After an associate mentioned you, combined with a bit of online research, I found my way to your blog. Glad I did because your thoughtful article is a good find.

I’m a believer in the importance of determining expected ROI for any corporate initiative, including for those of social media.

And let’s be realistic, any exec worth his salt will demand to know an expected ROI on any social media initiative – and they should since social media isn’t the only customer-facing initiative up for consideration.

What also needs to be remembered is social media doesn’t occur in isolatation. It will have resource impacts in terms of staffing and technology to name but two. Even if a company pursues social media with existing resources, there’s still a cost of business associated with the initiative. If nothing else, it’s the cost of using existing resources to pursue the social media versus another initiative.

So yes, social media initiatives do need to be translated into an expected ROI – because, yes, the only true measure of business success is $, either in terms of increased revenues or profitability.

In that regards then, throw me into the Olivier Blanchard camp.

However, you have valid points regarding the difficulty of measuring ROI for an emerging media.

For many companies right now, the answer may be to look at ROI by starting at expectations for activity levels. That is, start with expected metrics. Then using historical data regarding similar past activity, derive an expected return.

And I also agree with setting reasonable expectations for results – the long-term view you and Belinda both mentioned. However, the long-term view can be accounted for in the ROI determination as well.

STEVE – What you’re highlighting is the challenges associated with determining economic viability in the face of many unknowns. There are industry models that have experience in determining expected ROI under these challenges and social media may benefit from giving consideration to their valuation approaches.

One answer is to think of terms of chance of economic success relative to minimum, most likely, and maximum cases (this is common, for example, in the upstream oil industry to determine the valuation of exploration prospects).

As a social media example, imagine this sort of economic valuation:

* Min = 90% probability social media will generate x increased leads leading to $.
* ML = 50% probability social media will generate x+y increased leads leading to $$.
* Max = 10% probability social media will lead to x+y+z leads and $$$$.

I absolutely agree with you. You have put down a lot of my thoughts in words. The problem with many clients is that many do not see social media as a long term strategy. They only turn to social media as part of a campaign mechanic or medium. I think for the returns to make sense and be effective, brands need to start recognizing that it is part of their integrated marketing or even branding strategy to engage their consumers on social media. Only then, will such returns see true reflection of results.

I am glad you found it of value. I have been trying to find my position on all this and thought it would be helpful for other Social Media Professionals and Companies to share what I have come to understand.

Cheers,
Andrew