Final word on Social media ROI

Key take-away: Forrester’s recent report (16th July 2010) on Social Media ROI, I believe, puts an end to this endless debate. If you want to refer to just one definitive source on Social Media ROI, look no further and get the report from here (if you are not a Forrester client, it’s going to cost you a fortune…see a summary of the report at the end of this post to get an overall idea!!)

Around a year back, I was looking for a challenging social media issue to complete an academic project. I reached out to many well known social media experts to get their suggestions on what people in social media industry were struggling with - to my delight, I received many suggestions such as..

Jason Falls (Founder of Social Media Explorer):
I'm keenly interested in a couple of things right now. Perhaps one of these will work for you:
           -           The biggest fear most companies have is talking to customers who are mad/dissatisfied/detractors in a public forum. I'd love to catalog several examples of people who have done it successfully and not so successfully and see if there are some best practices/insights we could glean from that.
           -           Building community is a big push with companies right now. I'd love to do a retrospective on how communities form, going back to Rome, Greece, etc., to talk about the common bonds that bring people together - geography, common need, religion, etc. - then move into modern times and see where communities of consumers (Harley Davidson riders, etc.) gravitate and why and if there are commonalities we can pull from those. This is going to be the basis of "social business" for years to come but no one has adequately plunged into the topic yet.

What’s up with Data?

“The Economist” is not “Scientific American”; People don't read Economist to find out what’s happening in web technology. So, when a magazine like “The Economist” publishes a 20-page cover story on data and how data is being used by online businesses and government agencies, you know something big is going on…

And how big is that thing?…well, let me explain.

Why Behavioural Targeting is such a Big Deal?

If you want to run ads for your products on online or offline media, you’re going to have to take care of 2 things:

Reach – You can focus on increasing the reach of your ads. This is a time tested concept; if you have the money to reach out to a very large crowd, you’ll always find some people who’d be interested in purchasing your products – TV does it very well. The only problem is - your ad spend may not be optimized. Along with people who’ll buy your stuff, you are also wasting your marketing budget on a very large number of people who have no intention of doing business with you.

Frequency – Focusing on increasing the frequency of your ads is quite intuitive. After all, if you keep repeating your adds hundreds of time, some people will eventually buy your stuff just to see what the heck it is that you can't stop bugging them with. There are various theories about how frequency capping can achieve optimum result. For a long time, advertisers believed that showing an ad 3 times was the most optimum thing to do. This theory was disputed in 2003 by Atlas (now part of Microsoft), which claimed that even though the ROAS (return on ad spend) was optimum with 3 ad impressions, following such a “frequency capping” strategy could severely compromise on reach. The new optimum number is 10 as per Atlas. Needless to say, betting on frequency is not the most optimum way of spending your marketing dollars.

Why did Google Wave fail?

{On 4th August 2010, Google officially declared Google Wave to be dead. Here's my take on why I believe Google wave failed?}

A simple no-nonsense answer to that question can be found on Page#194 of Clay Shirky’s book Cognitive Surplus:
“Projects that will work only if they grow large generally won’t grow large;

A veritable natural law in social media is that to get to a system that is large and good, it is far better to start with a system that is small and good and work on making it bigger than to start with a system that is large and mediocre and working on making it better.