best Companies to Work For” list.

Marisa Thalberg – Vice President of Corporate Digital Marketing Worldwide for The Estée Lauder Companies, Inc. Charged with supporting the development of world-class digital and social marketing across the company’s collection of over 25 prestige beauty brands.  Her efforts have helped propel the company to be ranked as having the highest “Digital IQ” of any global beauty company.

John Hagel – Deloitte. Nearly 30 years’ experience as a management consultant, author, speaker and entrepreneur. He has helped companies around the world improve their performance by crafting creative business strategies that more effectively harness new generations of information technology and shape broader markets and industries.

Erika Jolly Brookes – Vice President of Product Strategy for Oracle. Works on the Oracle Cloud-Social business to help guide product strategy and development.

Michael Brito – Senior Vice President of Social Business Planning for Edelman Digital. Provides strategic counsel, guidance, and best practices to several of Edelman’s top global tech accounts and is responsible for helping transform their organizations to be more open, collaborative and socially proficient.

Jeff Dachis – Founder and CEO of Dachis Group. Helped establish the digital services industry more than a decade ago when he co-founded Razorfish, Inc. out of a one-bedroom New York City apartment.  Now as CEO of Dachis Group, the world’s leading social software and solutions firm.

Brian Solis – Principal at Altimeter Group. Globally recognized thought leader and published author in new media. His book, The End Of Business As Usual, looks at the changing consumer landscape, it’s impact on business and what companies can do to adapt and lead.

Dion Hinchcliffe – Chief Strategy Officer at Dachis Group. Business strategist, enterprise architect, author, analyst, and blogger. He currently works with the leadership teams of Fortune 500 and Global 2000 firms to devise strategies to help them adapt their organizations to the challenges and opportunities of the 21st century.

Peter Kim – Chief Solutions Architect at Dachis Group. Responsible for the definition, development, and delivery of data-driven social marketing solutions for the company’s current and future clients.  Peter is also the co-author of the popular management book Social Business by Design.

… and me.

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So if you can, come say hello. 🙂

Between now and then, you might also want to check out the contest that Tickr (client) is running. The quick version: You sign up, Tickr hooks you up with a Command Center account, and you submit a small case study or summary of how you used their monitoring tool. You can make it as simple or as intricate as you want, but originality and creativity will probably be the biggest factors in determining who wins. Find out more here.

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If you can’t make it but wish you could, pick up your copy of Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization. The book is 300 pages of facts and proven best practices that cover many of the points I will be talking about in Austin. (Don’t take my word for it though: go to smroi.net to sample a free chapter first, just to make sure it’s worth the money.)

And if English isn’t your first language, you can even get it in Spanish, Japanese, German, Korean and Italian now, with more international editions on the way.

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

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During the Superbowl on Sunday, there was a little glitch with the lights. They went out. We’re talking blackout. Within minutes, Oreo released the above image across several key social media channels. Not Duracell, not Energizer, not G.E…. Oreo.

Clever. And it paid off for the brand.

Why was this a win? Four interwoven reasons: Velocity, relevance, wit and execution.

Wit, relevance and execution, most ad agencies can handle. Velocity, on the the other hand (generating ad-quality content and publishing it as meme-like social content), not so much. That’s still rare.

I want you to think about obstacles vs. enablement.

I want you to think about culture and operational agility.

Something like this doesn’t happen by accident. You have to have the right people in place, the right presence on key channels, the right support from management, the right kind of relationship with your community, and an eye towards real-time community management and content creation.

How many levels of approvals and sign-off do you think that image had to go through before getting the okay? Judging by the speed with which it appeared on the interwebs when the lights at the Superdome went out, not many. How did Oreo pull that off?

1. At some point, Oreo decided it needed a nimble, agile, self-sufficient social media team.

2. At some point, Oreo decided to trust that team to do its job without having to micromanage it.

Easier said than done? Sure. But only by fine margins. Want to guess what separates Oreo from other companies that haven’t been able to do this yet? They hired the right people.

Instead of assigning social media duties to some intern or the cheapest content creation team they could find, they made sure that the people running that piece of their digital business were witty, capable, professional people who understand brand voice, who understand their fans, and who understand how memes and social marketing work.

This happened because the right people were hired and then allowed to do their job.

We can talk about tools, we can talk about processes, we can talk about platforms, but Oreo’s real genius can be traced straight back to having the right people in place.

If you want to celebrate brand management and superbowl advertising secret sauce today, the two words you should keep in mind are velocity and competence.

 Here’s how they did it. (via Buzzfeed)

Whether or not this ultimately translates to business growth, well played, Oreo. Well played.

Let’s close with two simple graphs:

1. Immediate impact on Twitter:

(Feel free to compare this graph with those of every Super Bowl advertiser.)

Oreo tweets

2. Impact of Twitter on conversations about the Super Bowl:

Superbowl Tickr

See that enormous horizontal blue line up there? That’s the volume of Twitter mentions against Facebook, Instagram, blogs and news for the same time frame. [source]

Long term, platforms like Facebook, Youtube, and Instagram are probably stronger bets for stickiness and reach, but in terms of real-time impact (especially during events), Twitter matters. It matters a lot.

PS: You’ll want to read this too. (Real-time marketing) by David Armano.

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If you’re interested in how to make something like that happen, then convert that attention into real sales, pick up a copy of Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization. The book is 300 pages of facts and proven best practices that explain how to do what Oreo just did – and then some. (Go to smroi.net to sample a free chapter first, just to make sure it’s worth the money.)

And if English isn’t your first language, you can even get it in Spanish, Japanese, German, Korean and Italian now, with more international editions on the way.

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

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 FGS

Facebook Graph Search explained in 15 seconds. It’s really simple. Ready?

Think search your community/network instead of search the web.

That’s all it is.

If that doesn’t work for you, think about search in terms of degrees of separation. Remember David Armano’s influence ripples? Imagine search working the same way. It’s basically search coupled with social relevance.

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If that still doesn’t work for you, here’s Zuck:

ZuckAlso check out Christopher Penn’s insights here. (Relevant to marketing, digital and bizdev pros.)

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Looking for straight answers to real questions about value, process, planning, measurement, management and reporting in the social business space? pick up a copy of Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization. The book is 300 pages of facts and proven best practices. (Go to smroi.net to sample a free chapter first, just to make sure it’s worth the money.)

And if English isn’t your first language, you can even get it in Spanish, Japanese, German, Korean and Italian now, with more international editions on the way.

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

Read Full Post »

You can actually do the work, or you can fake it and try to make an easy buck. It doesn’t matter what industry or profession you’re in. Athletes cheat. Accountant cut corners. Political consultants adjust poll numbers. Teachers hire surrogates to take their certifications for them. And yes, social media gurus make up magic equations that promise to measure everything from ROI to the value of a like.

We are surrounded by people who have chosen to make bullshit their vehicle of “success.”

Why? Because it’s easier than doing the work. Because it’s a faster path to revenue. Because for every executive or fan or client who sees bullshit or bad science for what they are, there are two or three who won’t know any better and will gladly pay for the next “big” thing.

Selling bullshit isn’t any different from selling anything else: at its core, it’s just a numbers game. You don’t have to sell to everyone. You won’t. You just have to sell to enough people who don’t know better and you will make a living. If you care more about positive cash flow than your reputation, about your next bonus or potential book deal than professional responsibility, about appearing to build value than actually providing any, then you can do pretty well selling complete crap.

Welcome to the world of gurus, of cult leaders, of chief tribe strategists.

About once or twice a year, I run into an example of social media bullshit that I find worthy of sharing with you on this blog. Sometimes, it’s a egregious money-making scheme whose sole intent is to prey on desperate, gullible, underemployed would-be “consultants” looking for an easy in to the “social media expert” space. Sometimes, it’s just bad science – a lousy equation or even a poorly conceived (insert acronym here) “calculator” whose authors didn’t really take the time to test and submit to any kind of legitimate peer review. Assumptions were made. Corners were cut. The whole thing was rushed.

I want to stress that not all social media gurus and self-professed digital experts are out to rip you off or sneak a sordid scheme past your bullshit detector. Many are just scam artists, but many are not. Sometimes, bad science just happens. Bad math, silly equations, erroneous reporting and made-up acronyms don’t get chucked into the FAIL pile because their author didn’t really know any better. Because they didn’t take the time to really put their own work to the test. They weren’t diligent with the proofing and peer review part of their experiment. Whether it’s laziness, incompetence, distraction, convenience or denial is for you to decide. All I know is that regardless of intent or reason, bad math is still bad math, and bad science is still bad science, and none of that ads net positive outcomes for those of us trying to make things work better in the social business space.

Today’s example illustrates how easily this sort of thing can happen. And before I get into the meat of it, let me just say that this post is in no way meant to be a bashing of Dan Zarrella. I’m sure he is very knowledgeable and supremely competent in a number of areas. I don’t know Dan. We’ve never worked on a project together. I have no idea who he is or what he does other than that he works for HubSpot. So what I am sharing here today isn’t meant as an attack on his character or competence or on whatever HubSpot is selling with this VOAL “model.” I just want to show you how easily business measurement nonsense can become “legitimized” by leveraging and combining personal brands, trusted publishing channels, market confusion, and the absence of a legitimate academic peer review process in the publishing of mathematical and measurement models anymore.

So before some of you jump on me for criticizing your best bud, stop. Breathe. Get some perspective. I’m not trying to hurt Dan or Hubspot. I am doing what someone around them should have done before this equation was published. This isn’t me bitching or making noise because I like the attention. This is me explaining something important and making sure that unsuspecting executives and decision-makers don’t fall for the latest flavor of bad social business measurement “science.” We’re never going to get out of this vicious cycle of “hey look at me, I invented a whole new social media equation” bullshit unless we have these kinds of discussions. We need to have them, even when they aren’t pleasant.

This industry is in desperate need of a serious dose of reality.  And if that sometimes comes with a swift kick to the balls, then sorry but that’s just what needs to happen.

An overview of the VOAL Equation:

This week, Dan Zarrella published a piece in the Harvard Business Review blog titled “How To Calculate The Value of a Like.” In it, he attempts to loosely equate the value of a like (VOAL) to ROI, then offers the following equation to calculate this so-called “value”:

The beauty of an equation like this is that virtually no one is going to take the time to try and make sense of it. Most marketing execs looking for a simple and easy way to calculate the ROI of their activities in digital channels will simply assume that the person behind the mathematical model is qualified and smart and competent. In fact, this was one of the argument provided by Dan on twitter yesterday when I questioned the equation.

For sport, we could dig into the equation itself. We could look at all of its components and determine whether they can be thrown into a bucket together, and through the alchemy of selective math, be twisted and bent into a legitimate measure of the value of a like. here’s how it breaks down:

L (Total Likes): The total number of audience members connected to your social media account. On Facebook, these are Likes of your page, and on Twitter, these are followers.

UpM (Unlikes-per-Month): The average number of fans who “unlike” your social network account each month. On Facebook, this is an “unlike,” and on Twitter, this is an “unfollow.”

LpD (Links-per-Day): The average number of times you’re posting links, and potentially converting links driven from your social media account. On Facebook, this is the number of posts you’re making, per day, that lead to a page on your website. On Twitter, this is the number of times, per day, you’re Tweeting these kinds of links.

C (Average Clicks): The average number of clicks on the links to your site you’re posting on your social media accounts.

