social media roi: necessary...not evil

CLT SMBCApril 22, 2010

Eric Boggs and Adam Covati

http://argylesocial.com

Social Media ROI:Necessary…Not Evil

Argyle helps marketers and small businesses link social media marketing efforts to business outcomes.

http://argylesocial.com@argylesocial

Public Beta Coming Soon

1. Social Media

2. ROI3. Necessary…4. …Not Evil

Agenda:

Social Media

Source: Forrester’s Interactive Advertising Models, July 2009

Social media marketing spend will grow from $716M in 2009 to $3.1B in 2014.

Source: “The CMO Survey” from Duke University’s Fuqua School of Business and the American Marketing Association (AMA), Feb 2010

Nearly 1/5 of marketing dollars will go to social in five years.

Source: Argyle Social survey, April 2010

Argyle Survey Quick Hitshttp://survey.argylesocial.com80+ responsesAll 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.


Less than $1k

$1k - $4k

$4k - $8k

$8k - $15k

$15k - $50k

$50k +

How much time do you invest in SMM each

month?


How much do you spend on SMM tools each

month?

Free

Less than $500

$500 - $2k

$2k - $5k

$5k - $15k

More than $15k

ROI

Return On Investment

ROI is the ratio of money gained or lost relative to the initial investment.

ROI =

Vf – Vi--------

Vi

You bought 10 $15 SMB CLT tickets in advance.You sold 9 of them at the door for $20.

ROI = 180 – 150

--------150

ROI = 20%

Investment value = $150Final value = $180

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?

Time = money

Of course you’d take the $100 today – you can end the year with $120 by exploiting SMB CLT ticket spread.

Let’s get mathematical!

You hired a SM consultant to develop a SM strategy in hopes of generating SMB CLT ticket sales.

What is your ROI?

The consultant charges a $400 fee. ($400 total)

Your earn $50 in y1, $250 y2, $500 y3. ($800 total)

ROI = 800 – 400

--------400

= 100% - you doubled your money!

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:

ROI = 800 – 532

--------532

= ~50% - not as good, but not bad!

But what about the timing of the cash flows?

The cash flows:

Year 0: -$400Year 1: $50Year 2: $250Year 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: -$400Year 1: $300Year 2: $250Year 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.

- Peter Drucker

“What gets measured gets managed.”

Necessary

PPC Email Social

✔ ✔ ?

New channel. New

challenges.

Email : Social :: Rinse : Repeat

Email Marketing ca 2003:

Desktop appsLittle managementLittle coordinationLittle measurementNo data integrationIncidental campaignsFew specialistsNo clear solutions

SM Marketing right now:

All of that…plus:

Incredible momentumAnalytics ecosystemData-driven marketingSomething to prove

- Fred Wilson

“Links are the currency of the web. That's the reason that Google is the king of the web…right now.”

Emphasis mine.

- Adam Covati

“Twitter and Facebook don’t drive traffic to your site. The content you posted on Twitter and Facebook drives traffic.”

Not Evil

5 (Not Evil) Steps

1. Define desired outcomes.2. Understand your inputs.3. Find tools that manage

data flow.4. Manage your team.5. Do the math.

1. Define desired outcomes.Outcomes:

RevenueCustomersLeadsMembersEtc.

Not Outcomes:

Followers/Fans/ReachClicks/ViewsSentiment/BuzzCommentsEtc.

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.

ROI = Vf – Vi--------

Vi

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

Conversations

Sentiment/PR

Value Push

Social Media Marketing Tools

CoTweetHootSuiteTweetDeck

Radian6ViralHeat

Google Alerts

bit.lyArgyleawe.sm

Conversations

Sentiment/PR

Value Push

Web Analytics & CRM

4. Manage the team.

5. Do the math…repeatedly.

But don’t forget about time value of money and opportunity cost!

ROI =

Vf – Vi--------

Vi

Eric Boggs, Founder & CEOAdam Covati, Founder & CTO

http://www.argylesocial.com

[email protected]

919.360.0238