Guest Posts, Social Media Measurement, Social Media ROI

How Size Matters in the Social Media ROI Debate

Simon Gornick How Size Matters in the Social Media ROI DebateGuest post by Simon Gornick, a content consultant specializing in short form slogans, and owner of The Tagline Machine.

ROI in social media is a luxury. And the only brands that can accept that are likely to be big ones with multi-platform marketing budgets. The larger the brand, the more likely they are to use social media without concerning themselves with its dollar ROI, when goodwill for them, is priceless. With mid-level brands the debate becomes more acute because the marketing budget is more thinly spread. And as for small brands, there’s no debate at all. For the most part, all they have is social media – so ROI is a matter of hope rather than measurable statistics.

That was a comment I added to a great post from Matt Ridings called “Is Our Addiction to ROI Killing Social Media” on Convince & Convert.

banana ruler 300x163 How Size Matters in the Social Media ROI DebateUnderstanding this equation goes to the very heart of modern marketing, not merely within social media but across the entire spectrum of marketing disciplines.

Part of the conundrum is rooted in the inherent contradictions of the Internet and its technology. On the one hand, Web technology has provided us with an almost obsessive level of measurability – metrics of just about every variable one can imagine are instantly available. On the other, the Internet is a vast, free flowing fish-pond where hundreds of millions of people swim and bob around from place to place, connecting, communicating, and moving on. Measuring that part of the process isn’t just dicey, it’s a recipe for insanity.

Bridging Both Sides of the Internet Experience

The answer is simpler than most people think. Find a way to measure and assess marketing responses that’s right for the channel you’re using – and stick with it.

If you’re using banner advertising (how wonderfully old-fashioned of you!) CPC, eCPM, and CPS are your bread and butter. The ROI – while still imprecise – is at its core at least – numerical. And if it’s numerical, the ebbs and flows of sales can be measured with some degree of accuracy against your spend. How much of advertising ROI is art rather than science is a matter for debate, but there’s enough vaguely convincing science in play to reassure executives.

Partially because “social media” means a great many things, it’s far more difficult to create a reliable attribution model.

Social media – at least today – is often more art than science. At best the science is the pseudo-science of persuasion and engagement – concepts that don’t sit well with the empiricists who want proof of everything, all the time.

Let’s look at how companies of various sizes and budgetary realities look at this quandary.

Big Brands and Social Media: The Virtuous Circle

Sure, elements of social media are measurable (how many times was a post retweeted or a YouTube video shared) but broadly speaking social media marketing isn’t often scientific enough to convince a big brand (no doubt full of empiricists) that it can go all-in on the fluid, free-flowing world of social media marketing, and certainly not at the expense of anything larger than a small fraction of a conventional marketing budget. It simply won’t happen, especially in a tight economic landscape where backs are to the wall, reputations hang by a thread, and experimentation is regarded with the same relish we’d have for a root canal.

At best, larger companies are going to look to social media as a brand-builder, a humanizing goodwill device that can set the table for other, more conventional parts of a company’s marketing approach. That’s the wise way to go, but it involves accepting (possibly even promoting) the inherent limitations of social media.

Social media taps into the causal swirl of the fish pond, but if an executive across the table says he’ll need to see ‘solid ROI on that’ he’s might as well be asking to do a focus group with a group of golden carp. Your response should be simple. Give us 10% of your marketing budget and we’ll enhance your brand with social media, so the ROI on the rest of your ad budget can improve by a corresponding degree.

In other words conventional marketing and social media marketing are symbiotic. If the social media implementation works – it’s a win-win. Increase in goodwill equals better response to conventional advertising, which feeds the virtuous circle. This is the same reason why good advertising breeds increases in search volume.

Mid-Sized Companies: The Squeeze is On

A small percentage of a multi-million dollar marketing budget is still a windfall in social media, but the smaller the company, the bigger the hole a decent sized social marketing spend is likely to cause. Mid-sized companies, squeezed by the power, scalability and discount power of big boys at the top can be even more cautious in shelling out for social media beyond a cursory ‘presence’. Anything more than that presence and the board is going to take the first chance it can to grill the CMO for breakfast (or feed him or her to the fish, depending on their mood).

And you can be sure the CMO wants no part of that.

To make matters worse, mid-sized brands often have far less WOM reach, and a shallower pool of historical goodwill upon which to draw, so social media marketing has to be that much more imaginative and more targeted to deliver the virtuous circle that bigger brands might experience.

