Social Media ROI: Necessary...Not EvilPresentation Transcript
Social Media ROI:Necessary…Not Evil CLT SMBC April 22, 2010 Eric Boggs and Adam Covati http://argylesocial.com
Argyle helps marketers and small businesses link social media marketing efforts to business outcomes. http://argylesocial.com @argylesocial
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Agenda: Social Media ROI Necessary… …Not Evil
Social media marketing spend will grow from $716M in 2009 to $3.1B in 2014. Source: Forrester’s Interactive Advertising Models, July 2009
Nearly 1/5 of marketing dollars will go to social in five years. Source: “The CMO Survey” from Duke University’s Fuqua School of Business and the American Marketing Association (AMA), Feb 2010
Argyle Survey Quick Hits http://survey.argylesocial.com 80+ responses All industries, companies, sizes Well over 60% rank their measurement capabilities and overall efforts as 5 or less on a scale of 10. Web analytics were the most “mission critical” tools. 57% have SMM budgets. Source: Argyle Social survey, April 2010
How much time do you invest in SMM each month? Source: Argyle Social survey, April 2010
How much do you spend on SMM tools each month? Source: Argyle Social survey, April 2010
ROI Return On Investment
ROI is the ratio of money gained or lost relative to the initial investment.
Vf – Vi -------- Vi ROI =
You bought 10 $15 SMB CLT tickets in advance. You sold 9 of them at the door for $20. 180 – 150 -------- 150 ROI = Investment value = $150 Final value = $180 ROI = 20%
But what about time value of money? If the interest rate is 10% annually, would you rather have $100 today (that you can’t use to buy SMB CLT tickets) or $110 one year from today? You wouldn’t care. $100 X 1.1 = $110. What if you could spend/invest the money? Of course you’d take the $100 today – you can end the year with $120 by exploiting SMB CLT ticket spread. Time = money
Let’s get mathematical! You hired a SM consultant to develop a SM strategy in hopes of generating SMB CLT ticket sales. The consultant charges a $400 fee. ($400 total) Your earn $50 in y1, $250 y2, $500 y3. ($800 total) What is your ROI?
800 – 400 -------- 400 800 – 532 -------- 532 ROI = ROI = = 100% - you doubled your money! = ~50% - not as good, but not bad! But what about time value of money? It took you 3 years and $400 to earn $800! At 10% annual interest, that $400 could have been $532. Using the same ROI math: But what about the timing of the cash flows?
The cash flows: Year 0: -$400 Year 1: $50 Year 2: $250 Year 3: $500 Using Excel’s IRR function – return is only ~15%. Why? Because the cash flows are back-loaded. At 10% annual interest, $500 three years from now is only worth $378 today.
If we rearrange the cash flows: Year 0: -$400 Year 1: $300 Year 2: $250 Year 3: $50 Using Excel’s IRR function – return is 30%. More of the cash comes up front as opposes to three years down the road.
“What gets measured gets managed.” - Peter Drucker
New channel. New challenges. PPC Email Social ✔ ✔ ?
Email : Social :: Rinse : Repeat Email Marketing ca 2003: Desktop apps Little management Little coordination Little measurement No data integration Incidental campaigns Few specialists No clear solutions SM Marketing right now: All of that…plus: Incredible momentum Analytics ecosystem Data-driven marketing Something to prove
“Links are the currency of the web. That's the reason that Google is the king of the web…right now.” - Fred Wilson Emphasis mine.
“Twitter and Facebook don’t drive traffic to your site. The content you posted on Twitter and Facebook drives traffic.” - Adam Covati
5 (Not Evil) Steps Define desired outcomes. Understand your inputs. Find tools that manage data flow. Manage your team. Do the math.
1. Define desired outcomes. Outcomes: Revenue Customers Leads Members Etc. Not Outcomes: Followers/Fans/Reach Clicks/Views Sentiment/Buzz Comments Etc. The outcome needs to be reflected as a meaningful number (or set of numbers) that you can (easily) track over time. Cost/Lead – Cost/Customer – Earnings/Lead – Etc.
2. Understand inputs. Vf – Vi -------- Vi ROI = People – salaries, contractors, creative, interns, your time Tools – posting, managing, monitoring Spend – ads, apps, games, etc. Overhead – cost accounting decisions Opportunity Cost – How else could I use these resources?
3. Find tools, manage data flow.
Social Media Marketing Goals Value Push Conversations Sentiment/PR
Social Media Marketing Tools Conversations Sentiment/PR Value Push CoTweet HootSuite TweetDeck bit.ly Argyle awe.sm Radian6 ViralHeat Google Alerts Web Analytics & CRM
4. Manage the team.
5. Do the math…repeatedly. Vf – Vi -------- Vi ROI = But don’t forget about time value of money and opportunity cost!
Eric Boggs, Founder & CEO Adam Covati, Founder & CTO http://www.argylesocial.com firstname.lastname@example.org 919.360.0238