If there's one phrase I could forever eliminate from the marketing handbook, it would be "What's the ROI on Social Media?" The question is completely inane, and belies a lack of meaningful understanding about metrics and performance measurement. It's a clear sign of a marketer who has embraced the language of accountability, with little understanding of the mechanics. You get the sense that because there's no prettily packaged Social Media Dashboard ready to bubble up impressive graphs for the CEO, marketers are adrift without a paddle.
Meaningful metrics come from defining your business objectives and key performance indicators that demonstrate whether or not you're making progress toward specific goals. If one of those indicators is not a clear increment of revenue or cost reduction, there won't be an ROI measurement. Sometimes that path is not easy to measure. Sometimes it's even more trouble than it's worth. What's the path to revenue for your corporate identity? What's the path to revenue for your business cards? Some initiatives are just a cost of doing business, and you rely on other justifications that are more relevant than an absurd and paralyzing devotion to ROI.
The point is, there isn't a magic formula for ROI or other marketing performance metrics. But there are building blocks and strategies for developing meaningful metrics that help you determine whether your programs are working. And that's no less true for emerging social media programs than it is for traditional direct response programs. You start with clear business objectives, develop KPIs, and then come up with ways to track them. And it turns out there are a lot of things you can measure in social media.
If your goal is to develop a position as a market thought leader, there are ways to measure influence. How many blog posts are you writing? How many other blogs are linking to yours, and at what level of influence as measured by tools like Technorati or BuzzLogic? How many people are commenting on your blog? How many people are subscribing to your feed? How is your traffic growing within your target market? What's your search engine rank for keywords you're blogging about?
If your goal is to drive leads and sales, there are ways to measure impact on cross-channel campaigns, and even direct click-throughs. It just takes the same kind of discipline that's always been leveraged in direct response campaigns. Tests and controls. Launch a control without a social media component, and a test that incorporates social media--like a campaign launch via blog, or customer participation in campaign creative. Launch a string of product offers via RSS and track click-throughs compared to an email campaign.
I won't trawl through the litany of business objectives, but if the objective is clear, the path to metrics isn't far behind. It's just not waiting on a silver platter with a big red bow. So please, don't ask what the ROI is on social media. Tell me what your business objectives are and what indicators would demonstrate progress, and odds are we'll be able to find ways to measure meaningful KPI's in social media--and even pit them directly against other programs you already reflexively invest in.
Unica has just released a relevant whitepaper on Web2.0 and Rich Internet Applications, that talks specifically about meaningful metics. Unica didn't ask me to plug the paper--it was brought to my attention by a friend and co-conspirator outside Unica, Mike Moore. But it's a useful read if you're looking for more ideas on how to approach social media metrics.