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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.

*          *          *

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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Before I begin, here are links to the three events mentioned in the video:

July 17: Americas Mart International Gift Show – Atlanta, GA

July 20 (not July 21, as I wrongly stated in the above video): Gaspedal’s Supergenius conference – New York, New York

July 27-28: ADMA Forum 2010 – Sydney, Australia

Okay. Now we can begin.

From solo operator to corporate front: The evolution of manufactured Social Media expertise in 2010

I guess it was just a matter of time before we had to revisit the issue of bogus Social Media “experts,” so today is as good as any to do just that. This time though, rather than drop the hammer on the latest Social Media certification scheme or outrageous Social Media R.O.I. equation/calculator, let me just speak in more general terms. Not that I particularly feel obliged to protect the guilty, but we can do this without pointing any fingers. Actually, for this topic, it works better if we don’t.

What I want to shed a light on today isn’t the lone “Social Media Expert” who tried his hand at being a day-trader, then got into SEO, then found himself out of a job for a few months and finally figured he’d try his luck as a Social Media consultant… because hey, how hard can it be, right? *sigh* We’ve already been down that road and I can’t think of anything to add at this juncture. No, today, I want to bring up another type of “Social Media expert” altogether: The kind that earns his or her validation from the company they work for, mostly as a marketing ploy engineered by said company.

Consider a scenario for a moment (and I am not making this up, so pay attention): Consulting Firm XYZ realizes that there is big money in Social Media consulting and services, say in the enterprise space. Every single one of their big clients is asking them for help on the Social Media front, first in terms of research and fact-finding, then in terms of strategy, then integration and training. They need to act fast or they might not get that business. What to do?

There are two ways of going about this: The first – Putting together a team of people with actual experience in these matters. Identify them internally or hire them as needed. The second – Grabbing the handful of consultants who did your initial research and fact-finding when it comes to Social Media, and change their respective titles to reflect their needed “expertise” in light of their new client-facing roles. One is the right, ethical, smart and professional way of getting into the Social Media consulting business. The other is the complete opposite of that.

Intelligent and ethical choices designate the winners in the long run

Let me be clear about this: Many firms and agencies choose the first of these choices. Companies like Edelman, Ogilvy, Radian 6, Deloitte and New Marketing Labs have already snatched up some pretty solid names in the space – an indication that they are taking their task and their clients’ well-being seriously. These companies would tend to fall into the good category. Sadly though, not all consulting firms and agencies have chosen the same path. More and more, I keep running into firms that knowingly appoint people with no experience or savvy to “Social Media Director,” “VP Social Business” and other such roles, then aggressively market them to their unsuspecting clients in order to secure lucrative consulting contracts.

Not that some consulting firms haven’t been doing this with other disciplines for decades, but this one hits a little closer to home. Besides, until now, internally manufactured experts at least had some semblance of experience. At worst, they received a decent degree of training before being thrust into their clients’ unfortunate laps to learn their craft as they went. Now though, when it comes to Social Media integration and program development, not so much. It’s like the bar has been lowered a few more notches, and that isn’t something we should turn a blind eye to.

How to manufacture a bogus Social Media expert for your company in 10 easy steps

So here’s how the process of manufacturing internal Social Media expertise works:

Step 1 – Identify the pigeon: the individual who isn’t really good at what s/he was hired to do, but is someone’s protegé within the organization and could fit into this role well enough. “Let’s see… Who fits that description… Ah yes. Jackson. Someone call Jackson in here. What?… Yes, tell him to bring his pencil.”

Step 2 – Send Jackson on a two-week fact-finding mission to find and browse through every study, article, report and policy ever written about Social Media. (We’ll come back to this in step 4.) “Yes, Jackson. Google. With a G.”

Step 3 – Build Jackson a personal website and a blog. Tell him to get a Twitter account started. Better get on Facebook too. Oh, and LinkedIn, just for good measure.

