Why is Social Media ROI such a big deal?

There are lots of books about marketing techniques, about how to measure campaign effectiveness, about when to use which broadcasting channel and so forth. When you read those books, you end up thinking: Ok, this can become pretty straight forward. Let’s define 4P, use this and that tool, define metrics for measurements and we’re set! And it works!

Traditional advertisementOf course it does! Traditional marketing in all its facets matured over the last many decades. Traditional marketing retains validity and its “raison d’être” – I don’t claim anything different here. However, there is a fundamental shift happening at the moment. And lots of people apparently do not recognize this shift in its entirety. Social media is something different than just another communication channel. I think this is a commonly shared opinion. In fact, it is a lot more than a channel. It is a new dimension of interconnectedness with customers, suppliers, society etc. necessitating a refurbished thinking of companies’ marketing.

Furthermore, a lot of companies simply cannot keep up to the rapid emergence of this new concept and technical possibilities of getting connected (even intertwined) with stakeholders. This is comprehensible as the progression of our culture, behavior or habits keeps getting slower relative to the speed of technological development and its opportunities. Or in other words: Technology grows faster and faster and we remain human. Being confronted with this rapidness, some companies literally rush into social networks, treat them like further one-way channels, and asking for the ROI of their mere participation.

Why is the discussion about social media effectiveness so sweeping and why is there so much dissent? It is clear that marketers have to justify expenditures. Hence they have to know the profitability of money invested for marketing campaigns. So you have metrics and figures at hand like spread losses, media costs, turnover, customer satisfaction, whatever. But what are you measuring? No one measures the medium. You never calculate the return of television or billboards – those are the “vehicles”. You measure the campaign and the specific marketing activity. Olivier Blanchard wrote a superb summary about having the right perspective and asking the right questions.

You cannot take metrics like followers, comments, facebook fans, number of various networks, and the subtlety of your posts, put them into an equation and calculate your rate of return. ROI is not medium-specific! You ask for the effectiveness of certain marketing activities. And this is the core of the whole discussion. It is about the things that you do in social media and not about the presence itself. You calculate the campaigns and activities that you run on facebook and twitter and so on … And of course there are answers to executives who ask for the ROI of their general social media efforts. But you have to alter the perspective. You have to approach it in a different and measurable way and you got the answer for social media effectiveness. It is a challenging task – but the major confusion keeps arising because of the same old story of apples and oranges.

There will be lots of posts coming up dealing with the measurement of effectiveness, though, I first will discuss the very basics surrounding this topic, literature and internet sources, my empirical approach of the thesis, and … you name it – (literally, name it!)

Stay tuned, please be critical with what I am writing, and engage yourself!

Best, Sebastian

(picture by barto @ flickr)


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