CR (Conversion Rate): The average conversion rate of your website, from visit to sale or visit to lead. This can be an overall average, but for increased accuracy, use the conversion rate measured from traffic coming from the social network you’re calculating.

ACV (Average Conversion Value): The average value of each “conversion.” In this context, a “conversion” is the action you’ve used to measure CR for. It could be average sale price or average lead value. For increased accuracy, use the average conversion value of traffic coming from the specific social network.

If you went through the process of actually making sense of the equation, you would realize fairly quickly that because the ACV is a subjective value that can be pretty much anything you want it to be, the math can be bent to deliver any kind of “value” you want it to. You might also notice that for whatever reason, “unlikes” are measured monthly but likes are measured along an indeterminate timeline. You might also be driven to ask yourself why LpD (links per day) even needs to be part of this equation or why it is multiplied by 30 (days per month) when the clicks and likes are not.

Let me pause here. The point is that, already, the logic behind equation is already a mess.

What is wrong with this VOAL “model” (first sweep):

1. Its bits and pieces don’t make a whole lot of sense.  We have “total likes” up against “average clicks.” If we have total likes, why not also have total clicks? As an aside, what does one even have to do with the other? (Which brings me to item number 2…)

2. The relationship between the bits and pieces doesn’t make a lot of sense. Why are we multiplying net likes by links per day x30, then again by clicks divided by likes, then again by the conversion rate, and then again by (an admittedly subjective) conversion value? That’s a lot of multiplication. A x B x C x D  = LV? Really? That’s the model?

3. The cost of any of these activities is not taken into account anywhere. Tip: It’s hard to calculate the value of anything without factoring the cost somewhere in the equation. That’s a problem.

4. C = Average Clicks. Okay. Per day? Per month? Per day x 30? What am I even plugging into the equation? Not clear.

5. In what currency is the “value” of a like measured? Is this value a monthly value? An average value? An average monthly value? Is it even a $ value? Not clear. (Again.) What about offline transactions? What about transactions that can’t be measured by a last-click-attribution model? Are they divorced from the “value” of a like?

6. I see no metric for shares or comments. Another major oversight given the importance of sharing and commenting in regards to attention and propensity to click on a link or consider a purchase.

What else is wrong with this VOAL “model” (second pass, caffeinated this time):

For what little time we just wasted on this pointless exercise, we haven’t even touched on the more relevant aspects of why this equation fails to deliver a mathematical solution to the question of like value. Seven of them in particular:

1. A Facebook fan’s value (now called a like) is not the same as the cost of that fan’s acquisition. I bring this up because measuring the value of a like without taking into account the cost of that like makes the process null and void.

Also, give some thought to the difference between page likes (fans) and update/content (likes). What likes are we measuring again? Oh wait… here it is:

L (Total Likes): The total number of audience members connected to your social media account. On Facebook, these are Likes of your page, and on Twitter, these are followers.

So… the equation doesn’t measure those daily “little” likes. The ones that are attached to content and updates. To measure that kind of engagement on a Facebook page, the equation instead looks at clicks on posted links. But for some reason, it looks at average clicks, not net clicks.

????…

(Why? Your guess is as good as mine.)

No details on whether those are average daily clicks or average monthly clicks either. Could they be average hourly clicks x 24 x 30 x 12? No idea.

2. Since “likes” really stand for fans of a page, let’s talk about that: A Facebook fan’s value is relative to his or her purchasing habits (and/or influence on others’ purchasing habits). A like/fan is worth absolutely $0 unless that individual actually purchases something. Let’s start there.

If your intent is to measure fans/likes to transaction dollars attributable to your Facebook page, no need for a complicated VOAL equation. Save yourself the trouble and just measure inbound traffic from Facebook against online sales $. It will only speak to a last-click attribution model (a pretty limited way to measure the impact of a channel on sales if you ask me) but at least it will be much easier to measure and far more accurate than a bullshit equation that makes no sense at all. Then just divide your online sales from Facebook links by the number of fans/likes on your page, and voila. Done. It’s still a crap way to measure the average “value” of your Facebook fans/likes, but at least your math won’t be wrong.

3. Determining the average value of a fan may be interesting as a baseline for other measurements, but give some thought to the fact that each Facebook fan’s value is unique. One fan may engage with your content in a measurable way 300x per month but never spend a penny on your products. Another may engage with your content only on occasion but spend $3K per month on your products. Averaging your fans “value” won’t only give you a false sense of the relationship between likes and transactions, it will also obscure genuine lead generation and customer relationship development opportunities in a space that begs to be social. What’s the value to your business of averaging out net lead generation values again? None. If this is what you spend your time on, you might as well stop wasting your time on social channels.

4. A Facebook fan’s value is also likely to be very elastic. Some customers just have erratic purchasing habits. They might spend $3K with you one month and not buy from you again for a year. Depending on the size of your community and your type of business, this elasticity’s effect on that equation will drive you nuts and won’t help you make sense of what is going on with your Facebook strategy.

5. There is little correlation between a Facebook like and an actual transaction in the real world. (Maybe I should have started with that.)

6. Likes can be bought and/or manufactured, and often are, rendering this kind of equation (even if it made any sense at all) completely worthless. If you have no idea how many fake followers/fans/likes you have and try to measure VOAL you’re basically screwed. Have fun with that.

7. Once again, what about offline transactions? (What about any and all transaction behaviors that don’t neatly fall into a last-click-attribution model, for that matter?) The equation seems to completely ignore the relationship between Facebook fans/likes and offline sales. For most businesses, that’s going to be a tough pill to swallow.

And since I haven’t yet mentioned proxy sales structures (distribution channels, like Ford dealerships vs Ford’s brand pages, or Best Buy vs. HP for instance), maybe this is a good time to bring them up, because this “model” doesn’t address that either. At all. If I ask my local VW dealer to measure his page’s likes against his monthly car sales using Zarrella’s VOAL & digital conversion model, somebody is going to walk out of that discussion with serious hypertension, and a social media manager somewhere is going to be out of a job.

(If you still need convincing, click here for a more in depth discussion.)

Bad Math in Action: Try the VOAL Equation for yourself.

If you can’t make heads or tails of Zarrella’s equation or my explanation, don’t worry. He has built a nice little website for you where you can just fill in the blanks and go see how it works for yourself. Here it is: www.valueofalike.com. Try it. I plugged in several of my clients’ numbers and according to the tool, the average value of their fans/likes seems to hover around $73,736.25.

Yes, you read that right: According to the site’s math, every additional 14 fans/likes I bring to their respective pages amounts to over $1,000,000.00 in value/potential revenue. (Over how long, nobody knows, though evidently, the average fan-customer spending $25/month with them has an lifespan of about 245 years.) My clients will be thrilled to hear all about that. Maybe I should start charging more for my services.

In the meantime, check your numbers against the math and see if you get more accurate results than I did. Maybe I did it wrong. I’ve been known to be wrong before, so it’s possible. Or maybe the calculator is off somehow. That’s possible too. Or am I just missing something? Was I supposed to move a decimal point over at some point?  I’ll try to do this using the long form of the equation later, just to see if I can make it work. Or maybe not. I don’t really care anymore. This whole thing is so stupid, pointless and overly complicated that it’s giving me a genuine headache.

We get it. It doesn’t work. Now what?

Let me share four final things with you and we can all get back to work:

1. If all you are looking to do is determine the average value of a fan/like in the context of a last-click attribution model (linking a transaction to the last link someone clicked on to get to your site before pressing “buy”), then just add up sales $ resulting from inbound traffic from Facebook and divide that by the number of fans/likes on your page. That will tell you the average value of a fan/like – which is to say it won’t really tell you a whole lot but at least you’ll be done in under a minute instead of spending ten minutes filling the blanks of Zarrella’s VOAL equation, and then another week trying to figure out why your numbers look so weird. Bonus: It will be just as useless, but it’ll be so quick that you’ll have more time to get back to doing real work.

Also, if you want to measure the ROI of your Facebook activity, you’ll have to work a little harder at it, but item 3 on this list ought to give you a few simple guidelines that will get you on the right track. What’s nice about it is that my example focuses mostly on linking offline (brick and mortar) transactions to channel activity, and that’s actually harder than linking digital activity to digital transactions. So have fun with it and I’ll be glad to answer any questions.

2. Because Zarrella’s article was published via the Harvard Business Review’s blog, scores of people won’t think to question it. The fact that he works for Hubspot (a reputable company) makes the equation seem that much more legitimate. And because it looks complicated as hell, who is going to take the time to figure out if it actually works (or how)? Nobody.

In other words, the assumption of competence on the part of the author (a) the perceived complexity of the equation itself (b) and the assumption of an editorial review process on the side of the publisher (c) will combine to ease readers into assuming that the contents of that article are solid. This is why we can’t have nice things.

Too many assumptions, not enough fact-checking. Again.

Shame on HBR for not making sure that what they publish has been verified, by the way. It isn’t the first time something like this has slipped through their editorial review process (assuming there even is one). Remember this gem?

Tip: Next time someone tells you they’ve invented a metric, run. Seriously. Turn around and start hoofing it.

3. I spent a little time explaining to Dan on Twitter how to actually measure the value of channels as they relate to actual sales, so you might want to check that out. (Feel free to skip the initial petty bickering and scroll straight to the process I outline in the example.) There are two versions of that exchange for you to pick from:

Rick Stillwell’s capture (go say hello) and Paul Shapiro’s capture (both unfortunately miss a few of our wittier exchanges, but that’s okay. The process part of it is far more important.) That method can be replicated by small and mid-sized businesses with little to no access to social media management tools like Radian 6, by the way. It takes a little work, but it’s simple. And yes, simple works. if you need more details on it, I talk about it in Social Media ROI.

4. Dan and HubSpot: Let me extend the following invitation. If you are serious about building a channel and fan/follower measurement model that actually works online and offline and will bring value to organizations you work with, I will gladly help. I can show you how to do this and how not to do it too. Get in touch if you want to. Or don’t. Totally your call.

For everyone else, also check out this piece by Zachary Chastain on Thought Labs. He gets to the point a lot faster than I do, and with far less bite. And also Sean Golliher’s brilliant piece, which outlines further problems with Zarrella’s VOAL model.

And if you’ve noticed that my writing has been scarce here lately, it’s because I have been writing about digital command centers and real-time social business intelligence over on the Tickr blog. No worries, I’m still here, but I have to split my time between both blogs right now. New project with exciting developments coming very soon, so stay tuned. (And go check it out.)

Until next time, have a great day. 🙂

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Not to take advantage of bad science to sell books, but since I go over real measurement methodology vs. bogus social media “measurement” in  Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization, it’s worth a mention. If you are tired of bullshit and just want straight answers to real questions about value, process, planning, measurement, management and reporting in the social business space, pick up a copy. The book is 300 pages of facts and proven best practices. You can read a free chapter and decide for yourself if it’s worth the money (go to smroi.net).

And if English isn’t your first language, you can even get it in Spanish, Japanese, German, Korean and Italian now, with more international editions on the way.

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

Read Full Post »

Digital Crisis management is hard work. It’s complicated work. But it’s also not rocket science once you understand the mechanics of the process. Today, let’s break down crisis management into five simple components (or phases) and briefly explore the structure of each one. Understanding how to break down a digital crisis management model that way, looking at what types of tools to use and how,  and going through a few general observations in regards to best practices will hopefully arm you with helpful guidelines should your organization ever find itself having to deal with… an unfortunate circumstance involving a lot of very angry people.

