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Understanding Social Media's ROI

_This article is by Guest Contributor Kate Trgovac who reports on the recent “BlogOn”: conference in New York City. This is the final article in the series._
“Dave Hornik”:, General Partner at August Capital, moderated “Understanding Social Media’s ROI”, the closing panel that centered on the costs, measurable benefits and strategic selling of social media into your organization. Panel members included: Laurie Mayers, Deputy Managing Director, Hass MS&L BlogWorks (the PR firm that manages “GM’s FastLane Blog”:; Craig Engler, General Manager, “”:; and Andy Sernovitz, CEO, “Word of Mouth Marketing Association”:”.
This was an exceptional panel, full of lively dialogue and great, actionable information.
Hornik’s first question: “Where has social media been put to good use?”

Engler cites “Ron Moore’s blog”: (producer of Battlestar Galactica) on *They expected 10,000 or so visitors but in the first 6 months they have over six million.* He sees three potential ROI measures for social media in his business – buzz, TV show ratings, and money (when a podcast is used as part of an ad package for sponsors).
Sernovitz gives the example of “QuickBooksGroups”:, a community site for niche-market users of Intuit’s QuickBooks (where you see plumbers helping plumbers with using a piece of small business software). Here there is only one ROI – connect with Real People.
Mayers PR firm manages the GM Fastlane blog. She says one of the biggest successes they have seen is the development of loyal readers on the blog, particularly those that support GM when they receive inaccurate negative press in other publications. Unfiltered feedback from GM customers is another big plus. They have about 5500 visitors a day.
Sernovitz goes on to describe the three ways that social media contribute to advertising in general:
# Answers – Social Media can answer the infamous 50% of advertising question that is wasted. He mentioned Intelliseek measuring Super Bowl ads and then tracking who is blogging what about them as an example.
# Amplifies – Social Media amplifies the effect of other media. By tracking the magnification effect you can measure the impact a blog is having and then put it into the *next* marketing plan.
# Adds a seat to the table – and this seat belongs to the consumer. Advertising is no longer a private conversation between an agency, a client and a media director. The consumer is now there and will be vocal about their presence.
Hornik then asked “What are the costs of Social Media, both explicit and hidden?”
Staff costs (both client and PR firm) are always underestimated, said Mayers.
Engler feels that in general the costs are quite low. Most of their social media initiatives are internal experiments – they try things out and see.
Sernovitz reminded us of the unseen *emotional* cost of using Social Media. Marketers and companies will need to accept that by using social media, a lot of the feedback isn’t going to be nice. And once you start using it, you can’t go back. So be prepared.
He further goes on to share the Honesty ROI:
*Relationship* – always disclose your relationships when engaging in social media
*Opinion* – say what you truly believe
*Identity* – don’t lie about who you are
Finally, Hornik asks, “So, ultimately, what are the ROI measures?”
Mayers: Traffic, inbound links, trackback links, number of comments per post.
Engler: For him, the return is potentially intangible. Typical goals when starting a show blog: people watch the show, people talk about the show, industry buzz about the marketing (e.g. a big success for him was an article in the Hollywood Reporter about Moore’s blog), etc. is working on a more specific ROI model for a blog they will be launching in the near future, but he didn’t provide details.
Sernovitz: WOMMA is working on a hard numbers ROI model, developing a methodology for measuring on and offline WOM. The target date release date is sometime in 2006. In the meantime, one way we can look at social media ROI is to compare to a focus group. In a typical focus group, 10 people participate and give 5 useful comments each, for a cost of $10K. So, you could extrapolate and say that every 50 comments on a blog is worth $10K.
There was a great question from the audience, “how does the GM Blog process work and how many resources does it take?”
Mayers indicated that it is a partnership between GM and Hass MS&L. Michael Wiley, Communications Director, New Media at GM is the blog champion. He rounds up the appropriate folks at GM to write posts. Content for the blog is driven by what people want to write about, what are hot topics on the blog and by ongoing industry events. She estimates that Wiley puts in about 20 hours a week on the blog as does her team.
_Kate Trgovac is currently Manager, Web Evolution for Petro-Canada. Prior to joining Petro-Canada, Kate spent eight years developing user experience strategies for clients at several interactive agencies in Toronto. She writes about technology, branding, user-experience and other topics of note on her blog “”: ._