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Measuring Social Media Value
Drilling Down Newsletter #99 4/2009

Drilling Down - Turning Customer
Data into Profits with a Spreadsheet
Have a question on Customer Valuation, Retention, Loyalty, or Defection?  Go ahead and send it to me here.

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Prior Newsletters:

Hi Folks, Jim Novo here.

Social media.  What is it, other than social?  Is it media?  Is it PR?  Is it Service?  Everything to everybody?  This month we wade directly into the social quagmire and try to define some ways to view and measure social media.

Over on the Blog, we touch on a related topic - the function of Display Advertising in the online world today.  My opinion is Display serves as a "bridge", and that online, the function usually handled by advertising offline occurs on the web site itself.

For those of you looking for a Data-Driven Marketing fix, I invite you to join myself, Kevin Hillstrom, and Akin Arikan for this webcast:

What Online Marketers Can Teach
Offline Colleagues (and vice versa)

on May 19, 2009  at noon ET.  Data, data everywhere and models to spare at this free Web Analytics Association event, open to both members and non-members alike.

Let's get with that Drillin'...

Sample Marketing Productivity Blog Post

Online Ads are Navigation
April 17, 2009

What if the media / agency complex story about how online advertising works is not really true.  What if Advertising - from the end user (visitor) perspective - performs a fundamentally different job online than it does offline?  What if the entire game is different than you think it is?  Might that explain why itís so difficult to get any agreement on the value of online advertising?

Continue reading on the blog:
Online Ads are Navigation
and feel free to leave comments.

Questions from Fellow Drillers

Measuring Social Media Value

Q:  I'm a social media consultant, facing the interesting challenges of measuring success, and wondered, what are your thoughts on social media measurement and life time value? The two seem to go together, but if anyone has thought about it, you would have.  Would love to know your thoughts.

A:  Just to be clear, the following is specifically about social for use as a Marketing platform, not as a utility or a way to keep in touch with people.  Interacting with other people can create a lot of value - emotional value for the participants.  There are obviously lots of great uses for social platforms and I'm sure there is more to come in that area.  The question is: does any of this make sense as "media"?

Social has different faces.  So let's specify for the purpose of the starting the discussion we are talking about social as an advertising media.  Then we will get into social as PR, social as Service, and so on down the line.

From a business perspective, I think people are over-thinking social as media, worrying about measuring what they really can't measure.  If you have a clear objective, social media is just another source of visitors, with the same kinds of issues - how much traffic do I get relative to cost, do they convert, and so forth.  Which means you measure LTV just like any traffic source that generates activity.

That doesn't mean there is not more value created from social media.  It just means the additional value is difficult to measure when you have a clear objective, so I view that value as a "bonus".  If social traffic is working for you at some acceptable level relative to cost, that's great because the actual benefit is greater than what you are measuring.  This, by the way, is true of all advertising.

Then you have social as PR, a way to "get the word out".  People have been measuring PR for decades and the standard is to compare this "earned media" to paid media in terms of value of the exposures, e.g. if you believe a page in a magazine has a certain value then a full-page review in that magazine has the same value.  And probably a higher value, since it's not "advertising" coming from the company, it's (hopefully) non-biased content.

That's the way it used to work.  You send your new Consumer Electronics product to a  magazine editor and maybe it gets reviewed.  If the review is a full page and it's positive, and a full page ad costs $30,000, well by golly you just got yourself $30,000 worth of PR.

I suspect that is the way we end up measuring the value of social media as PR, and it's probably the most reliable measurement.

If you are on the 3rd side of social, the customer service / input from community side, then social has the same value for these tasks the previous channels had - what is the value of solving a customer problem?  Of getting input from customers?  The value created is channel agnostic, so if you can answer the question for the phone, you can answer the question for Twitter.  The problem is, most people can't answer the question for the phone either, so asking the question about Twitter amounts to a lot of navel-gazing.

What worries me quite a bit about the Service side of social is companies have had access to all this information about broken processes or poor product design for decades, and they have largely ignored it.  All they had to do is some analysis of call center data tic lists and they could identify and act on their "Top 10 Biggest Customer Issues".

But they did not.  So there is a much larger organizational issue here, regardless of social media - what is the process we use to identify and act on poor customer experience? 

The bottom line is WOM has been around forever, and the measurement of it has always been controversial, so the measurement issue is not new to Marketing.  The fact online has more "data" then we usually have is helpful.

If you have a specific question or challenge to the above, I would be glad to respond to it. Dialogue is always helpful when you are dealing with new concepts and ideas!

Q:  I see social media as far more than a source of site traffic.  From a commonsense and anecdotal point of view, it's ideal for building relationships, whether business or personal (and in most cases, both - the line is blurry between the two.

A:  If you look at the *relationships* as opposed to the technology, certainly message boards and e-mail distribution lists, some of the oldest  technologies on the Internet (The Well was founded in 1985), would qualify as Social Media, wouldn't they?  And "the rules" for proper engagement in those communities have been well established for a decade.