To illustrate how this works, we will look at screen shots of what @KitchenAid’s recent PR crisis looked like on a basic Tickr dashboard. If you aren’t familiar with what happened and what the crisis was about, you can catch up here (just remember to come back). Hang on… before you go anywhere, let’s start at the beginning:

… (Continue reading).

*          *          *

Oh, and while you’re here…

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, Italian and Spanish.)

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

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HBO’s “The Newsroom.” Image courtesy of Melissa Moseley/HBO.

Last night, I finally watched the first few episodes of Aaron Sorkin’s “The Newsroom,” and something struck me about the first episode: All of the on-shift newsroom staffers are sitting around, working at their computers, and a story comes on the AP wire, which turns out to be the explosion at BP’s Deepwater Horizon well in the gulf of Mexico. The date is April 20, 2010. The rest, as they say, is history. What’s interesting though is that the camera gives us several closeup shots of the screen, and it basically looks a lot like an email inbox: each new story pops up on a vertically arranged list, probably arranged in chronological order. To make things easier or journalists, each story is tagged with a different color, yellow, orange and red indicating increasing levels of urgency and relevance. (Probably something along the lines of AP ENPS.) Now, don’t get me wrong: It’s a good system. It’s simple, it’s clear and it works. But being in the business of making things work better, something struck me about the limitations of that design: All it is is a whistle, a bell. Integrated into some basic productivity applications, sure, but my immediate reaction was to ask “what… that’s it? Where’s the rest of the info?”

The rest, of course, being something like this:

(Keep reading this story on the Tickr blog.)

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Oh, and while you’re here…

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

Read Full Post »

Today’s post is over on the Tickr blog. You should go check it out.

*          *          *

Oh, and while you’re here…

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

Read Full Post »

Good news: A sizeable piece of the Social Media ROI question seems to have just been answered by tech company called Ohtootay. Here’s what they offer:

According to this story in TechCrunch, “the solution lets companies track their efforts on Facebook, Twitter, Pinterest and elsewhere. But one of its more unique features in this crowded space is something which allows businesses to track their posts all the way through to website conversions, even when the original post didn’t point directly to their e-commerce site.”

This is big. And it only gets bigger.

It also goes beyond last click attribution, which has been a sticking points for all of us working to a) attribute transactions back to social activity when that activity is followed by a daisy chain of pre-transaction behaviors, and b) clearly map these paths to purchase. For instance, say that an investment in a social media program results in specific social activity that, in turn, enables discovery of a product for potential net new customers. (Lead generation.) That discovery may not trigger a purchase for days, weeks, even months. It was just the initial hand shake, the first of a succession of triggers that eventually culminated in a first transaction for that new customer. To prove ROI as it relates to social activity, you have to be able to connect all of those dots. Easier said than done, right? Most tools work backwards from the transaction to the point of origin just before the click that led them to an e-commerce site. That’s last-click attribution.

Most of the time, Google is going to get the credit for that last click attribution even though it really was just the last step in a daisy chain of purchase triggers and touch points.

Let’s look at Pinterest, for instance: Ohtootay lets companies “track Pinterest pins all the way through to website conversions and associated sales.” So far so good, right? But then there’s this: “This works even when a client shares a pin that doesn’t point to their own e-commerce site. […] What if a customer clicks on your pin that points to a relevant infographic not on your own site, later Googles you, and then decides to buy? Other analytics software will mistakenly tell social media managers that ‘Google’ caused this sale even though the customer’s first contact was through content you curated on your Pinterest boards.”

How does it do it? Well, it’s kind of simple, actually: “Ohtootay generates custom URLs (a company can use their preferred URL shortener as well), and then uses cookies to track the user. When that user arrives on the company’s e-commerce site, custom code embedded there will tell Ohtootay when a conversion actually happens.”

If that sounds familiar, it’s because it is the exact same principle you have heard me describe for years. These guys actually built an app around it, and for that, I thank them.

A word of caution though: Ohtootay doesn’t do everything you need it to in terms of calculating the ROI of your social activity. It doesn’t necessarily track offline purchases, for instance, which is a pretty big piece of the social media ROI question. (It’s hard to connect offline and online purchases 24/7, though it is pretty easy to run tests at regular intervals.) It also doesn’t get into the cost-savings piece of ROI. But for those types of limitations, Ohtootay is a huge step forward for companies looking to a) justify their social media program spending, b) connect specific social activity to specific financial outcomes (especially digital ones), and c) understand what channels and activities are having positive effects on transactions and which ones are not.

In terms of helping companies determine the ROI of their social programs, this may be the most important tool out there yet. The price tag may be a bit of a hurdle for smaller businesses though, so an SMB version with a more appropriate price-point wouldn’t be a bad idea. (Hint. Hint.) I will definitely be giving them a shot to see what’s what. (I haven’t yet.)

Okay, that’s it for today. Go forth and kick ass. Oh, and feel free to check out some of my other blog posts over on the Tickr blog (different kind of social media solution altogether: that one is all about monitoring).

Cheers,

O.

Disclosure: I have no material connection to Ohtootay whatsoever. They aren’t a client or a partner, they haven’t reached out to me, I haven’t received as much as smile from them let alone a single shiny peso. I wrote this post purely to share with you this little find because it’s a bit of a game-changer in the context of the #smROI discussion.

*          *          *

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

Read Full Post »

The 5 basic rules of calculating the value of a Facebook ‘fan’

A question that routinely comes up in social media circles is what is the value of a Facebook fan? (The question also applies to the value of a Twitter follower, Youtube subscriber, email recipient, etc.)

Invariably, whenever the question is asked, some mathematical savant – typically a self-professed digital alchemist – produces a proprietary algorithm that has somehow arrived at answer along the lines of $1.07 (Source: WSJ) or $3.60 (source: Vitrue) or even $136.38 (source: Syncapse), and so begins the race to answer this now quasi-hallowed question of the new digital age. The lure: He who can convince companies that he can calculate the value of a Facebook fan might have a shot at selling them on the notion that fan the more fans they acquire, the more value they generate for their business. (You can imagine the appeal of answering the “what is the ROI” question by explaining to a company that 10,000 net new fans per month x $136.38 = a $1,363,800 value. At a mere $75,000 per month, that’s a bargain, right?

All that is fine and good, except for one thing: Assigning an arbitrary (one might say “cookie-cutter”) value to Facebook fans in general, averaged out over the ENTIRE breadth of the business spectrum, is complete and utter BS.

To illustrate why that is, I give you the 5 basic rules of calculating the value of a Facebook fan:

Rule #1: A Facebook fan’s value is not the same as the cost of that fan’s acquisition.

Many of my friends in the agency world still cling, for example, to the notion that estimated media value or EAV (estimated advertising value), somehow transmutes the cost of reaching x potential customers into the value of these potential customers once reached. Following a media equivalency philosophy, it can be deduced that if the cost of reaching 1,000,000 people is generally $x and you only paid $y, the “value” of your campaign is still $x.

A hypothetical social media agency-client discussion regarding EAV: “Using social media, we generated 1,000,000 impressions that we converted into followers last quarter. At $1.03 per impression/acquired fan, the total cost of the campaign was $1,030,000. The average cost of an impression through traditional media being $3.97, the estimated media value of your campaign was $3,970,000.”

Next thing you know, the client believes 2 things: The first, that the value of each Facebook ‘fan’ is either ($3.97 – $1.03) = $2.94 or simply $3.97 (depending on the agency). The second, that the ROI of the campaign is ($3,970,000 – $1,030,000) = $2,940,000.

So you see what has happened here: Through a common little industry sleight of hand, a cost A vs. cost B comparison has magically produced an arbitrary “value” for something that actually has no tangible value yet. In case you were particularly observant, you may also have noticed how easily some of the authors of the posts I linked to in the intro mixed up costand value. Ooops. So much for expert analysis.

A word about why cost and value cannot be substituted for one another when applied to fans, followers and customers: Cost may be intimately connected to value when you are buying the family car, but the same logic does not apply to customers as a) you don’t really buy them outright, b) they don’t depreciate the way a car does, and c) they tend to generate revenue over time, far in excess (you hope) of what it cost to earn their business.

Even with the cost of acquiring a fan now determined, why has the value of that fan not yet been ascertained? Rule #2 will answer that question.

Rule #2: A Facebook fan’s value is relative to his or her purchasing habits (and/or influence on others’ purchasing habits).

Illustrated, the value of a fan can be calculated thus:

 a)      Direct Value: If a Facebook fan spent $76 on your products and services last month, her value was $76 for that month. If a Facebook fan spent €5697 on your products or services last month, his value was €5697 for the month.

The value of a fan/transacting customer is based on the value of their transaction. It is NOT based on the cost of having acquired them.

Example:

– Cost of acquiring Rick Spazzyfoot as a Facebook fan: €4.08

– Amount Rick Spazzyfoot has spent on our products and services since becoming a fan five months ago: €879.52

Which of the above two € figures represents the value of that fan to the company?

(If you answered €4.08, you answered wrong. Try again.)

 b)     Indirect value: If a fan seems to be influencing other people in his or her network to become transacting customers (or increase their buy rate or yield), then you can factor that value in as well for those specific time-frames. Because measurement tools are not yet sophisticated enough to a) properly measure influence and b) accurately tie it to specific transactions, I wouldn’t agonize over this point a whole lot. As long as you understand the value of word-of-mouth, positive recommendations and the relative influence that community members exert on each other, you will hold some valuable insights into your business ecosystem. Don’t lose sleep trying to calculate them just yet. Too soon.

The point being this: Until a Facebook ‘fan’ has transacted with you (or influenced a transaction), the monetary value of that fan is precisely zero.

One could even say that if each fan cost you, say, an average of $1.03 to acquire, the value of a fan before he or she has been converted into a transacting customer is actually -$1.03.

That’s right: A significant portion of your Facebook fans might actually put you in the negative. Something to think about when someone asks you to calculate the “value” of your “community,” especially if you purchased rather than earned a significant portion of your fans and followers (it happens more than you realize).

Rule #3: Each Facebook fan’s value is unique.

Every fan brings his or her unique individual value to the table. One fan may spend an average of €89 per month with your company. Another fan might spend an average of $3.79 per month with your company. Another yet may spend an average of ₤1,295 per month with your company. Is it reasonable to ignore this simple fact and instead assign them an arbitrary “value” based on an equation thought up by some guy you read about on the interwebs?

Three points:

1. The lifestyles, needs, tastes, budgets, purchasing habits, cultural differences, online engagement patterns and degree of emotional investment in your brand of each ‘fan’ may be completely different. These, compounded, lead to a wide range of behaviors in your fans. These behaviors dictate their value to you as a company.

2.  Many of your fans may only do business with you only on occasion. Because of this, you have to factor in the possibility that a significant percentage of your fans’ value may fluctuate in terms of activity rather than spend. How many of your fans are not regular customers? How many do business with you each day vs. each month? How many do business with you once a quarter vs. once every three years? Are you figuring your on/off customer-fans into your value equation?

 3. Lastly, we come to the final type of Facebook fan: The one that doesn’t fall into the transacting customer category.  They might remain “fans” without ever converting into customers. Do you know what percentage of your fans right now falls into this non-transacting category? Do you really think that their value is $3.97 or $139.73 or whatever amount an agency, guru or consulting firm arbitrarily assigned to them? No. They clicked a button and left. Their value, until proven otherwise, is zero.

