Again, What Is The ROI From Social Media?

by Dan Robles on 05/06/2009

humanelement_21-300x200 What is the ROI for Social Media?The quick answer is that ROI is indeterminable – get over it.

ROI is a static measurement where financial decision makers look into the Crystal Ball to project a future economic outcome which is then be protracted back into the present to arrive at a value of an investment opportunity.  In case you have not noticed, this valuation method is largely bankrupt.

Like lipstick on a pig

Yet ROI Persists. B-schools teach SWOT; Strengths, Weaknesses, Opportunities, and Threats as a means of dressing up our projections with yet more projections.  All the ROI in the world may predict the economic future but as soon as people react to the market condition through improved information in Social Media, all those models fail.  This is called reflexivity and it is becoming a dominant influence in all financial projections in the age of Social Media.

Fortunately, the true visionaries of the next economic paradigm are increasing in numbers and rapidly moving away from the ROI model into something far more valuable simply by asking the serious questions……

Hey, what exactly is the currency we’re using?

David Bullock and Jay Deragon from the Social Media Connection Network are producing a series of videos investigating the currency of social media where they astutely ask the tough questions, “What are people trading?” and “what is a Tweet worth?” While these may seem like simple questions, they have many an ROI expert stumped.

Nobody really cares if I had bacon for breakfast; so the ROI on that tweet is exactly zero.  However, if you get 15 tweets in an hour on the same subject – there must be something important related to bacon today.  The more people sending bacon tweets, the greater is the value of my “option” to react to what looks like a bacon pandemic.  Still, I hold the option, without the obligation, to expend my limited resources in response.

Options have value

The value of social media is counted in options – not ROI.  Social media is dynamic, not static. Therefore “Strengths, Weaknesses, Opportunities, and Threats (SWOT)” are also highly dynamic moving targets that are highly contagious in social media and cannot be foretold in the next 5 days let alone 5 years. The cardinal rule of business is to collect assets and reduce liabilities. An option is an asset and an obligation is a liability.

ROI fails.

ROI is a future projection brought to the present.  Options are collected in the present and projected to the future – there is a fundamental difference between the two that must not be overlooked.  People are doing something, they have a plan, they are cooking up a new trick and the ROI is indeterminable…

Options have value and obviously people are willing to pay for them with their time at a keyboard, therefore, they are willing to pay for them through any medium of exchange.  This is what people are doing on social media – collecting options. The Next Economic Paradigm will provide a means to cash in those options. Hold on to your chips, the social media game is far from over.

{ 17 comments }

ingenesist September 9, 2009 at 5:27 pm

RT @justtweets Again, What Is The ROI From Social Media?: The quick answer is that ROI is indeterminable – get over http://bit.ly/vNVMm

ingenesist September 9, 2009 at 5:27 pm

RT @jbenanto451psu RT @AJGerritson commenting on dan robles blog post "What is the ROI from social media" http://bit.ly/Hubt5

ingenesist (ingenesist) September 9, 2009 at 5:28 pm

Twitter Comment


RT @jbenanto451psu RT @AJGerritson commenting on dan robles blog post “What is the ROI from social media” [link to post]

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Jim Westcott May 8, 2009 at 9:15 am

Jay,

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Amber Naslund May 7, 2009 at 1:49 pm

Hi Dan,

Ah, the ROI topic. Clearly, to me, the most fundamental issue with measuring ROI is understanding what in tarnation you’re hoping to achieve in the first place. The investment and any ensuing return are moot unless they further a business goal. And instead of ROI being a prerequisite for every social media conversation, I think the discussion needs to start with “why are we doing this” and “what do we hope to achieve”? That’s what determines the investment in the first place. The rest is diligence and paying close attention to results. 🙂

Cheers.
Amber Naslund
Director of Community, Radian6
@ambercadabra

JDeragon May 6, 2009 at 10:43 pm

Again, What Is The ROI From Social Media?: The quick answer is that ROI is indeterminable – get over it.
ROI is .. http://tinyurl.com/cw86zj

Thomas Lee May 6, 2009 at 9:42 pm

RT @ajgerritson commenting on dan robles blog post “What is the ROI from social media” http://bit.ly/Hubt5

JDeragon May 6, 2009 at 5:43 pm

Again, What Is The ROI From Social Media?: The quick answer is that ROI is indeterminable – get over it.
ROI is .. http://tinyurl.com/cw86zj

Thomas Lee May 6, 2009 at 4:42 pm

RT @ajgerritson commenting on dan robles blog post “What is the ROI from social media” http://bit.ly/Hubt5

Jeff Benanto May 6, 2009 at 4:28 pm

RT @AJGerritson commenting on dan robles blog post “What is the ROI from social media” http://bit.ly/Hubt5

AJGerritson May 6, 2009 at 4:18 pm

commenting on dan robles blog post "What is the ROI from social media" http://bit.ly/Hubt5

smconnection May 6, 2009 at 5:01 pm

Again, What Is The ROI From Social Media?: The quick answer is that ROI is indeterminable – get over it.
ROI is .. http://tinyurl.com/cw86zj

AJ Gerritson May 6, 2009 at 4:15 pm

Hey Dan,

Great post!

Although the definition you have provided for ROI is accurate, worth noting is that many people also use the term – right or wrong – when referring to measuring campaign performance (e.g. “we spent 100k on our social media campaign last year, our ROI was…”).

In thinking in terms of campaign performance measurement, I think ROI can definitely be measured. My experience is that companies need to define exactly what they are trying to achieve before they start such initiatives and measure based upon these goals (brand mentions, awareness, web traffic, etc.).

I think it is also a lot easier to define ROI for B2B companies engaged in social media. I say this because our agency does a lot of work in the B2B space. We find our clients really care about measurement in the form of leads. So that’s what we give to them.

As different as the goals and the measurement of these campaigns, are the approaches to reach such success. For example, quality B2B leads come from executing carefully thought out strategies. These campaigns involve content development (white papers, webinars, podcasts), extensive monitoring of the social web (tools like radian6), engagement through social channels, engagement protocol development, landing page development, possible crm integration, and drip marketing planning and execution. This approach is in many ways different from executing a B2C campaign.

My two cents….

@ajgerritson

Brian C. Citizen May 6, 2009 at 2:54 pm

Daily Deragon Dose: Again, What Is The ROI From Social Media? http://tinyurl.com/cw86zj

Business 3.0 Tech. May 6, 2009 at 1:59 pm

RT Again, What Is The ROI From Social Media?: The quick answer is that ROI is indeterminable – get over it. ROI .. http://tinyurl.com/cw86zj

dan May 6, 2009 at 10:58 am

Sean;

Hmmm…funny you should say that. That’s exactly the point…brain waves.

Sean Wilder May 6, 2009 at 10:25 am

Wow…we must be sharing some brain waves. I wrote about the same topic on my blog yesterday. To me, social media/networking online is about making friends. You can’t really put an ROI on friendships, but we know they are important to successful.

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