Interestingly, the "rules" people talk about with regard to Facebook and Twitter and so forth - "doing social media right" - are the same as were first published in the FAQ's for these older communities.  People measured the value of participating in these older versions of community using goals, and I'm pretty sure those same ideas apply to Facebook, Blogging, Twitter, and anything else "community" that comes along, regardless of the technology.

Community and sharing are not new, they are the *very foundation* of the Internet.

Q:  Having said that, I must have another look at your book, to refresh my memory about how to measure LTV and how that could be done in social media.  In some ways, it should be easier because there are so many measurement points, but on the other hand, each interaction needs to be given a value as most of the interactions aren't direct sales.

A:  Now it gets more complicated - is an interaction media itself, or just a vehicle?

You are speaking as if a channel itself can have LTV, and that is not a concept I can embrace.  In the context of LTV, the interactions themselves do not have value; what has value is the emotional output of those interactions; how people feel as a result of them.  

Just because I interact with something or someone does not mean there was value created.  So just counting interactions (remember Hits?) is not likely to be very useful, unless you are selling media, which is a different story.  Media does not have LTV, visitors / customers have LTV.

LTV implies a goal that has value, right?

If someone contacts me though my blog or Twitter and asks me to speak at a conference, the value of participating in the community is the value of speaking at the conference.  This really has nothing to do with the number of interactions I've had; I had the right interaction with the right person which resulted in the request.  If enough of those events happen, the aggregate value of emotions created in the community is the sum of all those values; it really has nothing to do with interactions.

LTV requires a goal of some kind.  Counting "interactions" (or for that matter, "followers")  doesn't mean a heck of a lot unless those interactions result in reaching a goal of some kind.  Interaction for the sake of interaction itself isn't really a goal, you need an endpoint.

Just because I broadcast a message to 10,000 people, doesn't mean value was created; action must be taken to create value.

If I know I get one conference invitation for every 1000 interactions, then I have a way to keep score, but the interaction itself is simply a way to count.  If the value of speaking at conferences is known, then I know the value of participating in the various communities.

But let's say you are really focused on the idea that the interactions themselves have value.

If you want to value interactions, you're back over to the "media" side, and media has no LTV; the LTV resides in the actions taken as a result of the media interaction.  Counting interactions implies there is value in the impression created by the interaction (or why count them?); this means they are media.  Lots of people will see these comments or Tweets and an impression will occur.  Good.

If you want to take social as a media, I think the value of participation - if there are not specific goals (like a sale) - will be expressed like PR is, in terms of "impressions".  Nothing wrong with that, as far as it goes.

But, on the average, a single media impression (of any kind, online or offline) has little value - and this is true especially in these social environments where quantity is always stressed over quality (# of followers).

This is why "weight" is so important in media - because you need an absolute ton of these impressions to create any value.  With rare exceptions (Yahoo home page takeover?) it's very difficult for the web to achieve weight in the offline media sense - the web simply is not built for that kind of mission.  

So that means it is going to take a tremendous amount of work to scale "social impressions" to the point where they are effective.  The exception will be highly targeted micro-environments where you have a very high quality audience for the message.

How else could you get scale?  Well, you could run Display ads across the base of all  interactions, of course.  And this is where you run into a paradox with the current ad-supported social business model; let's follow this out to the next step.

If you think there is value in counting interactions, this means the social interaction *itself* - the actual Comment, the Tweet, etc. - is advertising, and so makes no sense as a vehicle for ads.  At best, these ads dilute or distract from the content that is doing the real work in this scenario - the interaction.  More likely, the ads are simply annoying and completely out of context in the environment.

From my perspective, the very definition of social excludes it from ever becoming an effective carrier for commercial advertising.  As I wrote in a blog post on this topic, participants are likely "Too Engaged to Pay Attention".

I can already hear people squealing, "But Jim, social is a hybrid, it's all of the above."  That's a convenient perspective, isn't it?

Because as long as social is "everything", there is not a right way to measure value, is there?


Have a question on Customer Valuation, Retention, Loyalty, or Defection?  Go ahead and send it to me here.

If you are a consultant, agency, or software developer with clients needing action-oriented customer intelligence or High ROI Customer
Marketing program designs, click here

That's it for this month's edition of the Drilling Down newsletter.  If you like the newsletter, please forward it to a friend!  Subscription instructions are top and bottom of this page.

Any comments on the newsletter (it's too long, too short, topic suggestions, etc.) please send them right along to me, along with any other questions on customer Valuation, Retention, Loyalty, and Defection here.

'Til next time, keep Drilling Down!

- Jim Novo

Copyright 2009, The Drilling Down Project by Jim Novo.  All rights reserved.  You are free to use material from this newsletter in whole or in part as long as you include complete credits, including live web site link and e-mail link.  Please tell me where the material will appear. 


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