 With this kind of fan/customer diversity within your company ecosystem, you come to realize that arbitrary values like “the value of a Facebook fan is $x” can’t be applied to the real world.

Rule #4: A Facebook fan’s value is likely to be elastic.

Because the value of a Facebook fan is a result of specific purchasing habits (and impact on others’ purchasing habits), a fan’s value is likely to be elastic over time. If you aren’t familiar with the term, it simply means “flexible.” As in: the value of a Facebook fan will change. It will fluctuate. It will not always be the same from measurement period to measurement period.

Let me illustrate: A Facebook fan might spend $76 on your products and services one month and $36 the following month. This means that her “value” was $76 one month and $36 the following month. If next month, she spends $290, $290 will become her “value” for that month.

Because transaction behaviors change, the value of a fan is also likely to change.

You can average this out over time (the fan’s value might average out to $97/month over the course of a year, for example), or just total her value per month, quarter, or year, depending on your reporting requirements. That is entirely up to you.

Example 1: “Based on her transactions, the value of Jane Jones, a fan since 2007, was $2,398.91 in 2010. Thanks to our fan engagement (digital customer development) program, Jane’s value increased to $2,911.02 in 2011.”

Example 2: Chris Pringle’s average monthly value in Q2 of 2011 was $290.76. His average monthly value in Q3 of 2012 was $476.21. He is one of 17,636 fans we managed to shift from a basic package to a premium package via our Facebook campaign.”

Note: In order to figure this stuff out, you are going to have to either get creative with the way your CRM solution interacts with your Facebook analytics suite or wait until Social CRM solutions get a little more robust. Some are getting close.

Examples of exceptions (where fan value may be somewhat inelastic):

 – You are a bank and a fan’s only transaction with you is a fixed monthly payment.

– You are a cable company and a fan’s only transaction with you is a monthly cable bill.

– You are a publisher and a fan’s only transaction with you is an annual magazine subscription.

– Your fans don’t transact with you. They clicked a button and left. If their value was $0 a month ago, it is still $0 this month.

If your business charges for a monthly service that tends to not fluctuate a whole lot, chances are that the value of each of your fans will remain rather constant. This compared to a Starbucks, a Target or an H&M.

Rule #5: A Facebook fan’s value varies from brand to brand and from product to product.

If a fan/customer’s value can fluctuate from month to month and that value can vary wildly from individual to individual within the same brand or product umbrella, imagine how much it can vary from brand to brand, and from product to product.

Compare, for example, the average value of a fan/customer for Coca Colaand the average value of a fan/customer for BMW. (Hypothetically of course, since I don’t have access to either company’s sales or CRM data.) What you may find is that a fan’s annual value for Coca Cola might average,say, $1,620 per year, while a fan’s annual value for BMW might average $42,000. Why? Because the products are entirely different. One costs less than $3 per unit and requires no maintenance. The other can cost tens of thousands of dollars per unit and requires maintenance, repairs, not to mention the occasional upgrade.

Moreover, a single strong recommendation from a fan can yield an enormous return for BMW, while a single recommendation from a fan will yield a comparatively smaller return for Coca Cola.

You can see how the notion that the “value” of a Facebook fan can be calculated absent the context of purchasing habits, brand affiliations, fluctuations in buying power, market forces and shifts in interests and even value perceptions is bunk. Unless of course you find yourself being asked to transform cost into value. (Less work. Easier to sell.) But that is a completely different conversation.

I hope this helped. From now on, if anyone seems confused about the topic of fan/follower/subscriber “value,” point them to this post.

Cheers,

Olivier

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If you haven’t already, check out Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization. Lots of vital advice in there for anyone working with social media in a business environment. Makes a great gift to employees, bosses, contractors and clients too. You can even read a free chapter here: smroi.net

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So I published this over on the Tickr blog, but I thought it would be relevant for you guys as well.

2007 – 2011: Adapting to the new complexities of social business

Five years ago, when businesses – from the enterprise down to smallmom & pop retailers – started using social media to enhance their business processes, things were simpler than they are today. You had your blog. You had your Facebook page. Maybe you had your Youtube channel and your Flickr account. If you were really ahead of the curve, you were already using this new thing called Twitter.

Back then, it was already becoming obvious that social media might be a bit of a time-suck. Not only were you supposed to manage your business and take care of customers, now you had to be a multi-platform publisher as well. You had to write stuff. You had to take pictures of stuff. You had to make videos and edit them and put them on the web. If you were really ahead of the curve, you were spending parts of your evenings looking for forums and discussions, watching, listening, taking notes, maybe even participating.

Already, it became clear that managing a social media presence for your business – or rather, managing the digital aspects of your transformation from a traditional business to an increasingly social business – would soon become a full-time job. You can almost trace the early discussions of social media ROI to that point in social business’ early evolution. It wasn’t really the “should I be on social media” question that did it. It was the “should I pay someone to do this instead of what I know will help my business” question, because it quickly became obvious that social business could never be an after-thought or just a part-time thing.

But this isn’t a post about ROI or social business evolution. This is a post about complexity – specifically, social business complexity. Perhaps more to the point, this is a post about managing that complexity. From the very beginning of this shift to social business, one of the biggest problems business owners and department managers have had to deal with (independently of assigning resources to the task) was simply information overload. Over the course of a very short time frame, businesses went from being disconnected from market intelligence and consumer insights to being flooded with both. Where in the past, organizations could expect consulting and market research firms to act as a collection agent, filter and translator of data, they were now confronted with a volume of information they simply were not capable of managing on their own. Social media monitoring seemed like a great idea. It looked great on paper. In reality, it was a very difficult thing to execute on. Too many sources. Too many hours in the day. Too many platforms to track. And even if it was possible to make sense of it all, then what? What did you do with it? It was hard enough to come up with content and respond to comments and tweets. The entire web had to be monitored and managed as well? Operationally, the task seemed gargantuan. Worse yet, it didn’t scale. (No worries. Scale is a topic we will cover soon.)

While some companies dove into the process of figuring out how to do this all on their own, it wasn’t long before a chunk of the market threw up their hands and decided to outsource the process rather than taking care of it themselves. And for a while there, it was rough for everybody. But then, something cool began to happen.

Necessity, after all, is the mother of invention.

2011-2013: the rise of social monitoring ecosystems

After a few years of experimentation with various social media dashboards and monitoring tools, it became clear that managing a social media program was not an either/or equation when it came to hardware and software. The question began to shift from “what’s the best tool for social media management” to “what else should I be using.” It was clear that certain social media tools, when used side by side, could not only increase the overall effectiveness of an entire program, but also amplify the value of each individual tool. If the word popping into your head right now is symbiosis, you’re on the right track.

Symbiosis:

1. Biology A close, prolonged association between two or more different organisms of different species that may, but does not necessarily, benefit each member.
2. A relationship of mutual benefit or dependence.

Let’s geek-out a little and get a little more specific, because symbiotic relationships come in three types:

Commensalism: A symbiotic relationship in which one organism derives benefit while causing little or no harm to the other. (Good.)

Parasitism: A symbiotic relationship in which one organism (the parasite) benefits and the other (the host) is generally harmed. (Bad.)

Mutualism: A symbiotic relationship in which both organisms benefits from their relationship with the other. (Best.)

Needless to say, you don’t want parasitism. At worst, combining several social media management tools together falls into a commensalist symbiosis scenario – one where some of these tools (and associated) functions will benefit from the utility of other tools, while the utility of these stand-alone tools will not be affected. At best, combining several social media management tools together will create a mutualist symbiosisscenario – on in which every one of these tools will see their utility and value enhanced by the others.

Walk into any company’s digital  ”mission control” center today, and what you will find is an illustration of one or the other of these two ecosystems – and sometimes a combination of both.

Simplifying Digital Mission Control centers: too little vs. too much

So now that we are talking about digital mission control centers (a topic we will revisit often in the coming months), let’s look at them from the perspective of trying to minimize the complexity of social media management…

read more…

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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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2010 MIMA Summit: Featured Speaker – Olivier Blanchard from MIMA on Vimeo.

I know it’s been a while since I’ve released a video (well… one that doesn’t involve hanging out with an octopus or trying to crash my bike on mountain descents), so here’s one fished out of the vault by @KrisColvin that might come in handy. It hails back to the 2010 MIMA summit, but everything in the video is fairly straightforward and still applies to your social business programs today, so it’s well worth another pass.

If the embedded video at the top of the post doesn’t launch, watch it here.

Also, some news:

You know by now that I am generally pretty guarded about who my clients are, but my latest project calls for a little bit of transparency since I am giving them some visibility on Facebook and Twitter and helping manage some of their accounts. I have recently started working pretty closely with the folks at Tickr. They’re the folks behind the one-screen multi-channel aggregator you’ve probably seen in videos of social/digital control centers – like the one PepsiCo built for Gatorade. It’s kind of hard to run into a mission control center that doesn’t have a screen dedicated to Tickr now. Anyway, they’re launching a free version and a pay-as-you-go version to complement the enterprise version that big brands are already using, so they’ve asked me to help out for a few months. Check it out and tell me (or them) what you think.

Aside from the shameless plug, you may be interested to know that I’ll be blogging there as well as here for a bit, so if you are looking for more basic social media how to stuff than what I usually post here, news about the world of digital monitoring, digital brand management, and the rise of digital mission control centers, look for some of that there. The short list:

The blog

The Facebook page

The Twitter account (@TickrUS)

The website

You can start a free account and test drive Tickr in minutes, so give them a shot. It’s a pretty cool little app that works super well with the Radian6’s, Alterians and Spiral 16’s of the world.

Cheers. Let me know if you want more videos. There are more in the vault.

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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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That.

 

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Problem? Solution:

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

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Moneyball - Courtesy of Sony Pictures.

I finally watched Moneyball over the weekend. I’m not a big baseball fan but it held my interest, partly because it was based on a true story and partly because the movie really wasn’t about baseball at all. It was about old thinking vs. new thinking, about industry politics vs. the heresy of innovation, about dinosaurs desperate to hang on to a failing model that sustains their livelihood even when that model is clearly broken, ineffective and no longer relevant.

The scenes in which Oakland As’ general manager Billy Beane (Brad Pitt) locks horns with his cadre of coaches and scouts over how to do more with less, about how to break the cycle of mediocrity plaguing their organization, about how to get results again is brilliant, not because of the writing or the acting but because it is spot on target. How do I know this? Because I have been in that meeting hundreds of times. Well, not that particular meeting, but in others exactly like it. And every week that goes by, I find myself sitting in that meeting again and again and again.

