We all understand that businesses exist to earn a return for owners. We also recognize that social media must bring demonstrable value to our enterprises or else it cannot earn the investments required for resources, IT development, consultants, tools, social marketing programs and other expenditures.
It is also vital to acknowledge that while social media can be used for direct marketing and increasingly will be used for commerce, that does not mean we can or will be able to easily tie financial results to social media investments. Social media isn't simply a sales and marketing channel; it is also a medium for relationships, reputation, community, service, advice, education, recruiting and awareness. This puts social media in the same category as other investments that firms typically will make without an eye to financial ROI. For example, customer service, employee education, hiring, corporate giving, sponsorships and public relations are rarely held to hard standards of ROI, yet that doesn't prevent businesses from investing as necessary.
I believe it is a sign of social media immaturity if a firm will only fund social media programs that can validate a positive ROI. This isn't to say that we social media professionals shouldn't measure every penny of business results that we deliver, but there are many benefits that cannot so easily be measured in dollars and cents. While I was at Forrester, we recommended a balanced scorecard approach to consider the range of short- and long-term benefits that are both quantitative and qualitative.
What are the dangers of holding social media to an expectation of measurable positive ROI? Here are five:
- Don't limit innovation: A major transformation in the way business operates is underway, and now is not the time to be on the wrong side of the innovation imperative. Amazon launched in 1995 and didn't turn a profit until 2001; Borders waited for Amazon to validate the value of online business (and in fact for seven years relied on Amazon for its ecommerce operation), and today, Amazon's market cap is $95 billion and Borders' is $3.2 million.
A while back, my former peer Nate Elliott criticized a tweet in which I quoted Erik Qualman who said that the ROI of social media is that you'll still be in business in five years. Nate's right--that statement is soft and misleading; Apple, for example, has yet to significantly embrace social media, yet I doubt anyone would predict Apple's demise in the next five years. Still, chances are your company isn't Apple and exists in a category that will see significant shifts in market share and profitability based on which players best leverage social media and adopt new ways to conduct social business. That doesn't mean you should simply waste money, but it does mean that your organization must embrace investments with uncertain ROI to help find what works and doesn't work for your brand, audience and category.
- Don't lose top talent: In a world awash with social media ninjas and gurus, there are precious few professionals who know social media, understand business processes, and are familiar with all the legal, regulatory and reputation risks inherent in social media. Finding people who tweet isn't hard; finding people who can earn the confidence of your CEO is another matter altogether.
I know two experienced and respected social media executives who've left their employers in recent months because they lost battles on funding for important social media programs. Both went to other firms who are hungrier and more ready for social media risks and rewards. I'm not suggesting companies fund every pet project offered up by their social media executives, but part of the value of funding social media isn't that it delivers immediate sales but instead that it prevents your company from losing experienced talent and incurring the cost of recruiting and onboarding new social media leaders.
- Don't let attribution problems stop you from doing what's right: While there are solutions to the problem of attribution, the simple fact is that most firms lack good metrics that permit them to attribute a portion of their sales to social media (or many other marketing tactics, for that matter). What channel gets credit when someone picks up the phone and completes a transaction after seeing 50 brand tweets, visiting the Web site, seeing a print ad and perusing the companies' online community? Chances are it's the phone channel, ignoring the impact of many social, digital and traditional touchpoints that contributed.
My advice to addressing this problem is twofold. First, if your firm uses marketing mix modeling and doesn't yet include social within its consideration set, change that immediately; validating that social contributes even a couple of percentage points to your overall revenue will be more than enough to fund most social media programs today. Secondly, play the attribution game. If your organization tracks inbound links from search engines and attributes same-session sales or inquiries to the search channel, then be sure to do the same for social media. While this approach is subject to all the same weaknesses and problems that attribution entails, there is no reason why your social media programs shouldn't get credit for sales or other beneficial transactions when people clickthrough from Facebook, Twitter and other social venues.
- Don't undermine your future advocacy: If you knew today that in 2013 you'd face a PR crisis, how would that affect your planning for 2012? If you knew for a fact that in two years your Facebook page would be flooded with Greenpeace protests or that you'll face a damaging accusation from consumer advocates, how would you prepare in the coming twelve months? Here's what you'd do: You'd invest more in PR and social media today. In traditional channels you'd strive for more positive press and stronger relationships with media contacts, and in social media you'd want to amass a much larger and more vibrant community of advocates who would help you defend your reputation and counteract negative content with positive and supportive feedback. And you'd do that in 2012 without consideration of the ROI.
That is one of the key problems with the idea of monetizing social media--it focuses on wringing value out of fans and followers today rather than building your reputation tomorrow. I had two occasions while at Forrester to speak with firms who faced large product recalls, and in both instances I was told that leaders wished they'd taken social media more seriously prior to the incident. Don't wait until your firm is forced to painfully recognize the qualitative value of reputation management in social media before letting go of the fixation on quantitative ROI and monetization.
- Don't trade tomorrow's brand value for today's sales: My favorite professional conversation in the past three years was with a peer who shared the story of a brand that came to realize it was delivering positive ROI in Facebook while eviscerating brand value. The brand's Facebook page collected thousands of fans who had positive affinity for the brand, and the company wanted to monetize these assets. The solution was simple--make posts containing discount offers with trackable links, then measure the clickthrough and conversion. The ROI was astronomical because, of course, the cost of a Facebook post was essentially zero; in fact, it worked so well, the brand starting pushing more discount offers and delivering more ROI.
Sounds like a success story, doesn't it? It was for a while, but then social media managers began to see the tone of the Facebook fan page change. Engagement on brand topics was down and posts from fans complaining about insufficient offers were up. The brand did a small online focus group and found that people "liked" the fan page because they truly liked the brand and its products, but over time the stream of discounts taught them to avoid making purchases until the right discount arrived (as it always would eventually.) The social media tactics were delivering demonstrable ROI; they also happened to be killing the brand and reducing margins. The focus on trackable offers and ROI had taken high-value fans--the kind who would purchase the brand regardless of price--and turned them into low-value price-conscious buyers.
People who focus too greatly on monetizing social media are not seeing the forest for the trees. It is too easy to measure the financial outcome of a given tactic while ignoring the wider impact to the reputation, affinity and advocacy of your brand. Your goal must never simply be to monetize social media but instead to do so while maintaining the value of your brand and consumer relationships. Otherwise, you risk chopping down trees and valuing the firewood produced while ignoring the damage done to your brand forest.