Jason Falls blog, Social Media Explorer, is right near the top of the list of my favorite social media blogs.  Jason had a post last week about social media measurement that led to a pretty lively discussion in the comments, on twitter, and on a number of blog posts that linked to the original post.  For some reason, I can’t seem to get this one out of my head…there was a lot I agree with in the discussion, but also a number of things that just don’t ring true to me.  In no particular order, here are some of my thoughts:

Like it or not, ROI matters

Based on what I saw in the conversation that followed Jason’s post, people’s views about ROI measurement seem to fall along a continuum.  On one end is the group that argues that measuring ROI might be hard, but it’s not impossible, and, given that the end goal of social media participation is to grow the business, social media marketers are either going to figure it out or they’re going to get screwed.  Dan Thornton makes the argument pretty effectively in his comment when he says that engagement metrics are important, “but you still need to figure out where engagement sits for the rest of the business, and how it’s integrated into other areas. If it’s contributing to natural search results, for example, then without any measurement of other outcomes, the results are all attributed to SEO work, and engagement is disregarded.”

At the other end of the spectrum is a group that, at best, is ambivalent about the idea of trying to measure social media ROI in terms of financial metrics.  Shannon Paul’s comment is indicative of this:

“I understand that businesses make decisions based on the bottom line, but isn’t social media engagement all about humanizing organizations? Ultimately, businesses are made of human beings and most human beings I know are motivated by a number of things in different measure — profit is only one such motivator.”

Shannon is another one who’s writing some really good stuff on her blog, but I’m with Dan on this one (just in case the title of the post didn’t tip you off).  Peter Kim summed up my feelings about this best when he said “I have and will always believe that the purpose of marketing is to sell stuff, whether direct response or 30-year sales cycle.  Marketers who don’t believe that their job is to ultimately sell something should become receptionists instead, if all you want to do is talk.”

Yes, metrics that indicate the quality of conversations are important and, yes, people should get more out social media participation than financial gain.  Frankly, I don’t think you can be successful without these things.  But at the end of the day, if participation isn’t going to result in revenue for the business, the initiatives aren’t going to get funded and it’s all for naught.  Marketers can get away with this now because we’re still deep in the early adopter phase, but this won’t last long.  Particularly in this economic environment, companies are going to move quickly from exclusively measuring things that indicate level of participation to measurements that tie to revenue.

You can’t determine the right metric without first identifying the goals

Katie Paine talked about letting your objectives drive your choice of metrics in the video interview that accompanied Jason’s post (watch this video…the ROI on the 11 minutes you’ll invest to watch it is very high :-) ).  Paraphrasing her comment, “in order to determine ROI, you need to know what the R is.”  In other words, you need to decide what you’re trying to achieve.  I think this is exactly right and it a point that gets missed often.  The metrics for measuring word-of-mouth effectiveness, for example, are going to be very different than the metrics for brand loyalty.

Incidentally, as part of this discussion, I’ve seen a number of tweets/comments saying that social media isn’t for attracting new customers, it’s for building relationships with existing customers.  Maybe I’m just misunderstanding what people are saying because, at face value, this doesn’t make sense to me and there are plenty of word-of-mouth case studies that refute it.  Some examples: 1) NetQoS’ viral video campaign – two of the primary goals were to increase traffic and drive leads.  The net result of their campaign was that it added $500,000 into the pipeline, 2)  Caminito Steakhouse, where they’ve seen a 30% increase in sales concurrent with a significant improvement in search engine rankings on key terms…they haven’t drawn a clear line that shows the link between participation, improved PageRank and increased revenue, but I guarantee you that it wouldn’t be hard to build a model that shows clear correlation, and 3) Martell Home Builders – take a look at the comment from Pierre Martell (the owner of the business).  Lead gen is a key part of their strategy and according to Pierre, “from an ROI point of view, because of the real estate fees were saving, it didn’t take many sales to justify this approach from a pure dollars and cents point of view.”

Traffic still matters

Katie argues that traffic doesn’t matter.  I disagree.  By itself it doesn’t, but in conjunction with other metrics, I think it’s still valuable.  Give me two blogs that are equally relevant to my customer, have the same average number of comments, have the same PageRank, etc.  Are you telling me that, even if one of these blogs has twice the traffic as the other, it’s no more valuable for word-of-mouth than the other?

Small and mid-size businesses have different measurement capabilities and needs than big businesses

Note the mention of ROI in the NetQoS, Martell Homes and Caminito Steakhouse word-of-mouth case studies.  For all three of these SMBs it just isn’t that difficult to measure ROI because the marketing mix isn’t that complex and the customer touchpoints are easier to track.  Very different than a big company, where measuring ROI requires fairly complex modeling since there are so many more possible drivers of revenue.  Do the metrics that the small business uses encapsulate all of the benefit provided by social media participation?  Definitely not, but it doesn’t matter.  Despite the fact that some of the value generated doesn’t get captured by the metrics (e.g., for NetQoS, prospects that become aware of the company as a result of the video campaign, but visit the site through organic search), there’s still enough measurable value to clearly justify the investment.

Measurement on the front-end is very different for the small business as well.  Big companies might think it’s important to conduct detailed analysis to determine influence, but small companies have neither the time or money for this.  While traditional metrics have problems, they’re simple and, when combined with engagement metrics, they’re good enough for small businesses.

So what does your social media dashboard look like?  What are your social media goals and what are the metrics that you track most closely to determine your success?