In the US, in Europe, in Asia, the same meeting goes on almost daily. The conference table is always basically the same, the fluorescent lighting too. The players, they’re the same as well, everywhere I go. Only the vocabulary changes, the industry lingo, but the meeting, it’s the same and it goes pretty much like this:


Billy Beane
: Guys, you’re just talking. Talking, “la-la-la-la”, like this is business as usual. It’s not.
Grady Fuson: We’re trying to solve the problem here, Billy.
Billy Beane: Not like this you’re not. You’re not even looking at the problem.
Grady Fuson: We’re very aware of the problem. I mean…
Billy Beane: Okay, good. What’s the problem?
Grady Fuson: Look, Billy, we all understand what the problem is. We have to…
Billy Beane: Okay, good. What’s the problem?
Grady Fuson: The problem is we have to replace three key players in our lineup.
Billy Beane: Nope. What’s the problem?
Pittaro: Same as it’s ever been. We’ve gotta replace these guys with what we have existing.
Billy Beane: Nope. What’s the problem, Barry?
Scout Barry: We need 38 home runs, 120 RBIs and 47 doubles to replace.
Billy Beane: Ehh! [imitates buzzer]

What we see in this scene is a roomful of insiders with a century and a half of industry experience between them, and yet they haven’t figured out that their model is outdated, that their “experience,” is no longer enough to keep moving forward. They carry on day after day, season after season, doing the same thing over and over again, half-expecting a different result, but then again, maybe not. Worst of all, most of them have no idea what the problems plaguing their organizations actually are. A lot of it is just operational myopia. Some of it is also ego: they couldn’t possibly be wrong. All that experience and intuition, the entire industry’s decades-old model… how could things have changed that much, right?

And yet they are wrong, the model isn’t working anymore, and instead of listening to the guy in the room who sees it and knows how to fix it, they treat him like a punk. When he wants to do something about it, they push back. Hard. In Moneyball, he’s their boss. Imagine when he is just a Director or a VP, or even just an account manager. Imagine how quickly he gets overruled then. I’ve seen amazing people get shut down and pushed out of organizations over this sort of thing. I could give you names and dates. I could make you ill with true stories of stupidity and petty politics, of wasted opportunities and complete operational failures that turned what could have been huge wins for companies that needed them (and customers who demanded them) into case studies in wasted potential. And as tragic as  these stories would be, they are no different from the opportunities that will be wasted this week, and the next, and the one after that, always for the same reasons, always because of the exact same thinking and business management dynamics.

I see that scene, that meeting, that discussion being played out almost everywhere I go, especially when it comes to social media and social business: guys sitting around a table, treating social like it is just an extension of the same old traditional digital marketing game they all understand and desperately want to stick to. And so they make strategy decisions based on models that don’t apply at all to the social space, they insist on using measurement schemes that aren’t the least bit relevant to it or the business as a whole, and worst of all, they make hiring decisions that absolutely make no sense at all for the new requirements of social communications. Why? Because even though the game has changed, no one in the room wants to accept that it has. No one in the room wants to adapt. No one in the room wants to look reality in the eye and do what needs to be done to actually win. Talk about it, sure. Use cool new words like earned media and engagement, definitely. But actually change anything and adapt to a new model? Nope. Not happening. The change management piece that comes with social business integration, the piece that is absolutely vital to it actually working, that piece is still DOA.

Here’s another conversation that also goes on “offline” at every company (agency or brand) around the world right now in regards to hiring decisions that touch on social media management. Here it is again, through the filter of Moneyball:

Peter Brand: There is an epidemic failure within the game to understand what is really happening. And this leads people who run Major League Baseball teams to misjudge their players and mismanage their teams. I apologize.
Billy Beane: Go on.
Peter Brand: Okay. People who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs. You’re trying to replace Johnny Damon. The Boston Red Sox see Johnny Damon and they see a star who’s worth seven and half million dollars a year. When I see Johnny Damon, what I see is… is… an imperfect understanding of where runs come from. The guy’s got a great glove. He’s a decent leadoff hitter. He can steal bases. But is he worth the seven and half million dollars a year that the Boston Red Sox are paying him? No. No. Baseball thinking is medieval. They are asking all the wrong questions. And if I say it to anybody, I’m-I’m ostracized. I’m-I’m-I’m a leper. So that’s why I’m-I’m cagey about this with you. That’s why I… I respect you, Mr. Beane, and if you want full disclosure, I think it’s a good thing that you got Damon off your payroll. I think it opens up all kinds of interesting possibilities.

Every company has a Peter Brand either on staff or sitting in a stack of CVs. Not necessarily in the sense that they are geniuses with statistics  but in the sense that they see the forest from the trees, that they see what needs to be done, but every time they open their mouths, they get shot down. Worse, if they open their mouths too much, they’re gone. And if their CV doesn’t have the bullet points and keywords that hiring managers were trained twenty years ago to find relevant, they don’t even get considered for the position.

If I see one more social media leadership position go by default to candidates with “big agency digital experience” or “big brand digital experience,” I am going to throw my pencil at somebody’s head. There is the medieval thinking in action, right there. There’s the primary reason why almost every social media program on the planet is failing to produce results, why three fourths of companies still can’t figure out how to calculate the ROI of their social media programs, why most brands see less than 1% of engagement from their followers and fans after the first touch, why “content is king” is failing, and why increasingly, “social media” strategy and budgets are shifting to ad buys on social networks. That’s right: For all the talk about earned media and engagement and conversations, social media account roles are starting to go to media buyers now. (Here’s some insight into it.) Everyone loves to talk the talk. Almost no company is willing to actually walk the walk. That sound you’re hearing is the banging of traditional marketing hammers pounding nails into social business’ coffin.

You want to know why most big brand social media programs aren’t gaining real traction? Why they don’t work without a constant influx of ad spending? Why nobody sticks around when the “free iPads for likes” promotions are gone? Start there: no one in the room gets it. No one in the room wants to get it. And when someone in the room does get it, he or she doesn’t keep their job for very long. You think most companies are going to hire, promote and support change agents all on their own?

So the real question is this: Do you want to actually score some real wins or do you just want to spend big marketing budgets and play at being a digital big shot?

It’s a real question. In fact, it’s the most important question you might ask yourself all year. Because the answer to that question will determine whether or not you still have a job in two years. No wait… I misspoke. The answer to that question will determine whether or not you have the job you want in two years, and yes, there’s a difference. A big one.

When you find yourself looking for your next gig (and you will eventually,) do you want to just be the guy who was SVP digital at (insert big brand/agency here) or do you want to be the guy who took (insert big brand/agency here)’s theoretical social media and social business programs, and turned them into the new industry standards, into the business model that everyone will be copying and basing theirs on for the next decade? It’s a real question. Which guy do you want to be? The dinosaur or the pioneer? If the answer is the latter, then are you going to have the huevos to go against the grain? To take chances on whom you hire, what kinds of programs you launch, where and how you invest your budgets? Are you willing to stick your neck out and do it right? Or is it more likely that you’ll just play it safe, hoping that the system will just carry you for another decade or two, that the CEO or CMO you will interview with next won’t notice that your job was basically to spend ad dollars and shuffle digital board pieces for the CEO’s monthly show-and-tell meeting?

Who do you want to be? What do you want to build? Do you want to just wear the jersey or do you want to win? Hold that thought. Here’s another key piece of dialogue from the movie, after Billy Beane’s gamble has paid off, after he has started turning some wheels in a big way. He responds to an invitation from John Henry, owner of the Boston Red Sox, who tells him this:

John Henry: I know you’ve taken it in the teeth out there, but the first guy through the wall. It always gets bloody, always. It’s the threat of not just the way of doing business, but in their minds it’s threatening the game. But really what it’s threatening is their livelihoods, it’s threatening their jobs, it’s threatening the way that they do things. And every time that happens, whether it’s the government or a way of doing business or whatever it is, the people are holding the reins, have their hands on the switch. They go bat shit crazy. I mean, anybody who’s not building a team right and rebuilding it using your model, they’re dinosaurs. They’ll be sitting on their ass on the sofa in October, watching the Boston Red Sox win the World Series.

And a couple of years later, they did.

So let’s talk about our world again for a minute. Let’s talk about what’s coming, about tipping points, about momentum: Ford not only hired the right guy (Scott Monty) a few years back but gave him the authority to build a solid program there. The result: some serious wins on just about every front, from customer perceptions to purchase intent to customer loyalty and recommendations. Even car design was impacted in 2010 by the importance of social communications in the Ford organization. Edelman Digital seems to be doing something similar (I keep running into some pretty solid folks there, notably Michael Brito and David Armano). Want to see something cool? This is one of the things they’re working on. Starbucks caught an early train with that too. So did Dell. What sucks is that in 2012, virtually no one else has even tried to keep up with them. For all the money being spent and all the “case studies” being pushed around the conference circuit, most companies are still fighting it, still refusing to accept that the game has changed – worse, trying to keep playing with old methods, with old thinking, with old, outdated skills and CV bullet points. But there will come a day when someone will be given the authority to build out this new model, when it will blow everyone out of the water, and when the blindfolds will have to come off. That day is coming. What side of change do you want to be on then?

Old thinking will not score wins here. Old tactics, old hiring, old measurement, they’re all wrong for these new marketing, communications and business models. They just don’t work anymore. If you don’t believe me, that’s fine. Keep watching your margins erode. Keep watching your digital dollars go to waste. Keep laying people off and outsourcing every last business function you can’t afford to keep in-house anymore. Keep pretending the world is the same today as it was five years ago, and that what you were doing five years ago will still be relevant five years from now. Whatever makes you feel better. Keep doing the same old thing that used to work, back before people carried smart phones and iPads. Keep thinking that the guy you just hired because he spent ten years managing digital for a fast-food brand knows fuck-all about building capacity and traction for a social media program, let alone produce concrete business results for you. Keep coloring the same old boxes with the same old crayons and see how far you’ll get.

_ Okay good. What’s the problem?

We need to fill a VP Digital role.

_ Nope. What’s the problem?

All right… Whatever. We need to fill a VP social media strategy role.

_ Nope. What’s the problem?

We need to hire someone with proven global digital management experience, Billy. Someone with Disney or Nike on their CV. Someone with serious digital campaign experience.

_ Nope. What’s the problem, Barry?

The problem is, we’re not growing our Facebook community fast enough, and our content isn’t seeing the numbers we want. We need a…

_ Nope. [Imitates buzzer]

Get unstuck. Watch Moneyball and let the light bulb go off in your head. Then go find your Peter Brand and hire the shit out of him before someone else does. If you’re lucky, you’ll save both your career and your company in the process.

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Here it is. A whole book on how to make social media work from a business standpoint. ROI is covered, along with a lot of process elements that tie back to it. 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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Let’s jump right in: With all this push for brands to “engage” in the social media space these past few years, the endless brouhaha of so-called Engagement strategies, bizarre measurement schemes like Return On Engagement and even the creation of new roles like Chief Engagement Officers and Engagement Strategists, you would think that engagement would be pretty high on every brand’s priority list by now.

More to the point, you would think that after 3 (and in many cases 4) years of building social media programs and managing online communities on Twitter, Facebook, Youtube, etc., most companies would have this stuff kind of figured out.

We aren’t talking about really complicated stuff here. Being on Facebook isn’t exactly as demanding as conceptualizing then producing a great superbowl ad. There isn’t really a whole lot of complicated R&D involved. All you have to do is keep people interested and… engage them, whatever the hell that means. How hard is it to just listen to people and talk with them? That is what we’re talking about, right? Engagement? Listening, replying, being helpful and interesting? Being relevant? But mostly, it’s about having conversations with people? Helping them find stuff, do stuff, share stuff that matters to them and ultimately benefits both them and the brand? Isn’t engagement about fueling both interest and that precious exchange of attention that is the substance of social interactions?

“Monitor, engage, and be transparent; these have always been the keys to success in the digital space.” – Dallas Lawrence

“Build it, and they will come” only works in the movies.  Social Media is a “build it, nurture it, engage them, and they may come and stay.” – Seth Godin

 Right? We know this, don’t we? Or is there some confusion still about what engagement actually is, how it works, what it looks like?

