Posts Tagged ‘return on influence’

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


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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Snake-oil 2

Part 1: Return on Incompetence

Here’s a flash of obvious: When most of us don’t know how to do something, we typically know that we don’t know how to do it.

Let me illustrate: As much as I would love to be an F-18 pilot, I don’t know how to fly an F-18 (or any aircraft, for that matter). As a result, you don’t see me walking around in a flight suit  pretending that I am an F-18 pilot.

More to the point, you don’t see me advertising my services as an F-18 flight instructor.

For the exact same reason, you don’t see me trying to sell services as an ice-carving, cat wrestling or underwear-modeling instructor. Why? because when most of us don’t know how to do something, we have a) enough sense and personal integrity not to pretend that we do, and b)  enough professional acumen not to pretend that we are qualified to teach it.

Yet this line of logic (and basic sense of professional ethics) seems to escape a disturbingly large group of people who evidently have latched-on to Social Media as an easy meal ticket  – one to be earned, in many cases, on the backs of people and companies who don’t know any better.

To add injury to insult, most of these would-be Social Media “experts” aren’t even good at masking the fact that they have no clue what they are talking about. You would think that they would at the very least grasp the most basic building blocks of social media… like the fact that a Twitter follower, a Facebook fan and a YouTube subscriber are essentially the same thing, but evidently, even that simple of a concept escapes some of these folks. In far too many instances, they don’t seem smart enough to realize how little they understand about a discipline they claim to be experts in.

Yet these are the people who increasingly find themselves advising companies around the US as to how to build, integrate, manage and measure social media programs.

Now, those of us who actually do this for a living and take it seriously can spot these posers a mile away, but how are unsuspecting executives supposed to? To the uninitiated, anyone with a neat sounding social media measurement formula and a whiteboard presentation can sound like they know what they’re talking about. (If you had never seen what gold looks like and a self-proclaimed expert came along with a bag of yellow dust and told you it was gold, why wouldn’t you believe them?)

More often than not, the otherwise innocent combination of inexperience, ambition and lack of professional accountability are to blame. But in far too many cases, an unhealthy blend of raw opportunism and… economic conditions  have given rise to a mob of social media snake oil salesmen. Whatever the causes may be, it worries me to see how quickly both dangerously inexperienced amateurs and deliberate hacks alike have taken over the “social” management business with their special brand of complete nonsense.

Perhaps more troubling: Very few among those of us working hard to build up this discipline are speaking out against bad practices and obnoxious BS from this unscrupulous crowd.

Look, leadership isn’t just about thought leadership. It isn’t just about being pioneers or evangelists or mavens. It certainly isn’t just about getting the accolades and the followers and the invitations to speak at conferences.  Leadership is also about responsibility. And we have a responsibility to keep our community and this field as ethical, professional, and free of BS as we can.

If leaders in this field don’t stand up for its integrity, who will?


Return on Inaction:

The reality is that the hijacking of Social Media by hack jobs isn’t happening in a vacuum: Every instance of an agency, firm or consultant promising results and delivering a goose egg makes it that much less likely that their  clients will put their trust in a social media adviser again, genuine or not. And rightly so.

To outsiders, there is no difference between a Chris Penn (who knows his shiznit) and a Joe Shmoe (who couldn’t find his way out of a paper bag if Twitter drew him a map), and that is a big problem: Anyone with a little bit of SEO savvy can have his/her bogus methodology pop up at the top of Google searches. And if no one calls him/her on the BS, there will be no indication anywhere that what s/he is selling is complete nonsense.

Case in point: How many companies have already fallen for misguided methodologies like these? (I use the term misguided since as far as I can tell, their authors seem to have developed these methods in good faith.)

Social Media ROI Calculator no.1. (Go here for the analysis.)

Social Media ROI Calculator no. 2.

Social Media ROI Calculator no. 3.

Bogus Social Media ROI measurement methodology no. 327.

And then there’s  this conversation on LinkedIn. Count how many of these folks are consultants. Tell me that level of widespread confusion and ignorance about the mechanics of Social Media doesn’t open the door for abuse and nonsense on a large scale.

We can do better.

If you believe that the hacks and misguided amateurs will eventually go away on their own, you’re wrong. Why would they? The money isn’t bad, the opportunities are growing and there is still virtually zero accountability in this line of work. Every other company is looking for a social media expert to teach them how to either develop, integrate, manage or measure social media, yet the vast majority of business execs couldn’t tell a true professional from an agency flunkie with a Facebook account. You do the math.

We’re going to be on the wrong side of that growth curve for while unless we start establishing standards for the industry. And I mean sooner rather than later.

How Not To Measure Social Media – Part 2

Here is Part 1.

Below is another example of social media nonsense passing for expertise. I don’t want to make any assumptions about anyone’s motives in this specific case, so to be fair, it’s probable that whomever put this together genuinely thought that the thinking behind the equation and methodology was sound. There is no reason to think that anyone at Digital Royalty was trying to make a quick buck off unsuspecting clients when they developed this. (My guess is that they mean well.) But the fact remains that the people behind this thing don’t understand either Social Media or program measurement well enough to teach either. And that’s the danger: Regardless of people’s intentions and motives, bad methodology is bad methodology no matter how you look at it. And bad methodology quickly turns into bad business for everyone involved.

But don’t take my word for it: Watch the video and make up your own mind. (Watch carefully because I’ll have questions for you afterwards.)

And here is the “equation” referenced in that video:


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

Rather than listing out all of the flaws in this methodology and equation, let me ask a few questions that outline some of my key concerns. You can try to answer them yourselves or go straight to the answer/comment. You choice. (These were questions I asked the author on her blog post. They remain unanswered.)

