social media roi: necessary...not evil
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CLT SMBCApril 22, 2010
Eric Boggs and Adam Covati
http://argylesocial.com
Social Media ROI:Necessary…Not Evil
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Argyle helps marketers and small businesses link social media marketing efforts to business outcomes.
http://argylesocial.com@argylesocial
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Public Beta Coming Soon
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1. Social Media
2. ROI3. Necessary…4. …Not Evil
Agenda:
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Social Media
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Source: Forrester’s Interactive Advertising Models, July 2009
Social media marketing spend will grow from $716M in 2009 to $3.1B in 2014.
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Source: “The CMO Survey” from Duke University’s Fuqua School of Business and the American Marketing Association (AMA), Feb 2010
Nearly 1/5 of marketing dollars will go to social in five years.
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Source: Argyle Social survey, April 2010
Argyle Survey Quick Hitshttp://survey.argylesocial.com80+ responsesAll industries, companies, sizes
Well over 60% rank their measurement capabilities and overall efforts as 5 or less on a scale of 10.Web analytics were the most “mission critical” tools.
57% have SMM budgets.
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Source: Argyle Social survey, April 2010
Less than $1k
$1k - $4k
$4k - $8k
$8k - $15k
$15k - $50k
$50k +
How much time do you invest in SMM each
month?
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Source: Argyle Social survey, April 2010
How much do you spend on SMM tools each
month?
Free
Less than $500
$500 - $2k
$2k - $5k
$5k - $15k
More than $15k
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ROI
Return On Investment
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ROI is the ratio of money gained or lost relative to the initial investment.
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ROI =
Vf – Vi--------
Vi
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You bought 10 $15 SMB CLT tickets in advance.You sold 9 of them at the door for $20.
ROI = 180 – 150
--------150
ROI = 20%
Investment value = $150Final value = $180
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But what about time value of money?If the interest rate is 10% annually, would you rather have $100 today (that you can’t use to buy SMB CLT tickets) or $110 one year from today?
You wouldn’t care. $100 X 1.1 = $110.
What if you could spend/invest the money?
Time = money
Of course you’d take the $100 today – you can end the year with $120 by exploiting SMB CLT ticket spread.
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Let’s get mathematical!
You hired a SM consultant to develop a SM strategy in hopes of generating SMB CLT ticket sales.
What is your ROI?
The consultant charges a $400 fee. ($400 total)
Your earn $50 in y1, $250 y2, $500 y3. ($800 total)
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ROI = 800 – 400
--------400
= 100% - you doubled your money!
But what about time value of money? It took you 3 years and $400 to earn $800!
At 10% annual interest, that $400 could have been $532.Using the same ROI math:
ROI = 800 – 532
--------532
= ~50% - not as good, but not bad!
But what about the timing of the cash flows?
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The cash flows:
Year 0: -$400Year 1: $50Year 2: $250Year 3: $500
Using Excel’s IRR function – return is only ~15%.
Why? Because the cash flows are back-loaded. At 10% annual interest, $500 three years from now is only worth $378 today.
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If we rearrange the cash flows:
Year 0: -$400Year 1: $300Year 2: $250Year 3: $50
Using Excel’s IRR function – return is 30%.
More of the cash comes up front as opposes to three years down the road.
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- Peter Drucker
“What gets measured gets managed.”
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Necessary
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PPC Email Social
✔ ✔ ?
New channel. New
challenges.
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Email : Social :: Rinse : Repeat
Email Marketing ca 2003:
Desktop appsLittle managementLittle coordinationLittle measurementNo data integrationIncidental campaignsFew specialistsNo clear solutions
SM Marketing right now:
All of that…plus:
Incredible momentumAnalytics ecosystemData-driven marketingSomething to prove
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- Fred Wilson
“Links are the currency of the web. That's the reason that Google is the king of the web…right now.”
Emphasis mine.
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- Adam Covati
“Twitter and Facebook don’t drive traffic to your site. The content you posted on Twitter and Facebook drives traffic.”
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Not Evil
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5 (Not Evil) Steps
1. Define desired outcomes.2. Understand your inputs.3. Find tools that manage
data flow.4. Manage your team.5. Do the math.
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1. Define desired outcomes.Outcomes:
RevenueCustomersLeadsMembersEtc.
Not Outcomes:
Followers/Fans/ReachClicks/ViewsSentiment/BuzzCommentsEtc.
The outcome needs to be reflected as a meaningful number (or set of numbers) that you can (easily) track over time.
Cost/Lead – Cost/Customer – Earnings/Lead – Etc.
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2. Understand inputs.
ROI = Vf – Vi--------
Vi
People – salaries, contractors, creative, interns, your time
Tools – posting, managing, monitoring
Spend – ads, apps, games, etc.
Overhead – cost accounting decisions
Opportunity Cost – How else could I use these resources?
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3. Find tools, manage data flow.
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Social Media Marketing Goals
Conversations
Sentiment/PR
Value Push
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Social Media Marketing Tools
CoTweetHootSuiteTweetDeck
Radian6ViralHeat
Google Alerts
bit.lyArgyleawe.sm
Conversations
Sentiment/PR
Value Push
Web Analytics & CRM
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4. Manage the team.
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5. Do the math…repeatedly.
But don’t forget about time value of money and opportunity cost!
ROI =
Vf – Vi--------
Vi
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Eric Boggs, Founder & CEOAdam Covati, Founder & CTO
http://www.argylesocial.com
919.360.0238