AdAge this week published this follow-up piece by Matthew Creamer in which data from a study released last month by the Ehrenberg-Bass Institute identifies a gap between engagement theory and engagement execution, primarily on Facebook. Evidently, it is easier to strategize about engaging with customers than it is to actually… do it.

Here is the punchline: According to the study, less than 1% of fans of the biggest brands on Facebook actually engage with these brands online.

How can this be? Don’t these brands have qualified social media directors and SVPs? Don’t the world’s biggest brands have brilliant social media strategies, content strategies and engagement strategies? Don’t they work with digital agencies that specialize in this sort of thing?

You can’t throw a cat on Facebook without hitting some kind of webinar or certification program promising to teach you how to engage with customers via social media. There is a social media #conference somewhere in the world almost every day. Have you looked at how many presentations about engagement and Facebook have been uploaded to Slideshare recently? Have you seen the change in people’s resumes in the last year? Everyone has 5-10 years of social media management experience now. (Yeah… time sure flies when you’re having fun. Magic!)

Again, I have to ask: How hard is it to just listen to people and talk with them? The content piece should be pretty easy: Copy, creative, slap a little photo or video, edit, publish, done. Everything else that isn’t back-of-house (monitoring, measuring, analyzing, correlating activity to outcomes) essentially amounts to the most basic social skills available to human beings: Saying hello. Asking questions. Answering questions. Talking about what people might be interested in. Paying attention. Making people feel like they matter, because in the end, they do.

Only 1% fan engagement. That’s it. Actually… maybe less than that:

To get to these findings, the researchers used one of Facebook’s own metrics, People Talking About This, the awkwardly-named running count of likes, posts, comments, tags, shares and other ways a user of the social network can interact with branded pages. It was unveiled last fall as a way of giving advertisers a sharper look at at the level of activity on their pages.

Researchers for the institute looked at this metric as a proportion of overall fan growth of the top 200 brands on Facebook over a six-week period back in October and they found the percentage of People Talking About This to overall fans to be 1.3%. If you subtract new likes, which only requires a click and in the minds of the researchers are akin to TV ratings, and isolate for more engaged forms of interaction, you’re left within an even smaller number: 0.45%. That means less than half a percent of people who identify themselves as like a brand actually bother to create any content around it.

 Once the “click like for a chance to win a free iPad” campaign is over (or the agency you hired has just out and out purchased your fans from Chinese or Russian fan/follower mills) it’s more like 0.45%.

This begs the question: With Facebook inching towards a billion users worldwide and people spending an obscene amount of time there, billions of dollars of marketing spent to engage them on Facebook is only yielding 0.45% engagement? What the hell is going on?

My first reflex was to look for flaws in the study, and there may be ways of picking apart its findings. Fine. But then it occurred to me that I myself have very little engagement with my favorite brands on Facebook. Let’s go through the list: Apple, Sony, Starbucks, RayBan, G-Shock, Panerai, H&M, VW, BMW, Hyundai (don’t laugh), Nike, Delta Airlines, HBO, Ikea, Moleskine, Smalto, Brooks Brothers, Nestle, Menthos, Trader Joe’s, Pilot, Rudy Project, Specialized, Cervelo, Mizuno, Nutella… Okay, I’ll stop. You get the idea. When was the last time I interacted with any of them on Facebook? I can’t remember. How often am I completely blown off by that “brand” when I do bother to comment on their posts or share their content? Almost 100% of the time.

That sucks.

So I started asking around. Everyone I talked to responded in the same way. In fact, one of the human beings I regularly engage with on Facebook (when I am naturally not engaging with a brand) put it to me in as clear a manner as I could have hoped for. His name is Vincent Ammirato, and this is what he said:

I simply don’t interact with brands through social media. I interact with people. Not one of those top 10 passion brands does anything for me. So sure I’ll buy from them when, for example, I want to surprise the wife with a little blue box. But they aren’t my idols or friends. Their “news feeds” aren’t about issues that I care about. I could easily stop purchasing from any of them and be just fine.

The solution to brands struggling to establish a meaningful, valuable connection through social media channels (Facebook or otherwise) is contained entirely in this reply. Any SVP, Global Digital Engagement Strategery can reverse-engineer this short reply into a model for success in the space. It won’t take five minutes. You won’t even need to waste your time working with $20,000/hr social media experts. It’s all right there.

Simple problem, simple fix:

 1. Own your relationships.

I have said it a hundred hundred zillion times: You cannot effectively outsource relationships. Of all the things brands can outsource to digital agencies and analytics firms, the one thing that cannot be effectively outsourced is the relationship they have with their customers. Social media are not the same as other forms of media. You can send a spokesperson or PR professional to hang out with journalists in your place and no one will find that weird or disingenuous. You cannot ask an agency AE to pretend to be you at a pig roast that you were invited to by your customers. Two different contexts entirely. Expectations of engagement in Social Media fall into the pig roast category. Your agency can hold your hand and stand with you, but you’re going to have to show up to the party yourself or people simply will stop inviting you.

Outsource everything else if you must, but own your relationships. No one can do this for you.

2. Engagement and Marketing aren’t the same thing.

Engagement on social media channels is not just a marketing communications function. Every single brand who has treated it as if it were is now finding out that treating engagement like marketing is yielding – yes, you guessed it: 0.45% actual engagement. Why? Because there is no natural impulse in human beings to interact with marketing day after day after day. As Vincent aptly puts it: I interact with people.

Do you see people hanging out at Starbucks with their favorite coupons? Do you think that changes because you repackaged your marketing to be “social” and pushed it out to Facebook?

Here’s something I need you to think about, uninterrupted, for maybe 90 seconds: Marketing on Facebook is fine. It’s great. But don’t confuse marketing with engagement. The two can go hand in hand when managed properly, but they are not the same thing. We all know that you have a marketing strategy in place for Facebook, but do you actually have an engagement strategy? 0.45% actual engagement means you thought you did but really didn’t. Back to the drawing board.

3. Stop thinking that content is the heart and soul of the attention economy.

In spite of what has been drilled into our collective brains by people who make a living creating content, content is not king.

“By creating compelling content, you can become a celebrity.” Paul Gillin

“Think like a publisher, not a marketer.” David Meerman Scott

No. First, the objective is not to become a celebrity. If becoming a celebrity is your objective, maybe managing a business or a Social Media/Business program for a brand isn’t for you. So cut the personal branding shit. It was already old 4 years ago.

Second, don’t think like a publisher. Or a Marketer, even. Think like a human being. Brands have been focusing on filling their Facebook properties with content and marketing for the last 4 years. What’s the result? 0.45% actual engagement. Think about it for a minute: Do you really think that the answer to the problem is more content or marketing? More publishing, even?

Reminder:

I simply don’t interact with brands through social media. I interact with people.

You aren’t going to out-content your competitors. You aren’t going to create “viral campaigns” every other week. And let’s be honest: You can’t compete against the endless flood of funny memes that drive most of the shares on Facebook unless you fire your entire marketing department and hire weird, slightly insane, socially irreverent interns whose jet fuel is a blend of pop-culure infused sarcasm and… Oh wait… their CVs would never make it past your HR department. They don’t have the requisite social media management experience. Never mind.

An easier way to fix the problem is simply to focus on the missing piece: How human is your brand, really?

4. Stop hiding your humans.

If I don’t know the name and face of the person managing your Facebook page, I am not going to interact with that page on a daily basis. Or maybe ever.

This may be the most important bit of insight I am sharing here today.

Let me illustrate my point: I know that Ford’s Social Media guy is Scott Monty. I know what Scott Monty looks like. Whenever I see his smiling, blue-eyed, bow-tie wearing profile picture in my stream, I look at what he is sharing. A picture of his sandwich? That looks delicious. I’m going to click on that. A picture of him at the Detroit auto show? Cool. I’m going to click on that too. An article about the Ford Mustang winning an award somewhere? Clicked. Read. Commented. Engaged.

The same content published/posted by a faceless account with the Ford logo as its avatar/identity? Ignored.

I have no idea who handles Nutella’s Facebook page. VW? Levi’s? Sony? BMW? Trader Joe’s? H&M? Not a  clue. The result: Zero interaction. Why? Because people come to Facebook to interact with people, not brands or marketing or content or logos. It’s FACEbook. Give people some face, already. You actually need humans to humanize your brand. You can’t engage from behind a digital billboard with faceless account managers who never see the light of day.

You want to know who else is doing it right on Facebook? Mashable. How do I interact with Mashable’s content? Through Pete Cashmore. Same feed. The difference: Peter Cashmore is a human being. With a face and a name I know. With a pretty unique voice too, which I appreciate for its human quality.When Mashable’s content comes to me through him, I pay attention and interact with it. It’s that simple. Who else does this pretty well? Edelman Digital (Armano, Brito, Rubel). Dell (Binhammer). CNN. MSNBC. (Probably Fox News too.) At one time, Comcast (Eliason). Seesmic (Lemeur, for starters). Learn from them.

It bears repeating: If your customers don’t know who your social media “person” (the person they are interacting with) is, if they don’t know his or her name, if they don’t know what they look like, if they can’t see a face on that profile photo, they simply are not going to interact with that account, no matter how many iPads you promise to give away.

Going back to item number 1 on this list: if you outsource your account management, you have no chance of accomplishing this. None. Zero. 0.45% actual engagement is what you can continue to expect moving forward. No amount of marketing spend will change that. 0.45% Engagement is right on par with the level of engagement people have with a wall. If that’s all your Facebook account is – a wall – then don’t be surprised that nobody gives a shit. Invest in a human.

5. Either give a shit or don’t, but you need to decide.

Nobody minds that you are there to sell stuff. It’s understood. Hell, we want to be sold to. Have you seen what people willingly pay for an iPhone or a latte at Starbucks? Our cash is yours if you give us a good reason to part with it. We wouldn’t be clicking that like button if we didn’t acknowledge that we accept that you have something to sell. It’s what that initial handshake is for.

But if all you do is push PR content and marketing offers down our throats all day and don’t actually give a shit about who we are, what we do, what matters to us outside of the next transaction, you’re wasting your time measuring engagement. Just turn your Facebook presence into a store and stop wasting your time pretending to be “social.” You might actually increase conversions going that route. In fact, if that’s what you really want to do, stop wasting time creating boring content nobody cares about and just give us 20% off coupons. If all you are going to do is use Facebook as a marketing channel, you might as well save yourself the trouble and just cut to the chase.

Just remember that being “social” (meaning being genuinely interested in the engagement piece as a relationship-building process) can’t be faked. Don’t even try. It’s insulting and ultimately works against you in the social space. Either commit to it 100% or don’t even try. Nobody just half-cares about their customers or friends. Either be in or out. Either give a shit or don’t.

I can pretty-much guarantee though that if you show that you do truly care every single day, it will pay off in spades: Positive recommendations, customer retention, customer loyalty, more frequent engagement, deeper engagement, increased mindshare, increased wallet share… If you want these things, you can have them. It’s up to you to make it happen.

6. Be helpful.

Do something helpful for someone every day and you’ll have engagement. Publish boring marketing content to fill empty spaces because you probably ought to and you will be hanging out with crickets. Who does your content strategy serve again? Your marketing department or your fans? Real question. What’s the most helpful thing you’ve done on Facebook today? This week? This month? In the last year?

Yeah… That’s what I thought. You can do better than that.