Step 4 – Remember all of that research Jackson did for Step 2? Yeah… Get the web guy to create a page that agglomerates all of those “resources” on his new website. A) It’ll look like he really knows his stuff. B) It’s great for SEO. C) With a resource like that, we’re sure to attract a few bloggers and e-journalists.

Step 5 – “Get the PR team rolling. We need to get our man some speaking gigs and a few key quotes in industry pubs.”

Step 6 – “Call our print people. We need to make sure Jackson gets published asap. Pull some strings. We need this.”

Step 7 – “Mortimer, make sure jackson blogs once per week. Yes, make him if he doesn’t want to. Same with Twitter. I want a daily tweet from him, with a link to something we own. Wait… on second thought, never mind. We’ll let Legal handle all that.”

Step 8 – “Make sure that Jackson’s personal website looks nothing like ours, but throw in an easy-to-spot disclaimer that clearly identifies him/her as our employee. No sense throwing bait without the hook. Yes, our company name needs to be italicized.”

Step 9 – “Call the PR team again. Let’s make sure everyone knows we’ve named Jackson VP of Social Business. Yeah, contact all the big bloggers too. Some of them might share the info with their networks. Oh, and email our clients. Yes, all of them.”

Step 10 – “Book a few rooms for SxSW and Blogworld. Jackson needs to be seen. Let’s see if we can sponsor a party while we’re there too. We have some leftover marketing money from that thing last month anyway.”

Voila. Before you know it, someone with zero background in the space as of three months ago is suddenly an expert working with Fortune 100 clients for a prominent consulting firm. Just. Like. That.

Smoke, mirrors, and the proverbial wool in the age of Google: Wrapping it all up with a simple job title

Now imagine you’re a company looking to build a Social Media program, and you don’t know where to start. The consulting firm you work with comes to you with a Social Media consulting package. They introduce you to their “expert,” Their VP of Social Business, with his own team of social media consultants. You google the guy. You find his website. You find the extensive list of resources he linked to on his website, along with a handful of quickly drafted $150 reports done internally by research interns last summer. He has a twitter account, a Facebook profile and even a blog with a good dozen posts on it you can’t really understand, but they’re filled with links. Looks good, right? Why should you doubt any of this? Seems legit enough.

After all, why should you doubt marketing from a company looking to generate millions of dollars in Social Media consulting fees after an investment of less than $10K in web design and PR? Hell, they didn’t even need to staff up. All they did was shuffle a few consultants around then printed them new business cards to reflect their new… expertise. Bam. Instant new service offering.

This isn’t theory. It isn’t a what if scenario. This is all too real. This actually happens, and it happens within very large, reputable firms as well as small fly-by-night ones.

All of this to say: Be cautious. Do your homework – not just on the firm itself, as it might otherwise have a stellar reputation and an impressive list of clients, but more specifically on the “experts” your consulting partners bring to your table. Just because a company you hire to help you tells you their experts are indeed experts doesn’t make them so. Do your homework. Research the “experts.” Don’t let well-designed websites and fancy titles fool you.

7 simple ways to separate legitimate  professionals from manufactured experts

Here are some things to look for before you throw your money away on a complete disaster:

1. EVERY person worthy of occupying a Director or VP level position in the Social Media, Social Business or Social Communications space has been involved in some sort of social/digital publishing for 3-5+ years. Typically, this manifests itself as a blog. Case in point: NML’s Chris Brogan and Keith Burtis, Francois Gossieaux, Geoff Livingston, Valeria Maltoni, Orange’s Yann Gourvennec, Neville Hobson, R6’s Amber Naslund, Ford’s Scott Monty, Seth Godin, Brian Solis, Jeremiah Owyang, Edelman’s David Armano, Ogilvy’s John Bell, … All have been actively involved in the Social Web for years. They didn’t get into it six months ago or just last year. They have been in it from the start, and as a result, they know what they’re talking about. These folks are respected in the space because they helped build it. They are the caliber of people consulting firms should look for in a hire. Period.