1) Why do FB fans and Twitter followers fall into the volume column but YouTube subscribers fall into the engagement column?

Twitter followers, Facebook fans & friends and YouTube subscribers fall into the same category. They should be in the same column. (The “reach” column – not featured in this methodology.) Reach is neither hot nor cold. It’s a hard metric.

Demonstrating a lack of understanding about something as basic as this throws up a bright red flag right off the bat.

2) Why do frequency and reach apply to volume but not engagement or conversions? (Warning: This one may hurt your brain, so feel free to skip ahead.)

Assuming that Volume and Engagement are relevant categories/columns, (and that’s a very big if) Frequency and Reach would apply to both.

Let’s take a step back and look at the definitions of Frequency and Reach:

Frequency is a measure of how often something happens. (An activity, a transaction, etc.)

Reach is a measure of how many people you can touch. To use Amy’s own ecosystem terminology, reach is the number of people who live in your ecosystem.

A subset of reach is how many people within that ecosystem you actually touched or engaged with for a particular campaign.

Once you realize that, you start to see how the concept of a volume column is a bit shaky: You would have to include “reach” as an element of the “volume” column even though they are basically two words describing the same thing. See how this makes no sense?

But I digress.

Based on this model, Frequency (of interactions) should also show up in the engagement column: (How often do you engage?) Likewise, Reach would manifest itself in the engagement column in terms of how many people were touched/reached through… engagement.

If a Conversion column exists, then Frequency also applies to it: Frequency of conversions = how often conversions happen. (Or transactions, for that matter.)

Regardless of how flawed your method may be, this is simple, basic, common sense stuff that can be plugged in properly IF you understand it.

The lack of basic understanding of reach and frequency raises another red flag.

3) What does “actual activity and action” mean?

Transactions? Website visits? Who knows? Knowing what you’re talking about matters. Letting other people what you’re talking about matters too. “Actual activity and action” doesn’t mean anything.

Another red flag.

4) The size of your “ecosystem” = Reach. How can reach fall into both the cold and warm columns?

The size of an ecosystem is the definition of reach.  Calling something two different things doesn’t actually make it two different things. (This doesn’t happen when you know what you’re talking about.)

Having the same element appear twice in the same equation is bad math.

The red flags keep popping up.

5) Return on Influence = Adding 3 web analytics values to sentiment x reach (again)? Seriously? That’s the equation?

Before we dive deeper into this, the equation needs more work, starting with the fundamental flaws I already outlined.

Once you’ve revamped the basic elements of the method and equation, you have to then understand how the pieces fit mathematically (assuming they even do). Throwing a bunch of unrelated values together does not constitute serious social media measurement.

6) What unit of measure do you use? If it’s a “return,” what are we talking about? What does the number mean? What is it in reference to?

If the equation is supposed to create an influence index, then it doesn’t need a unit of measure. Just call it a Social Influence Index (SII) or whatever you want, and you’ll be fine. Whatever number the equation spits out is your “score”. Fair enough. There is nothing scientific about it, but you can probably get away with it.

But if you are going to call it “return on X,” you need a unit of measure. In real Return on Investment, you distill the investment in time, human capital and other resources to $$$. The “return” on that investment therefore is calculated in $$$ as well. Money is the common unit of measure.  The ROI equation gives you a ratio of money invested to money earned. The same rules apply here: If this is to be a “return on influence,” what unit of measure is used to calculate that ratio of return?

Without a clear unit of measure, you cannot calculate “return” on something. Basic 101 stuff. Learn it.

7) If “warm” data is “intangible and hard to measure,” why is it part of the equation to begin with?

Either it’s soft data and thus anecdotal or it is hard data and it can be used here. You have to pick one. You can’t claim that “warm” data is intangible/hard to measure and then add it to your “equation”. This is not a gray area.

Data isn’t cold, warm or hot. There’s only reliable data and unreliable data.

8) (Just added) Why does the equation on the board not match the equation in the graphic?

I knew something else about that equation was bugging me, but I couldn’t quite put my finger on it. Yet it was under my nose the whole time:

In the video, the “cold” half of the equation is interpreted as (Page Views x Visits) / Time Spent

In the graphic, the “cold” half of the equation is interpreted as (Page Views x Visits) + Time Spent

Which is it? Do we divide by Time Spent or do we add Time Spent?

(Thanks to @AnnaObrien for pointing it out.)

Incidentally, Frequency is not defined either in net page views or net unique visits either…

… And most of the KPIs explained early in the video seem to completely vanish…

… but by this point, who cares.

I could go on and on and on, but you get the picture: At first glance, the equation and the methodology look solid to the average person: Clean graphics, columns on a whiteboard, buzzwords we’ve all heard before, the promise of a digital agency backing it up, etc. Because the video and equation has already been posted on a variety of sites that fail to ask basic stink test questions by people who don’t know what flaws to look for, it makes its way to the top of search queries. Before you know it, complete nonsense goes mainstream and passes for real methodology because of three things: Decent packaging, Search, and confirmation of validity by other non-experts who barely skimmed the material.


This is how real Social Media expertise gets hijacked, and how Social Media management – as a discipline – loses credibility in the business world before it even gets a chance to prove its worth.

Last words:

This stuff isn’t just going to go away on its own. It’s great to see some folks in the Social Media management community speak out against this kind of BS, but they are the exception rather than the rule. At some point, the incessant retweeting and arse-kissing has to start making room for more relevant and responsible behavior: Call a cat a cat. When you see BS, don’t just look the other way. Call it out. Ask real questions. Put people to the test. That’s what leaders do. That’s what professionals do. We can’t keep allowing remedial BS to invalidate the real work being done in this space by those of us who actually care about it.

Rant over.

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