7. Have a purpose.

A strategy without a purpose is kind of like an essay without a topic. Why are you on Facebook again? What’s the value of that to you? What’s the value of that to people you want to engage with there? Give that some thought. The clearer your purpose, the higher the degree of engagement. It’s that simple. 0.45% actual engagement screams “pointless” to me. Like content for the sake of content. Like marketing spend for the sake of not losing your budget next year. Like being on Facebook because… “everyone else is, so we thought we should be there too. We’re still figuring out what we want to do though.”

8. Don’t buy fans, followers, likes and subscribers. Ever.

And don’t encourage your CMO, Social Media Directors and agencies to do so by rewarding them for meeting fan acquisition quotas. We have talked about this. The profit margins on fake fans aren’t rocket science for providers of said “fans”. The horrible mess it causes for brands who end up with tens of thousands of fake followers and fans is terribly costly and in most cases irreversible from a measurement standpoint. These people will never buy from you. They will never recommend you to their friends. They will never contribute in any way to the success of your brand. The only two things they will actually do is guarantee zero engagement and screw up your conversion metrics for the next ten years. Don’t do it. Don’t allow yourself to step into that giant pile of digital marketing poop.

9. If nobody cares about your product, your digital content won’t magically fix that.

This one is kind of self-explanatory. Talk is cheap. Focus on creating real value. If people love your products, they will share that with each other. The SEO magic behind your content is irrelevant if nobody cares about your product. You can publish stuff all day long on Facebook and no one will care.

10. Don’t just think about vertical engagement. Think about lateral engagement.

If your engagement strategy involves responding to every query and mention yourself, you’re missing the point. (Though if only ten people say hi to you every day, you ought to be able to manage that.) A vibrant, healthy community doesn’t depend on the brand’s community manager to drive conversations. The fans should be handling 80% of the comments. They should be talking to each other more than they talk to your brand’s representative. That’s what supports scale in the social space. Think about how you can make that happen. You can’t have significant engagement or drive long-term momentum in the social space without a mechanism in place to support that conversation engine. The platform + content equation alone won’t do it.

This stuff really isn’t that hard. It’s as simple as walking into a crowded room and making friends, then coming back the next day and meeting their friends, and doing it again the next day. If you just listen to them today, you’ll know what to talk to them about tomorrow. Once they start sharing stuff with you, you’ll know what they want you to share with them. Relationship-building 101.  Pretty much everything else you need to know is right here.

It has been all along.

Realistically, you are never going to see 100% engagement. Not even 50%. Shoot for 20% though. The 80/20 rule: 80% of your fans won’t comment. They’ll just watch and listen quietly. But 20% of them should naturally comment, share and participate. That’s what you want.

1% is embarrassing. Find a way to fix that.

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If the Brandbuilder blog isn’t enough, Social Media ROI provides a simple, carry-everywhere real-world 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. Do yourself a favor and check it out at www.smroi.net. Now available at fine bookstores everywhere. Also available in German, Japanese and Korean.

Click here to read a free chapter.

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

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I told you I would bring back this post regularly. Here it is again, until the day when everyone understands how simple this is. Okay, here we go:

If you are still having trouble explaining or understanding 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. So what is 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. doesn’t magically lose its relevance because social media “is about engagement.” 

If your business is for-profit and you are looking to use social media in any way, shape or form to help your business grow, then all of your questions regarding the R.O.I. of investing in social media activity are relevant. Any social media consultant who tells you otherwise is an idiot.

Concepts like Return on Engagement, Return on Influence, Return on Conversation are all bullshit. Nice exercises in light semantic theory, but utterly devoid of substance. First, they can’t be calculated. Second, they bring absolutely zero insight or value to your business. In fact, they pull your attention away from legitimate outcomes. Third, they are not in any way shape or form substitutes for Return on Investment.

Fact: If a social media “expert” tells you that ROI isn’t important, he (or she) is a hack. Remove them from your organization immediately.

Fact: A social media “expert” who doesn’t know how to calculate ROI properly (or teach you how to do it) might just be an expert at blogging, and not social media program management or social business integration.

Note: Integrating social media and business requires more experience than just making it look like 100,000+ “people” follow you on Twitter. Anyone can become a speaker nowadays. Anyone can publish a book and make themselves look like an expert. Unfortunately, at least 9 out of 10 social media speakers/experts/gurus/authors couldn’t effectively manage a Fortune 500 social media/business practice if you infused their brains with an extra 100 points of IQ and enrolled them in an executive MBA course. Be very careful who you hire, whose blogs you read, and whom you elect to influence your business decisions.

“Digital Influence” does not necessarily reflect competence. Always remember that. Some of the dumbest and most dishonest people in this business have enormous followings on Twitter, blogs and G+, and very high Klout scores to boot. (They spend an enormous amount of time making sure they do.) Conversely, some of the most brilliant, competent, ethical people in this business aren’t all that visible. Why? Because they are too busy doing real work to focus all of their efforts building personal brands and better mouse traps.

There are other litmus tests, but the ROI bit is a pretty solid one: A so-called expert who skirts the issue or fails a simple ROI problem/test from your CFO probably isn’t as qualified to advise you as his or her Klout score might have suggested. 😉

7. … But R.O.I. isn’t relevant to every type of activity.

Having said that, not all social media activity needs to drive ROI. As important as it may be to understand how to calculate it and why, it is equally important to know when ROI isn’t really relevant to a particular activity or objective.

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.

Knowing when and how ROI matters (or not) will a) help you avoid costly mistakes and will b) hopefully help you make smart decisions when it comes to assigning precious resources and budgets to specific social media/business programs.

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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.

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

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Since I am bouncing around Europe this week, (come say hi at #tsc12 if you can), now is a good time to republish this list from a few months ago. It is still as relevant today as it was then:

1. “Social” is something you are, not something you doIf your company culture doesn’t focus on building relationships with your customers, then chances are that you won’t use social media to do it either. The “media” doesn’t dictate how social a company is or isn’t. It simply enhances its ability to be a social business – if in fact it is – or illustrates the extent to which it isn’t.

2. You cannot effectively outsource customer relationships to an agency. Research and intelligence, sure: that can be outsourced. Creative? That too. Implementing technologies and helping you with strategy? You bet. Marketing, PR and advertising? Of course. But the relationship part: Shaking hands, being there when customers ask your for help, participating in conversations, making them feel at home when they do business with you, none of these can be effectively outsourced. Not unless your agency partner embeds a team with you for a few months and you are both committed to a long term program, anyway.

3. A blog is just a blog. It isn’t a magical trust and influence publishing converter for the web. Publishing propaganda or marketing content is just that, regardless of the publishing platform. Just because you publish marketing content on a blog doesn’t mean it magically morphs into something “authentic” that “engaged customers” will spread through “word of mouth.”

4. Marketing on social media channels isn’t “social.” It is just marketing on social media channels. Just as publishing marketing content on a blog doesn’t make marketing content any less manufactured and biased, publishing content on social media channels isn’t “social.” Every time I hear a company proudly state that they have a social media program when in fact, all they have is a marketing program that uses social media channels, I feel sorry for its stakeholders and customers. This is one of two things: Delusion or spin. And by “spin,” I mean a lie. If you are a professional in this space, either build a real social media/business program – one that is actually social – or get out of the way because those of us on a mission to do it right are coming in hot.

5. Transparency isn’t just a word. If you don’t intend to practice it, don’t preach it. Transparency isn’t a flag you get to wave around only when it is convenient. Disclosure also shouldn’t be something your legal department needs to brief you about. You already know what’s right. And by “right,” I don’t just mean “ethical” or what you can get away with. I mean “right.” Do that. Treat your customers with respect and treat your program on foundations of integrity and professional pride.

6. Change management, not social media tools and platforms, is at the crux of social media program development. Because social is something you are, not something you do, most organizations cannot succeed in the social space by changing what they do and not who they are. A Director of Social Media can only do so much. “Social” speaks at least as much to your company’s DNA as it does to its business practices. If you don’t really care about your customers, social media won’t magically transform you into someone who does. You have to wantto become this type of individual, and for your organization as a whole to follow suit, in order for the socialization of your business to be successful.

7. People are more important than technology. Hire people who care about other people. If you hire and promote assholes, your company will be full of assholes. It doesn’t matter how much Twitter and Facebook you add to your company’s communications or how many awesome monitoring dashboards you buy if you are a company of assholes.  Guess what: An asshole on social media is still an asshole. Start with your people, not your tools. They are what makes social either work or fail.

8. Social media should not be managed by Marketing anymore than your phones should be managed by Sales41% of social media directors are marketing professionals while only 1% are customer service professionals. Would you care to guess as to why it is that only 1% of social media programs seem to be yielding actual results (and I mean business measurables, not just web measurables)  while the rest are just making noise and turning anecdotal BS into “case studies?” (See item 9 for further insights into this.)

9. Shut up and listen. Everywhere I look, I see companies spending a good deal of their time (and budgets) focusing on producing content, blog posts, social media press releases, tweets, updates, events, and looking to “content strategy” to make sure it all fits smoothly together. That’s nice. Too bad they don’t spend at least as much time thinking about their listening strategy. Maybe they would actually get somewhere if they did. Listen to your customers. Listen to your competitors’ customers. Everything companies need to know is passing them by because they are too busy talking. Shut up, already. Use social technologies to learn how to better serve your customers and become a better company, and you’ll be good to go. Pertinent data can be turned into valuable insights. Valuable insights can be used to make better business decisions (strategic and tactical, short term and long term). That’s the real value. Pushing content all day long and measuring likes and impressions won’t get you very far. Remember: If your communications serve your marketing department more than they serve your customers or your business on the whole, you are probably doing it wrong.

10. Any consultant, “thought leader,” agency or partner who doesn’t tell you these things isn’t fit to be consulted on the subject. Do big promises, miracle cures and fairy tales sound like reality to you? “If you buy X, your business will suddenly grow and improve?” Really? Does “we have the best secret formula” sound legitimate to you? It doesn’t matter where your new “advisors” have worked, who they have worked with or how many people follow them on Twitter.  Of course they are all going to have great stories to tell. It’s called “marketing.” Ever heard of it?

Or maybe I would call that blog “The Emperor’s New Clothes: Alive and well in 2011 2012.”

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

– #smROI is now available in English, German, Korean and Japanese.

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We’re going to talk about a few things today: The relationship between ad spend and sales, the importance of focusing on the right metrics in order to make smart budget decisions, the problem with using impressions as a unit of campaign success, and how easily die-hard habits can trip us up.

Hat tip to Chris Young for pointing me to this story in Business Insider. Pay attention to how the story begins:

Reality appears to have finally arrived at Procter & Gamble, the world’s largest marketer, whose $10 billion annual ad budget has hurt the company’s margins.

P&G said it would lay off 1,600 staffers, including marketers, as part of a cost-cutting exercise. More interestingly, CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its sales.

Read it again.

The piece de resistance in that little insight dinner you just treated yourself to isn’t the part about P&G’s $10B ad budget or that P&G is the world’s largest marketer. It isn’t even that it shrank its workforce by 1,600 (which is really unfortunate) and it isn’t even that Jim Edwards chose to characterize P&G CEO Robert McDonald’s fork in the road moment as an awakening. No, the really interesting thing in this story is this:

CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its sales.

That’s right: Ad budgets vs. sales. The company’s $10B investment in advertising & marketing vs. return on investment measured in… wait for it: sales.

Finally. Not likes, not followers, not retweets or follows or shares.