Find out how long your consulting firm’s “expert” has been blogging. Less than 2 years? Proceed with caution. Less than 8 months? Look for expertise elsewhere.

2. Read their blog. What do you find? Crap content just to fill a page 3x per week and provide search engines with carefully chosen keywords, or is the content actually helpful, well researched, shrewdly analyzed and intelligently presented? Does this person care about what they do, or are they just doing what they need to in order to “be in the game?” Does their content give you ideas or just regurgitate someone else’s articles and content? Speaking of original content, how much of what they blog about is THEIR content? (Hacks like to borrow and appropriate content. Get a sense for whether or not this individual really knows their stuff or is merely a parrot with a fancy title.)

3. Blogging isn’t everything. Lots of people have been blogging for 5+ years but couldn’t manage a Social Media practice if their lives depended on it. Who have they worked with? What have they done? What is their background? What relevant mix of experience do they bring into the role? Were they an SEO expert a year ago? And a day trader before that? If so, be careful.

Note: Though there is no clear path to Social Media management savvy, the individual’s story has to make sense. Maybe they were a corporate marketing guy who fell in love with the Social web and started incorporating it into their company’s activities. Maybe they were an artisan who used Social Media to tap into communities and figured out how to apply those lessons to business.  Maybe they were a tech or a baker or a PR manager or a Customer Service manager who realized how Social Media might change the game for their discipline and have been tweaking the model ever since. Everyone capable of functioning at the Director or VP level in the Social Business space has a story to tell about how they came into the space that involves passion, an idea, and a very specific path. Look for it. Ask to hear it. Conversely, the manufactured “experts” don’t have a story. They just showed up a few months ago because the time was right to jump in. It’s a simple litmus test, and one that usually works quite well.

4. How do they handle themselves on Social Channels? Do they ever respond to comments? If so, how? Are they using Twitter, Facebook and LinkedIn as mere broadcast vehicles, or do they actually care enough about the space and their role in it to engage, respond and participate in discussions? How fluent are they with dos and don’ts of various Social communications platforms? Have they demonstrated on these channels the ease and fluency that you would expect from someone with real experience under their belt, or are they merely “there,” kind of floundering?

5. Who outside of the organization and its clients can vouch for them? Don’t ask their boss. Don’t ask their HR person. Don’t ask their other clients either. You might as well ask their mom while you’re at it. Find validation outside of their immediate circle of interest.

6. In their initial meetings with you, do they speak more than they listen? Do they lead with a 5-step “program” or a “P.L.A.N.” rather than trying to see how to organically grow a program within your organization? Do they make you wait for even the most basic feedback rather than discussing possibilities and ideas right there and then? Red flags all. Once the sale is made, then what?

7. Do they care? This is a simple gut check. If they’re into it, if they are passionate about the space and what you might do together, you’re probably on the right track. If they aren’t passionate about any of this, then be very careful where things go. Social Business management without genuine passion is like a folk singer without stories to tell: It won’t go very far. Look for passion. Genuine, burning, infectious passion. Yes, even in a consultant.

Caution for now, but expect clear skies eventually

So again, be cautious. This line of work hasn’t been around long enough for professionals to be able to establish themselves as clearly to outside onlookers and prospective clients as, say, plumbers, designers, attorneys, restaurateurs or journalists. Nobody was a Director of Social Communications ten years ago. Five years ago, even. This line of work is still fairly new, even to those of us who have been involved with it for the better part of a decade, and in some cases longer than that.

Five years from now, the waters won’t be as murky. Hacks will have fallen by the wayside and those with a real aptitude for this type of activity will have emerged as clear professionals in their field. But until then, proceed with caution. Do your research. Don’t confuse a job title, a neat website and some fractal Social Networking activity for anything more than just good marketing.

Cheers.

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