The advertising and public relations industries have to prove their worth. They have to show that what you bought delivered a return on investment (ROI). And the demand to create more accountability for social media increases every single day. Just last month, accountability was the basis for most of the discussion at ad:tech in San Francisco (watch my interview with Scott Milener, CEO of AdRocket, in which he talks about advertisers increasing demand for performance-based advertising).
Five years ago I remember making presentations to blue chip companies about a whole host of different social media projects such as a corporate social network for customers, a video demo site, a corporate blog, and a corporate podcast. While all the presentations went very well, and my audiences were always engaged, the last question always asked was, “How much is it going to cost, and how many people are we going to reach?” While I could offer different cost options, I couldn’t guarantee an audience. And it was at that point the pitch was often sunk.
You can’t make decisions on new media if you’re measuring it with old media metrics
Marketers have been taught that the building blocks for decision making are CPMs (cost per thousands). If you have a budget and know your CPMs, with a little spreadsheet work you can develop an entire media plan. Marketers and their clients are taught that a media plan will tell you how much it’s going to cost you to reach your audience.
A media plan’s building block is the CPM. It’s the metric that advertisers know, understand, and negotiate on. The problem is when you use an old media metric (CPM) to measure new media, you can’t measure it properly, and as a result, you miss out on fantastic opportunities. It’s the same reason why you don’t use a slide rule to measure the sky.
The people who have succeeded with social media probably didn’t even know what a CPM was. And more importantly, they made their decision to engage without determining an ROI. Do you know of one person who engaged in social media because they calculated a positive ROI first? If the evidence shows that everyone who succeeds in social media did it before calculating an ROI, then why do corporations still think they need to calculate ROI first before they engage?
“We’ve been trained that everything gets measured down to a sales lead. If that’s how you measure social media, then forget it,” said David Meerman Scott, author of The New Rules of Marketing and PR and World Wide Rave. Scott mentioned this during a panel session entitled, “The Conversational Corporation: How Social Media Has Changed the Enterprise” held at Dow Jones in Palo Alto, Calif. I joined Scott on the conference panel along with Shel Israel, co-author of Naked Conversations and the upcoming book, Twitterville.
Many decisions are made without calculating ROI
“What’s the ROI of your receptionist? What’s the ROI of your parking? What’s the ROI of the paint on the walls? What’s the ROI of the landscapers,” said Scott as he continued on his ‘I hate the ROI-obsessed business culture’ rant. “The idea that everything has to come back to a measurable ROI is ludicrous. ”
I thought Scott’s rant during the panel really summed it up. Nobody thinks about these things with ROI. But for some reason, because the word “media” is attached to “social media” we need to measure its ROI first before we do anything.
Although, don’t think that not measuring your ROI before you engage in social media precludes you from measuring your social media efforts. You should, and there are tons of ways to do it.
Ultimately, success in social media comes down to commitment, having something to say that will interest your audience, and ultimately, getting over your fear. “The person who has the least fear is the one who will be doing it first, and they will be the ones who succeed,” Scott said.
If not ROI, what’s it going to take?
Even with all this agreement that ROI shouldn’t be the deciding factor to engage in social media, what should be? What do large corporations need to feel comfortable about engaging in social media? And second, and this is the trick question, for those corporation you do persuade, knowing that social media’s costs are mostly in labor, how do you persuade clients to create larger social media budgets, possibly taking dollars away from traditional media budgets?
For more great coverage of the Dow Jones roundtable event, check out David Libby’s very detailed coverage and the post from Daniela Barberosa of Dow Jones, who organized the event. Plus, here are some more photos as well. You can see video of the event on both sites, but be warned, the audio is very poor.David Spark, a partner in Socialmedia.biz, helps businesses grow by developing thought leadership through storytelling and covering live events. Contact David by email, follow him on Twitter and Google Plus or leave a comment below.