There is No ROI in Social Media…or is there?
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
6 Responses to “There is No ROI in Social Media…or is there?”
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Leo,
You’ve made some interesting points about social media.
One big problem is that social media is a long term effort which does not have an immediately measurable effect on the bottom-line. In some ways, it is like brand-building. Does brand-building work? IMO, not always. If you believe that brand-building works for your business, then it may be worth testing out the use of social media to build your brand.
But that brings up a second point. Brand-building is expensive in time and effort if not in money. It is an opportunity cost. While you build your brand, you are not doing something else. If you have some other tasks that can immediately bring in money, it may be better to concentrate on these tasks.
>> 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. … These days, social media is a very powerful tool in fostering these connections.
Unfortunately, not all social media is equal with regards to this. IIRC, you mentioned that one of your first successful IM ventures was achieved through participation in a niche forum. Because a good forum enables conversation, you are able to build both your brand and authority. Ditto for a blog with active followers.
But can the same be said of things like twitter, digg, stumbleupon, etc? From what I see, social bookmarking sites like digg and stumbleupon do not really enable conversations. As for twitter, how can there be and useful converesation with it’s 140-character limit?
@ Calvin,
Good points….I actually agree with you in regard to measuring bottom line and the long term effect. It is one of the biggest problems that big brands are having with social media. Do you use social media for anything beyond reputation management without a clear cut vision on exactly what you are hoping to achieve with social media beyond that? There is no doubt that big brands need social media, if nothing else to keep up with streams concerning their brand.
But for the regular old marketer/business hoping to use social media to build a brand, is it worth it? For me, social media still equates to platforms that allow you to converse and connect. Social voting sites like digg clearly are not included as they don’t do much in terms of creating a social atmosphere in which the business can engage as well (well, they could but the participation is very limited). Forums are the oldest form of social media and are still very effective in the aspect that you typically don’t have to hunt for the market…the market is conveniently all in the same place.
Obviously the biggest, most powerful effect you could hope for in regards to social media is that the traffic comes from people talking about you…not you talking about yourself. With digg and SU, there is really nothing to come out of it (well, with SU, if you are into graphics or video, there could be some positives but information is simply not valued as much). In regards to Twitter, it isn’t necessarily what is said in the twitter stream, it is the link that comes from it (although I am very divided on this….I briefly talked about this in my last newsletter).
I have to admit I go back and forth in regards to social media. On the one hand, conversations play such a big part in regards to sales. On the other, there is so much noise out there in the social media platforms that I find it very difficult to believe that most will get anything useful out of it. And forums….well, they work but they are hit and miss. This blog actually went from 0-100 a day within a month of launching largely in part to a post I wrote that was promoted by others in the forums. Did it or could it have made money? Dunno, as I don’t actively promote much. I doubt that it would have outright, although there are ways to foster relationships with list marketing and other things.
I do know this….I am glad that I am not relying solely on social media to pay me. The uncertainty is a killer and if big brands with their teams of marketers are left scratching their hands, what could a dumbbell like me hope to do to trump their efforts?
The way that I know social media could be used for small businesses is the way it was supposed to be used in the first place. To network with others in your market.
I don’t want a brand. In fact, I hate it when I see new faces pop up on that MyBlogLog widget I have on my main blog. It means a blogger came there and not only didn’t I make any money off them but maybe they were spying on me and getting ideas to steal.
Totally under the radar is where I want to be: raking in that search engine traffic that comes to my blog once, perhaps clicks a link and then never returns.
I agree with that strategy as well. BUT, you have to understand that the REAL money isn’t in building a network of adsense websites. The real money comes from building a business. Court’s breakthrough 500k year (I think that is what he is claiming he is going to make) isn’t from the network of adsense sites he has built….the majority of it will likely come from his membership site in which he shows people how to make money with adsense.
You are leaving money on the table my man. Real businesses understand that it is cheaper to sell to an existing customer than it is to continuously grab new customers. And the ones who are advertising have the nets to draw in those that buy from them and likely know the LCV of everyone who buys. So, let’s say that you are driving business to these guys who in turn are paying you .75 per click. I can guarantee you that they will likely not only make money on a first time sale, they will likely have recurring sales making that click they paid for an absolut steal.
Now imagine if you had a net in place yourself. What would you do with a 5k list that has been groomed over a year? What could you sale to your market? What if you sent out one offer a month to your list and it converted at 1%? What if each sale netted you $12? Now, you tell me which is a smarter strategy? Adsense is easy but all in all, publishers leave the money on the table and the advertisers take the lion share. Don’t think for a second that is not the case. It may be easier, but there are simply less barriers to contend with when you start to establish a business relationship with customers.
Grizzly is the only one man show that I know that makes big money via adsense. Most of the adsense publishers that are making 150k+ a year are actual companies that have the budget to leverage to make that kind of money. The real money is in creating products, building a brand and selling that brand to potential customers. I am not simply talking about the “make money” products either. There are products that teach your bird to behave and to speak. There are products that focus on potty training your child. There are products that show you how to go green.
Adsense is easier, sure. But it ain’t the only show in town and it is definitely not the best way to quickly realize profit.
Like I said earlier, I play with social media. I know that there are good uses for it. I don’t think that the ROI is there immediately though. And that is the dip that most marketers can’t pass through. I definitely don’t think that using social media as your sole marketing strategy is a good strategy though…in a sense, you’d be better off committing marketing suicide.
Yes, I am aware of what you are saying. I may have to go that route someday too but right now I have my plate full with what I have going on. And it ain’t too shabby so I will stick with it and milk it for everything I can until something changes.
Having a membership site will probably be something I never do. That is not up my ally skill wise. I love advertising and figuring out how to get more out of my sites. It is something that a lot of people don’t really know how to do.
I don’t think I ever want to be known, by anybody. Once you are known (like Court) and put yourself out there, you have responsibility and a name you have to uphold. You have to answer to your critics and supporters. I never want to deal with that hassle. Just let me make my money and fade away into the sunset. Well I need to get back to some article writing now. Thanks.
Nice post. Good ideas on value, and I would add that value can be very unpredictable when it comes to social media, particularly a blog. Say your blog just trudges along, and while there is great content and committed writing, it isn’t doing much in the way of driving traffic. But one day because of that commitment, paired with an active social media life, leads to major traffic after a digg or some such thing. Or all of a sudden a relationship you’ve forged on Facebook leads to your company’s biggest contract. The power of community holds more potential than a highway billboard or a sponsored listing.
Additionally, we don’t really know where social media is going. Will more and more searches take place in Facebook? Laying at least a groundwork can’t hurt. But claiming we can predict ROI is tough. Traditional media had it figured out at some point, but that was when media was created as an outlet for marketing. Now, new media has been created for information, for community – and marketing must adapt.