Measuring ROI from Social Media

March 16th, 2010

Daniel Davidson

Le Agenda

• ROI: Not as you know it…• What is Social Media• The Social Media measurement process

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• 4 methodologies for reaching revenue• Sources of value from Social Media

Why is ROI Important?As marketers, we focus on:– Selling more units– Growing market share– Increasing the subscriber base– Deploying more communications

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… and ROI is the metric that shows if money is being made

I paid $1MM for this project. Where is my

return?!? Bahhh!

This is all fine and dandy, but the true goal of a company is TO MAKE MONEY

Jack, the boss

ROI should be straight forward…

ROI = Return on Investment

For traditional media, there are many, established methods for measuring ROI:• Pepsi Super Bowl Ad• Ralph Lauren Cologne Print Ad• Dell Computer Direct Mail

= Sum of all Gross Revenue from that tactic

Sum of all Investment in that tactic

4 The house that Jack didn’t build

… but Social Media measurement is different.

• Everyone interacts with social media in different ways– Tom is always updating his Facebook status. Heather watches YouTube videos at lunch.

And Mike diligently relies on customer reviews before booking any hotel

Suck Level Social Media ROI > Suck Level Traditional Media ROI

Actual theory proven by Swedish Social Media scientists

• Control is in the hands of the consumer– Want to build awareness? Drive retention? Have a strong call-

to-action? Tough! You don’t get to control the content – the user does! (that’s why they call it “user-generated,” silly!)

• Social Media is always changing!– Yesterday, MySpace. Today, Facebook. Tomorrow, who knows?

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Introducing…

Bacon Social Media

...set up a Facebook fan page to share bacon tips

…tweet about new recipes and product launches

… upload pictures of fabulous, beautiful bacon

… post videos of how to make complex recipes

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Major Types of Social Media

• Blogs• Customer reviews, forums• Micro-blogs (e.g. Twitter)• Communities (e.g. Facebook)• Video sharing (e.g. YouTube)• Photo snaring (e.g. Flickr)• Podcasts• Wiki’s (e.g. Wikipedia)• Virtual worlds (e.g. SecondLife)• Social Bookmarking (e.g. Delicious)• Documents (e.g. Slideshare.net)

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The “investment” of return on investment…

• Time (generate content, review comments)• Agency fees• Video production or editing• YouTube partner program• Blog hosting or setup• Equipment (video cameras)• Multimedia software• Training

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Source: Kru Research

Approach to ROI

Corporate Social Involvement

Consumer Action

Engagement Metrics

BusinessImpact

A company sets up social discussion on social networks like Facebook and YouTube…

…which will lead consumers to interact with the brand, form opinions, and take action online…

…which we will measure using various social network tools…

…and then correlate to business impact, such as bacon revenue.

The accuracy of a solid ROI model lies in the last step: translating engagement (like YouTube video views or sentiment analysis on a blog) into financial results.

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“I know that my social media efforts drive revenue, but how? And how will I be able to measure this effect?”

Engagement Metrics

1. @ replies (Twitter)2. Active placements (Widgets)3. Badges/Buttons downloaded (General)4. Click throughs (General)5. Comments (Blogs, YouTube, General)6. Downloads (General)7. DMs (Twitter)8. E-Cards/Cheer card (General)9. Embedded links/embeds (YouTube, Videos)10. Fans / Followers / Friends / Contacts (Facebook,

Twitter, YouTube, Flickr)11. Forward to Friend (Blogs, General)12. Grabs (Widgets)13. Links / Trackbacks (Blogs, Twitter, General)14. Listed15. Listens (Podcasts)16. Members (Total Members, New Member, Active

Member)17. Off-line mentions (Traditional media)18. Opt-ins (email newsletters)19. Page views (General)

20. Print page (General)

21. Rankings in search engines (YouTube and Twitter content in Google Results)

22. Ratings / Rankings / Tags (YouTube, Blogs, General)

23. Ratios (Member vs. Complete Profile, Member vs. Activity, Read vs. Comment (total/new/active/unsubs))

24. Refer a friend (email newsletters, Blogs, General)25. Return visitors (General)26. RTs (Twitter)27. Sentiment (General social media)28. Share of conversation (General social media)29. Shares (General)30. Subscribers (email opt-in, RSS feeds)31. Time spent per visit (General)32. Total mentions (General)33. Trackbacks (see Links)34. Unique visitors (General)35. Videos viewed (YouTube, General)36. Votes/Like This (YouTube, General)Source: Kru Research11

