Social Media and the Ambiguous "Return on Investment"

A couple weeks ago, I read a post (wished I could find it now) which made the claim that there is no ROI in social media.  This, of course, caused a rather intense debate (although somewhat one-sided since there are more social media pundits online than the latter) on whether this was true or not. This kind of takes me back a year or two ago when I attended a social media carnival.  There were big wigs from Fed Ex and other fortune 500 companies trying to get their head around this "new" thing.  Frankly they were scared of it.  And justifiably so.  The world for advertisers and marketing had begun to turn on its head.  No longer could a business control the conversation;  they were merely participants in it. Of course, there were others who were wanting to figure it out for something more than simply brand and reputation management.  They wanted to know where was the money in it.  They wanted to know how to manipulate it to increase a return on investment.  How could they use it to make a buck? Bloggers and marketers who don't like social media and think that it is nothing more than a huge time sink will be quick to point out that it isn't worth anything.  They will point out the fact that things like digg doesn't convert well, adsense CTR suffer, and twitter with its "retweets" don't seem to garner a very positive CTR (never mind conversions). It should surprise no one that for most social media won't increase your bottom line DIRECTLY.  The amount of friends, LinkedIn partners or Twitter Followers is not a good indication of where you shop, what car you drive (or could drive), or how big your house is.  RSS numbers, although sexy, won't make you rich and are usually inflated to the point where your actual traffic is nowhere near the RSS claims at least in terms of reach. The direct part is the conundrum for online businesses both big and small.  The things that really matter when it comes to social media are largely thought to be unmeasurable.  Trying to measure things like RSS subscriptions, additions to your list, sales or other things that most marketers will use for ROI are skewed because, it isn't the direct measurements that matter; it is the trickle down effect that social media has for brands, websites, and products.

Just because your opt-in rate from a tweet post is 1% may not be indicative of success or failure.

In plain language, it doesn't mean that social media is a waste of time for a marketer...... It just means that social media doesn't have any direct ramifications in terms of sales or opt-in rates... This confuses marketers and businesses who are looking for static, bottom line numbers.  It is too easy to dismiss the "social" side of things because the benefits aren't reflected into immediate monetary benefits. However, there are ways to harness social media into your marketing plan which will pay off dividends on the back end....

What kind of benefit can you expect from the social media platforms?  Ed lee from Blogging me, Blogging you has a reprint of the crib sheet for social media.  (You can also check it out directly here, in jpeg format.)

Social Media and businesses

We can start on the entrepreneur level since most entrepreneurs are the early adapters in any trend.  They are also the ones most desperate for any type of media to work for their market that will give them a leg up from their bigger competitors. The first problem that these types of marketers face is recognition and credibility.  And they try to tackle both these problems in the worst way they possible could...by scaling up fast and growing a follower list.  For Facebook and Myspace, it is friends.  For LinkedIn, its associates and for Twitter it is followers. Typically, the game goes like this- You follow me, I follow you....we follow each other and try to get each other to be interested in whatever we are doing.  The signal to noise ratio is through the roof, but other than the obligatory first-look-at-your-website-to-see-if-you-are-a-spammer, it is meaningless. Other marketers try to get a little more savvy in their approach and add a liberal smattering of links from other sources in an attempt to break through the noise.  The idea is that if you can break the plain in terms of being interesting, you will become more credible and therefore the crowd that follows you will be more likely to listen to what you have to say. There is an issue to this though.... The problem is that it isn't what you are saying;  it is what others are saying about you.  That is the driving point in social media.  It is also why most marketers that aren't social will dismiss it so quickly as ineffective.... Social media makes it very difficult to game.  You can fool Google into believing that your site is the most relevant by building tiers and tiers of links.  But having your peers in your market and their friends, associates and followers cite you is a completely different story.

So, where is the ROI for Small Businesses and Websites?

Citations about you, your brand or your product will make it more visible in the network that may matter second (with buyers being first) but are equally important because they spread the message, helping to increase your visibility in the market and building credibility to your brand.  Think of it as a guilty by association in reverse.

How Much is a Connection Worth?

For those of us who don't mind peddling weight loss e-books and skin bleaching products by inferring "tone" on a web page that ranks, this means nothing.  After all, this type of marketer isn't interested in lifetime customer value because it is usually a one-off sale.  However, if you are building a brand and trying to increase your credibility, being an active participant in your market can pay off. Marketing is a service related field.  Online marketers tend to forget this.  They may think in terms of value for their customers but few understand the powerful effect of connection.  And making connections is hard.  The best salesmen offline are the best because they can create or bridge a connection between themselves and their customer.  If you can connect with your market, everything else will come after that.  These days, social media is a very powerful tool in fostering these connections. Once again, you can't measure it (at least conventionally)......but that connection could be the tipping point for you and your business....You may not be able to sell your product directly (social media typically isn't interested in being sold to)...you may not be able to pad your list with new sign-ups....but brand awareness could make you the go-to website should they need it at a later date. The fact that you have managed to garner the attention and recognition of others in your market that already are credible will help suspend disbelief because, in effect, you are riding their coat-tails in regards to credibility. They link to you not only improving your visibility, but their "followers, friends, or associates" may visit your page with a positive bias built in because of the person who recommended you. And THAT is powerful.  THAT is the ROI in Social Media.... You may not get sales from it.  But you could get;

• Links...
• Brand Recognition and Visibility...
• Brand Credibility...
• Access to the most important advertisers on this planet...the Mavens in your market.

Photo Credits-Social Engage, Social Media Laws of Attraction