For mid-sized companies, social media ROI can be even more of an obsession because there’s simply less room for error. Naturally, that impulse might drift into their assessment of the efficacy of their spend.

It’s a safe bet that pesky ROI-addicted empiricists at mid-sized companies will be even more vociferous in meetings than their big-brand brethren, and they’ll be downright stubborn if their marketing budgets have been shrunk or squeezed.

Incidentally, none of this has anything to do with whether social media marketing ‘works’. It has everything to do with corporate politics, perception and self-preservation.

Small Business: No Marketing Budget = No Brainer

Of course, if you really want to get to up close and personal with the hardships of being in business, try being a bootstrapped startup with a marketing budget of around zero. That is reality for most small businesses.

For multitudes of home-based entrepreneurs newly-minted by the necessities of survival during and after the Great Recession (and I count myself as one of their proud number) social media marketing is all they have. For the little guys like us, debating the ROI of social media is a luxury we can’t afford to waste time upon.

You don’t have to pay someone to implement a social media campaign, and you don’t have to pay to use it. You are the CMO. And the execution arm. And because it’s free – in financial terms, at least – the dollar ROI of social media can’t ever go into the negative. Opportunity costs are something else entirely, but small business doesn’t often ponder such things. Not having to write checks for social media is one of its great advantages.

Of course, getting it right when you’re a minnow in the big Internet pond is far tougher than when you’re a big marketing barracuda at a large brand, or a feisty PR piranha at a mid-sized outfit.

In truth, the ROI on a social media campaign which gave you twenty-five new ‘likes’ and ‘follows’ in six months slaving over a hot browser is likely not very good at all. The only way to hopefully improve your ROI is to learn how to play the social media game more efficiently, which often requires an even greater investment of time – a luxury for small business.

Social Media ROI Lessons Learned

I’m a self-confessed minnow in the great lake that is the Internet. I’m not a social media consultant, but I use social media as a big part of my business strategy. Finding ways to harness its energy for your business through experimentation and exploration is a central part of the marketing equation for companies; big, medium, small and downright tiny. I can add little to the category of social media expertise except for this: our expectations for social media, and how we view “appropriate” ROI is usually a factor of how big of a company we are – and the corresponding role social plays – more than any objective measure of success.

(photo by iStock Photo – a Convince & Convert sponsor)

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  • http://twitter.com/michael_taggart Michael Taggart

    Thought-provoking stuff. But isn’t it simpler than you suggest? You don’t have to produce empirical evidence of RoI – you only have to show a strong correlation between your social media metrics and your returrns. And you do this by layering those metrics on to your metrics for sales, frequency of purchase etc. Simples , no?

    • http://www.convinceandconvert.com jaybaer

      Simple in intention, absolutely. Not as simple in execution, because most folks don’t have (or won’t share) enough data to demonstrate correlation.

    • http://www.taglinemachine.com Simon Gornick

      In principle, Michael, I would totally agree. But for larger brands with more diverse marketing channels, the more diffuse the correlation.

  • http://twitter.com/michael_taggart Michael Taggart

    BTW, this is poetry: “Social media taps into the causal swirl of the fish pond…” :::)))

    • http://www.taglinemachine.com Simon Gornick

      Many thanks for the compliment. Sometimes the writer in me just flies.

  • http://www.linkedin.com/in/internetmarketingnickstamoulis Nick Stamoulis

    I also think that our expectations of ROI when it comes to Social Media also depend on our knowledge of what social media truly is and how it works. For example, a person who has no knowledge of social media may think that with it, you’ll become an overnight success, however those expectations are completely false. In any case, great post here.

    • http://www.taglinemachine.com Simon Gornick

      That’s a very good point, Nick. Expertise is a critical component to assessing ROI. That’s perhaps more true of smaller outfits where the SM implementation is ‘home-made’. At larger brands where the SM expertise is bought (inhouse or outsourced) the CMO asks the questions that often the SM peeps can’t answer.

    • http://socialprattle.wordpress.com Joshua Barnes

      Nick, totally! I think because the bar is so low for entry, that someone could begin to think, “hey this is easy, I’m having fun” and whammo. They agitate people because they cross social streams, produce duplicate content and destroy credibility before they even get started.

  • http://twitter.com/DaGood Daniel Goodall

    Hi Simon,

    Love this post. Really aligned to my thinking.

    Your “size matters” analysis makes a lot of sense.