Sales.

But hang on… we aren’t out of the woods yet.

1. Advertising vs. Sales: In search of symbiotic balance.

On a call with Wall Street analysts, Mr. McDonald illustrated the relationship between spend and revenue by explaining how P&G’s  advertising budgets are determined in relation to sales numbers:

As we’ve said historically, the 9% to 11% range [for advertising as a percentage of sales] has been what we have spent. Actually, I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we’re quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available.

So far so good, right? Here we find that advertising spend roughly amounts to 10% of sales revenue. This is an important point as it illustrates three important insights:

1. Advertising and sales are not independent of each other. They are in fact intimately connected. (If not, your company has a problem.)

2. The former (advertising) is meant to influence the latter (sales). We know this. That is generally advertising’s purpose.

3. There exists for every company a sweet spot in regards to the ratio of ad/marketing spend vs. the sales revenue it helps generate. Companies that measure the impact of advertising on their sales have a 100% better chance of finding it than companies that don’t.

If there’s a concrete lesson here, it is this: Not tying your advertising and marketing dollars to sales is a lot like landing a 747 with a blindfold on. Actually… it’s harder. A 747 has elaborate navigation systems and can pretty much fly and land by itself. Your business can’t really do that. So… if you think that landing a 747 blindfolded is a bad idea, not measuring the impact that your ad spend has on sales is an even worse one.

The difficulty is that with a $10B ad budget like P&G’s – that encompasses thousands of campaigns in a broad range of markets – identifying what works and what doesn’t requires some measure of diligence, accountability (and competence) from every campaign and product manager across the organization. 1,600 staffers on P&G’s payroll lost their jobs over this simple point.

Here’s the warning shot fired by Mr. McDonald across the bow of every single professional in a marketing management role today: It doesn’t take a whole lot of skill or savvy to spend a company’s money. Anyone can gamble a budget on a campaign or an ad buy and cruise by, quarter after quarter, by virtue of the fact that they generated impressions or dialed up brand mentions. It used to be that the guy with the biggest chunk of money to spend was the most powerful guy in the room. Well… that simply isn’t good enough anymore. Accountability might just have been called back to the table.

As every CEO on the planet watches and learns from P&G’s course direction this year, expect this sort of organizational adjustment to become far more commonplace. Not the laying off, mind you: The focus on real results and accountability.

One can hope.

2. Ad spend and the new media landscape.

Under Mr. McDonald’s stewardship, P&G’s ad budgets are reported to have grown by 24% in the last two years. The theory behind the increase was probably pretty simple: Spend more, sell more. And to be fair, it isn’t entirely without merit.

The same theory was put into practice this month in Florida by the Mitt Romney Campaign and its allies. In an effort to decimate his principal opponent (Newt Gingrich) in the GOP’s Florida primary, the Romney camp took no chances: According to a study by Politico, the Romney campaign and its super PAC allies outspent Gingrich by a ratio of almost 5 to 1. (Ad spend breakdown: $15.3 million for Romney and Restore Our Future vs. about $3.4 million for Gingrich and Winning Our Future.)

The result: 12,768 ads supporting Mitt Romney. Only 210 ads supporting Newt Gingrich. (Sources: USA Today; Wesleyan Media Project)

The outcome: A 14-point lead for Romney going into the Florida primary. (The 14-point lead held to the end of the contest: Romney ended up with 46% of the vote vs. Gingrich’s 32%.)

The first lesson here is this: In a world of traditional media, ad spend does matter. If you are willing to erode your margins or if you have money to burn, spend more, sell more can still work pretty well, at least in short intense bursts.

The second lesson, however is this: The world has evolved. More importantly, the media landscape has evolved. That kind of wholesale ad spend is quickly losing its appeal for the folks footing the bill. Reach can be achieved at much lower costs now. Compare traditional media buys vs. the cost of engagement via social networks, for instance and you will see a radically different set of numbers.

Another aspect of the old vs. new media discussion is that we are learning that the stickiness of a message varies from channel to channel. There is mounting evidence that content shared by trusted and like-minded peers holds more power than the exact same content simply blasted over traditional media outlets. This raises a question about the validity of “impressions” as a relevant (see neutral) unit of measure (or KPI) for campaign success, at least moving forward. Not only do impressions only measure reach (rather than consumer behavior – like actually buying stuff rather than just watching an ad), it is now clear that impressions are not created equal. The notion that an impression via a television spot bears the same weight as an impression resulting from a trusted peer sharing the same spot on Facebook, for instance finds itself on increasingly shaky ground.

Is this another nail in the coffin of traditional media measurement? Maybe. (Hopefully.) Why am I even bringing this up? You will find out in a few minutes.

Back to the main vein of our discussion: Political campaigns and the business world would do well to catch up to the times unless they want to continue to spend hundreds of millions of dollars (if not billions) on bandwidths which may no longer provide the most bang for their buck. P&G’s Robert McDonald appears to have come to this realization.

Here he is again in the same call to Wall Street analysts:

I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we’re quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available.

In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient.

There.

This is a radical change of perspective from a CEO who increased ad spend by 24% in just two years. Why the sudden change of heart? What happened? Three things:

1. A 24% increase in ad spend resulted in just 6% growth in sales for the same period. The numbers don’t lie: Spend more, sell more no longer works the way it used to twenty years ago. Not with the advent of the social web. Not in the new media landscape. The two year experiment was worth a shot but it failed. No sense continuing on the wrong path. As any good CEO would, Mr. McDonald looked at the facts, assessed the damage, and made a course correction. That’s how it’s supposed to work.

2. Communications channels have changed. The technologies have changed. Consumers and their expectations have changed. Search, mobile, location, social networks, community management and advertainment have pushed the old ad spend models a few feet closer to the edge of the big pit of irrelevance. Marketing has been fundamentally altered in the last few years. With a richer media mix today than ever before, and with a brand new palette of far more cost-effective (and stickier) options than traditional media, P&G finds itself in a position to adapt and explore new possibilities and models. That has to be exciting for Mr. McDonald and his team.

3. One of P&G’s experiments with new media was pretty successful already. Remember Old Spice? That was them. Mr. McDonald surely took a closer look at the little phenom and saw in it a template for a smarter, more effective hybrid model of traditional advertising, consumer engagement and potentially viral, WOM-driven advertainment. Case in point:

One example is our Old Spice campaign, where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world. So while there may be pressure on advertising, particularly in the United States, for example, during the year of a presidential election, there are mitigating factors like the plethora of media available.

And here we come to another fork in the road. Remember that thing about impressions I brought up earlier? We’re getting to it.

3. Relevant success metrics vs. everything else.

We know that advertising’s purpose – at least for consumer products companies – is ultimately to drive sales.

We also know that one of the principal reasons why P&G CEO Robert McDonald is now shifting his attention (and budgets) away from traditional advertising models to a more diverse model of traditional and interactive/social types of media was brought about by the realization that more ad spend did not have the desired impact on sales.

It  stands to reason then that the principal success metric for P&G’s investment in advertising should be sales: The campaigns which most effectively drive sales win. Following the same logic, the campaigns which manage to most effectively drive sales while minimizing costs will be even bigger wins. Right?

Imagine you’re a CEO. Looking back on two key campaigns in the last year, you are asked to choose which one was most effective at selling one of your top products. Here they are:

Campaign A (Traditional advertising) – Cost: $2,000,000. Revenue: $20,000,000.

Campaign B (Social Media program) – Cost: $50,000. Revenue: $20,000,000.

Both campaigns resulted in the same volume of sales for the product but one cost 40 times less than the other. Which one was the most effective? That one. Campaign B. Same result at a fraction of the cost.

So the ultimate yard stick of success for a campaign is twofold: 1. The campaign drove (and grew) sales. 2. The campaign also minimized costs.

Now read Mr. McDonald’s words again:

One example is our Old Spice campaign, where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world. So while there may be pressure on advertising, particularly in the United States, for example, during the year of a presidential election, there are mitigating factors like the plethora of media available.

Alas, when pressed to illustrate a key success metric for P&G’s Old Spice campaign, Mr. McDonald didn’t refer to increases in product sales or the relative cost of shifting a portion of his media spend to social channels. Instead, he introduced a completely different metric: Impressions.

Doh! How did this happen? How did we go from Mr. McDonald “waking up” to the connection between ad spend and sales back to “impressions?” Where did that even come from? *sigh* We were doing so well.

Let’s go over this again:

1. Impressions are an intermediate metric. They measure reach. Eyeballs, if you will. They don’t take into account kind of important things like conversions to sales, for instance.

If a campaign is clever and entertaining but ineffective at prompting consumers to buy a product, it will still be shared via social networks. It might even “go viral” and enjoy 1.8 billion impressions, likes and shares. But free or not, those 1.8 billion impressions could result in exactly $0 in net new sales.

Impressions are not transactions. Sharing content isn’t buying. It’s just sharing. Be very careful not to stop there, even on a call to Wall Street analysts. Stick to numbers that matter: Spend and sales. Close the loop. No matter how good the intermediate numbers look, remember to track the impact of your campaigns all the way to their ultimate goal: Driving sales of a product.

2. Those 1.8 billion impressions were not free. Not by a long shot. The amplification effect of social networks and viral sharing may have been free, but the campaign itself wasn’t. The strategists and creatives who designed, built and managed the campaign didn’t work for free. The actors, production staff and editors who put the spots together didn’t work for free. There were production costs involved. Digital folks wrote code and built apps and websites to make the content not only work online but spread properly to gain its initial momentum. A small army of talented and very well trained professionals made those 1.8 billion impressions possible, then nurtured that process.

Not to mention that the Old Spice campaign had major traditional media components. The campaign included ad spend for TV, print and web. The social components (YouTube, Facebook, etc.) were just one part of a greater whole. The two reinforced one another very well, but… we are a far cry from 1.8 billion “free” impressions.

Now you see how easily focusing on the wrong success metrics can lead companies astray. In three seconds flat, we were right back where we started: Instead of focusing on driving sales we shifted to driving impressions.

Note that as soon as the conversation shifted back to the old media notion that “impressions” also serve as a success metric for marketing activity, bad assumptions immediately entered the picture:

1. The assumption that 1.8 billion impressions necessarily impact sales.

2. The assumption that impressions are free because they take place on social networks.

That is how fragile business focus is these days: The introduction of just one bad metric can shift your perspective enough to send you and your media spend into the ditch in a matter of seconds. With hundreds of potential success metrics and digital statistics being thrown at decision makers all day long, it is easy to lose sight of what matters, of what works and what doesn’t.

In case you’ve lost track as well, here’s a reminder:

CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its sales.

The article does not say CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its likes. … or followers. … or shares. … or retweets. … or impressions.

It says sales and there’s a good reason for that.

One last illustration to bring it home: Remember our two examples from earlier?

Campaign A (Traditional advertising) – Cost: $2,000,000. Revenue: $20,000,000.

Campaign B (Social Media program 1) – Cost: $50,000. Revenue: $20,000,000.

Now let’s add a third campaign:

Campaign C (Social Media program 2) – Cost: $50,000. Impressions: 100,000,000 (estimated) Revenue: unknown.

Let me ask you something: Given the choice, which of these three campaigns would you rather be responsible for come reporting time? Which one would you feel most comfortable presenting to Mr. McDonald? Which one would you want to stake your career on?

Here’s to keeping your eye on the ball.

Cheers,

Olivier

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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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