The Indy Awesome Blog

There has been a LOT of debate in the social media community when it comes to clearly identifying the ROI in social media.  While it’s clear that there IS an ROI in social media, it seems nearly impossible for the community to agree on the exact indicators.  I thought I’d dedicate this post to examining a few different viewpoints proposed by some of my favorite bloggers.

 Chris Baggot of Compendium Blogware

The assignment was to take all the keyword traffic generated through a blogging program and assign a cost per click based on dividing the total number of clicks by the total monthly cost of the blogs. Then simply compare that keyword traffic to what it would cost in Pay Per Click and calculate the difference.

In the case above the total monthly blog cost was $2,500 for about 100 Compended blogs. That same traffic through PPC would have cost almost $42,000! This is a great example of the clear&tangible value of widespread corporate blogs. I’ve never seen this exercise do worse than a 5x blog benefit.

A great way to measure the ROI in anything is to compare the cost with an established strategy and therefore prove that the new strategy accomplishes the same thing at a reduced cost. Chris is also known for arguing that the ROI in social media must be calculated through direct conversions (sales). This is obviously a good strategy as well, but it only works partially, due to the fact that there are other benefits to social media marketing besides dollars generated.

 Kyle Lacy of Brand Swag

I have always been a believer in social media to help grow your business. You can use it as a delivery tool to send a message to many users in a short time span and build relationships. The problem with the business environment and social media is the mindset many business owners are under… the “i need my return now” mindset. “I’m investing $2000 a month in marketing.” I need to see return every month.

 Chris Brogan of New Marketing Labs

Marketing is about reaching a number. Send 41,000 brochures and we’ll get 41 sales. Reach millions of views, and you’re successful like Fred.

These two quotes more adequately define what I perceive to be the true ROI value in social media, though Mr. Baggot’s views factor in as well.

When I look at social media I see hard and soft conversion points. The hard conversion points are the direct sales that result from your online marketing efforts. The ROI in this is instantly measurable and perfectly defined. It’s the soft conversion points that give us a little more trouble, though I believe they can be defined easily through a more basic comparison. These soft conversion points include email addresses you obtain from your blog comments, friends on social networks, and anyone else who volunteers their contact info or who you can connect with within the social media community.

Look at direct mail, or even email marketing. A lot of what determines the effectiveness (or ineffectiveness) of these older marketing strategies is the list. Building these lists can cost thousands of dollars in research and a lot of time. What is social media great at doing? BUILDING LISTS! This is the key to defining the soft conversion points in social media. It is the newest, sexiest and easiest way to build large lists of people who you can then broadcast your message to. Sometimes the easiest way to define something new is to compare it to something that’s already been proven, and I think this model works. What do you think?