    My own view has been that the lack of an accurate attribution means that the more profitable companies are more likely to allocate resources to social media, but those less profitable may stick to things they can absolutely prove like SEM. That was my conclusion when I read the Altimeter research relating Engagement to company profitability (most others claimed that the same research proved that Social Media increases profits) http://danielgoodall.com/2009/08/01/survival-of-the-nicest

    Also, really happy to see someone else using the phrase goodwill in relation to these social media efforts, which I think is exactly the right phrase to use:
    http://danielgoodall.com/2010/03/02/the-goodwill-hunters

    Great stuff!

  • http://socialprattle.wordpress.com Joshua Barnes

    Don’t you think that it’s a question of if exec’s get it or not? I mean, all the numbers and pictures in the world isn’t going to convince a conservative traditionalist to take chances. I guess the argument being made is make the best case possible, but some of whether or not this will work is predetermined by the personalities that make up the leadership as well the market viability of such a strategy for specific companies.

    For instances, I don’t think you’re going to see infosec leveraging social media that much. Or if they do, it will be about the personalities of the people who work for them. Why? It’s an inherent security vulnerability and goes against their core value prop.

    • http://www.taglinemachine.com Simon Gornick

      Whether or not an exec is a risk-taker is crucial, but circumstances – like being profitable – drive a propensity towards taking risks. In this economy taking risks is something that gives people nightmares. Three years ago that same executive might have thrown around money like it was going out of style (which, of course, as we now know, it was!).

  • Jim

    Masterful article. Our biggest benefit from social media so far is how it informs what we do: what we write about; what inspires readers the most; what needs to be covered in our writings; unknown wants; etc.

    You have to play to find all this stuff out!

    • http://www.taglinemachine.com Simon Gornick

      One of the elements of SM that’s unspoken is that its inherently driven by the law of diminishing marginal returns. The more writing out there. The less it means. There’s an assumption that if you write it, people will act on it. In an internet and text saturated world, that’s simply not true. Differentiation is undermined rather than enhanced by sharing.

      • http://www.usainternetmarketing.com/ ppc management company

        you are right, i appriciate, becaue writting and if it is effective, more people will be around..

  • http://twitter.com/StickyStimuli Yael Davidowitz-Neu

    Really solid post – revenue attribution by marketing channel is a very tricky thing as it involves taking marketing efforts that should ideally be benefiting one another and attempting to break them down more granularly. If that’s easy, you are likely losing ROI in failing to reap the synergistic benefits of multiple marketing campaigns.

    I was once at a conference where I heard speaker say that branding dollars make direct response dollars work harder. I think that’s very true and, at least for large brands, the highest ROI social media efforts will function much the same way. As result, attributing their precise revenue contribution to broader marketing efforts becomes hugely challenging.

    • http://www.taglinemachine.com Simon Gornick

      Of course, proponents, practitioners and disciples of each marketing discipline like to think that theirs is the driving force of ROI, and can make a lengthy and learned case to support it. All it serves to do is clutter the pipes and keep the digital market researchers in business.

  • http://www.taglinemachine.com Simon Gornick

    Hey, Daniel – I read your post and I completely agree with you. SM is great but only boosterists try and turn it into a science. If you’re Coca Cola, SM means nothing next to conventional advertising and marketing streams.

  • http://twitter.com/SEM_Freak Geoff Andrews

    Great post which gets to the crux of some of the issues around Social Media. All levels of organisation need to assess their goals with regards to Social Media – is it to be for engagement, customer service or part of the ‘noise’ behind other SEO activities to support the brand (not necessarily big brands)?

    As outlined, understanding how this steam contributes to the overall aims of the organization is key. Segmenting traffic and setting relevant goals for each stream is the start of getting the best ROI from all streams.

  • http://www.terametric.com Taariq Lewis

    Great post and thoughts about the trouble at the mid-market. This is where we at Terametric think there’s an opportunity to help companies with low WOM try to understand and model their inbound and outbound social media marketing activity. It’s hard work and budgets are small.

  • letstalkandchat

    I just found a great company that builds websites for info products. To keep your costs low, they’ll mentor you on how to create your site, design a marketing funnel (one of the guys works in Hollywood and makes really slick videos), and the other guy programmed Myspace. If you’re looking to have professional web design for your small business and not waste any time or money then check their site out. Check them out: http://www.mikelmurphy.com/easy-info-product-site-system/