One of the biggest concerns about the growth of social media is its impact on marketing metrics. How do you measure influence? How do you measure engagement? How do you measure the ROI of a blog, or a wiki, or a forum? There are a number of facets of this discussion that are worth pulling apart and clarifying for debate.
First and foremost, the struggle over defining online performance metrics significantly transcends social media. This is a challenge that is more accurately located in the broader category of advancing Web technology. As Tom Hespos points out in a great article on "The Death of the Page View" , technologies that have no implicit connection to social media, like AJAX and Flash, are causing significant disruption to accepted Web metrics like the page view. Web publishers are already struggling over the definition of new metrics for reach and engagement because the ways in which information is published is making older metrics obsolete. Social media as a set of technology tools is simply an extension of this issue, while social media as a social communications trend--the changing ways in which influence is shaped and transmitted--is amplifying the challenge. Simply stated, we need new measures of communication flow that are rooted in the way new technology works--and we have a long way to go. But you won't skirt the issue by avoiding engagement with social media.
The lack of robust metrics makes a lot of marketers gun shy. If you can't demonstrate clear ROI, how can you justify the budget? I don't want to be flippant about this, but I think marketers need to bring a little balance to the justifiable demand for performance accountability. We do need to be accountable, and we do need to show that we've thoroughly vetted the investments we're making. But when you're in a competitive market that demands innovation, you have to get in the trenches to help innovation along, instead of just throwing up knee-jerk stop signs to every project that doesn't come with a business case tied up in a neat bow. It makes me think of a prehistoric fish in a receding inland sea saying to an amphibian "so, what's the business case for legs?"
The best approach I've seen from a marketing group that needs some space to innovate is to allocate a percentage of their budget--let's say from 2 to 10 percent--to emerging marketing programs. Boards that are spouting wisdom about innovative cultures can put their money where their mouth is by sanctioning a small percentage of the budget for programs that may not have a clear cut metric for ROI. Having a dedicated budget then puts a greater focus on how programs are selected, and how performance against business objects should be measured rather than just a slavish devotion to fitting innovative programs into an expected ROI mold.
And that brings us to another significant problem in the typical discussion over metrics. I say this so many times I think it'll wind up on my gravestone: You can be incredibly efficient at doing the wrong things. The vast majority of program metrics are internally focused--they only tell you whether or not your proceeding efficiently. They don't tell you whether you're going in the right direction. Campaign metrics? Market share? Very important. But are you winning the right customers? Are you pursuing the right markets? How much revenue are you leaving on the table--or wasting on marketing programs that won't increase your market share? What's missing is a wider frame of marketing metrics that account for your performance within a competitive set of businesses. Victor Cook is the visionary who's been hammering on this idea for 40 years, and recently published a book that provides a framework for externally focused metrics. I extensively reviewed his book online, and he's recently launched a blog to discuss marketing finance.
Finally, social media is a very thrifty way to fail. There are so many small programs leveraging cheap or even open source technology, that the "i" in ROI is very small compared to any marketing program that involves traditional media. I launched my marketing tech news blog MarketingRev at a total cost of $175 and 40 hours of my own labor, including design, programming and hosting costs for a year. The ROI was astronomical with my first speaking, and just accelerates with consulting referrals, and emerging technology partnerships for my agency. But the payoff in the way that blog keeps me informed and fully engaged in my market would be worth the investment even if I didn't make a dime in revenue.
Performance metrics are an important reality for marketers to understand and embrace--but that also means having a balanced perspective. If the only lens you have for looking at marketing programs is a simplistic formula for ROI, you'll have another important metric to face up to in the future: opportunity cost.