3 Steps to Evaluating a Social Media Tactic

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1. Understand the key benefits of each social media tactic• Understand how each social network is used and can generate consumer engagement• “Twitter serves to establish direct conversation with current, future, and lapsed customers”

2. Create the engagement metrics to measure performance• Metrics must be observable and trackable• “# of followers of @BriansBaconBungalow”

3. Link the metrics to business objectives • Link tagging – embed a key or referrer ID in links so that we can use RM database to track

an individual from online action to eventual car sale• Scenario modeling – build scenario analysis to model the chain of events from a certain

online action to an eventual car sale• Mirroring method – how much was gained by mirroring an another tactic? • Baseline analysis – measure the level of a business objective (e.g. test drives) before and

after the implementation of a social network initiative

Linking Metrics to Return: Link Tagging

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Brian’s Bacon Bungalow

Link to a website where customer registers and can then be tracked

Embed a key or referrer ID in links so that we can track an individual from online action

to eventual sale

Brian uses Facebook to create hype around a new product or bacon recipe

Other techniques might allow for cookie placement, so that a purchase on another day could be tracked back to the viewer of the Facebook page.

Linking Metrics to Return: Scenario Modeling

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Build scenario analysis to model the chain of events from an online action

to an eventual revenue inflow

“10,000 unique individuals read one of @BriansBaconBungalow tweets last year. Twitter analytics tells me so!”

“I know from research and surveys that 10% of these individuals will visit www.BriansBaconBungalow.com.”

“Website path analysis tells me that 5% of online visits result in a purchase, adding an average of $30 in revenue.”

10,000 × 0.10 × 0.05 × $30 = $1,500 in incremental revenue from Tweeting

Brian’s Bacon Bungalow

Linking Metrics to Return: Mirroring Method

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Brian pays $100 per 10,000 impressions in Bacon Monthly.

BaconMonthl

y

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Of course!

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How much was gained by mirroring or replacing another tactic?

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!

Brian got 10,000 views of a photo/ad on Flickr!

The same number of impressions in Bacon Monthly normally costs $100, and generates $200 in revenue. Yay!

YouTube = TVFacebook = PRFlickr = Print

Social Media tactics that resemble traditional media

Linking Metrics to Return: Baseline Analysis

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Brian posts a series of videos on YouTube, demonstrating how to make some of the more difficult bacon recipes…

Measure the revenue before and after the implementation of a social media tactic

… and he measures revenue before and after the posting.

‘How to make Bacon Sushi’

Website Sales by Month ($)

YouTube Video series launches

Return from social media investment will materialize in

multiple ways…

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Decreased cost from business replacement (customer service, focus groups, market research)

Consumer opinions from blogs, posts, and discussion groups provide insights and intelligence normally obtained through focus groups and

market research. Product user forums replace official customer service.

Increased revenue from visits to website or store

Positive social involvement drives individuals to the doctor’s office, retail store or to the corporate sites – each such visit moves the

consumer 1 step closer to purchase

Decreased cost from traditional media channels

YouTube videos replace TV spots, Facebook contests replace official PR efforts, Flickr pictures replace print ads

Increased revenue from Word Of Mouth

Social involvement develops and empowers brand ambassadors, who work to bring others into the conversation around the brand

Increased revenue from loyalty and social affirmation of purchase

Increased interaction with the brand through social sites will build loyalty, which drives repeat purchases

Decrease costIncrease revenue

Additional (and indirect) sources of return from social involvement

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Decreased cost from shareholder communications

Social networks provide the company a unique medium through which to comment on financial results, corporate changes and other news with the shareholders and investment community

Increased revenue from press coverage and PR

Well-executed social interaction initiatives will create favorable press coverage and PR (example: GM FastLane blog)

Decreased cost from HR/recruiting

The “best and brightest” will leverage employee posts and other discussion boards in their decision to apply

to and work for the company

Increased sales from employee productivity

Employees will be happier and more productive when they have forums where they can share their passion with their work with the

outside world

Decreased cost from monitoring adverse events and opinions

Monitoring the social network sites will allow marketers to hear adverse opinions early and to get a handle on problems quickly

Summary• ROI is the metric that justifies an investment• Measuring Social Media engagement is easy… … but it is tough to translate those to revenue.

• Link Tagging: embed link or cookie• Scenario Modeling: A x B x C = $• Mirroring Method: what other tactic

does this mirror?• Baseline analysis: measure revenue

before and after

• Look beyond just “increased sales” for sources of return from social media

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The goal of social media is to create conversation.

The goal of a company is to make money.

As marketers, we need to show clients and managers how these conversations translate to money.

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