How to measure social media returns

“Not everything that can be counted is worth counting. And not everything that is worth counting can be counted.” Albert Einstein

Social media is a seductive tool for business. The thought of “engaging” closely with customers and prospective customers warms the most unromantic business heart. And that is why investment in social media keeps on rising.

However, social media seems to be different from other digital channels. Digital is completely measurable isn’t it? Well no; but social media is particularly hard to measure.

Once upon a time, social media evangelists used to say: “Measurement is simple. Just look at the number of Facebook Likes you have. See how many of these people convert into sales. Divide the value of those sales by the number of Likes and that’s your ROI.”

Hmmm.

That assumes that the act of Liking results in the sale. And that is pretty questionable. (After all perhaps they Liked you because they were intending to purchase anyway.)

So if that isn’t a valid metric, how can you measure social media?

I think the answer is to say that there are a number of different types of metric, and some of these can be have monetary value attached, while others can have non monetary value attached.

(I know most digital commentators hate non-monetary metrics but the reality is that things like brand preference and share of voice are useful as they provide indications of success and failure which can be acted on.)

I am going to propose six different types of social media metrics:

• Vanity KPIs
• Indicative KPIs
• Brand KPIs
• Strategic KPIs
• Marketing KPIs
• Sales KPIs

Let’s take a look at each of these.

Vanity KPIs

Vanity KPIs are of little, if any, value. They include:

• Followers and Fans. Many of these people will be irrelevant to you; perhaps they interacted once (typically this is how often they do interact) and then forget all about you. (If you think your Facebook Fans are constantly interacting with your brand then why is it that engagement rates almost always drop as Fan numbers grow?)
• This metric represents an “opportunity to see” (OTS) a post; but only in an unsatisfactory way as the OTS represents accounts who have access to the post not accounts who have any real chance of seeing it. (Take Twitter. On average each Twitter account follows 100 users, tweets 5 times a day and is on Twitter 5 minutes a day. That means that in those 5 minutes, the average user will have had access to 500 tweets posted that day – they would have to read two each second to read them all!
• Trivial engagements – Likes, Favourites. These are easy actions that mean very little to the user and so have little value to brands

Indicative KPIs

Indicative KPIs are a bit more useful. They tell you that things are moving in the right (or wrong) direction but not much else. They include:

• This is rarely accurate but a “blip” in sentiment may indicate something of importance; and of course it can also be useful to compare your sentiment with that of your competitors as this may tell you whether you need to take extra efforts to out compete them
• The total number of weak engagements – Shares, Retweets. There is some small benefit in cementing a relationship and driving visibility through these engagements, although it hard to put any real value on them
• The total number of “strong” engagements such as comment and posts mentioning the brand: these are likely to be of greater value than weaker engagements but it is difficult to put a credible value on them
• Website traffic from social media. Likely to give you a warm feeling if rising, but of little value in itself

Brand KPIs

These are KPIs that indicate brand support; unfortunately some of these have to be measured using primary research (e.g. surveys) so they may be hidden unless budget is available. Examples are:

• Positive brand perceptions e.g. thought leadership (“sentiment” won’t be a useful proxy for this)
• Claimed purchase propensity
• Number of Follower/Fan “influencers” (i.e. people with a certain number of followers) including the number of influential prospects/customers and the number of media influencers (journalists, bloggers)

Strategic KPIs

Strategic KPIs are particularly interesting. These KPIs can be extremely important but as they don’t relate directly to marketing investment or sales success they are very difficult to put a value on. That doesn’t mean they should be ignored. They include:

• Competitor benchmarking parameters such as Share of Voice and comparative sentiment
• Keywords around satisfaction as these can indicate areas for new product development as well as helping the development of appropriate advertising messages and search terms; particularly interesting are:
  • Keywords related to dissatisfaction with competitors
  • Keywords/topics that generate engagement
  • Keywords in any comments

Keywords themselves are not strictly “measures” but the depth of insight they provide can be measured through volume and number of categories in any one period

Marketing KPIs

Marketing KPIs are related to marketing success (or failure) and can often have a monetary value attached. Some of these parameters will be related to the website traffic generated from social media including:

• The cost of generating the equivalent amount of traffic volume via paid search
• The value of non-sales conversions (e.g. product sheet downloads) and leads (e.g. leads from email submission); to create a value these will need a further calculation based on the average number of sales that are made following a non-sales conversion or lead
• The value of back-links achieved from social media; again there will be a need for a further calculation based on the way that the value of SEO activity is measured

In addition there are some “pure” social media parameters that can be related to marketing:

• The number of “qualified” Followers/Fans (i.e. people identified as prospects) who can be given a value based on average conversion rates
• The number of people identified as being dissatisfied with competitors; these can be treated as leads and over time a value based on average conversions can be established
• The number of contacts with customers that have arisen as a direct result of social media activity; these can potentially be valued using the average cost per customer contact for channels outside social media

Sales KPIs

And finally there is a KPI that can be directly linked to sales: the value of sales that have been converted directly from SM leads. This is of course where the eyes of many businesses will focus. And it is undeniably important.

A caveat though. Social media is just one channel among many. All marketing touch-points in a customer’s journey to a purchase (search, advertising, email, social) will contribute to making that sale, not just the last one.

Just as it is wrong to ignore the contribution of social media when the final touch-point is an email or a search result, so it is wrong to ignore the contribution of email and search when the final touch point-is social media.

Any sales KPI therefore should accept that and follow the attribution method you use for assigning value to other channels.

It’s not easy. But then, who said it would be! This method of tracking social media returns won’t be 100% accurate. But it will at least be more accurate than a method that says that the only value is in a sale made as a direct result of a social media contact.

Are advertising campaigns really extinct?

I have just read a rather extraordinary whitepaper. According to customer experience “experts” SDL.com, advertising campaigns are extinct. This is because “Digital channels, social media and mobile communications have fundamentally changed the way consumers interact with brands”.

This is a well worn argument and one that many digital evangelists have promoted since the early 1990s. But it is not a valid argument.

SDL start by saying that “customers orchestrate their own experiences, no longer following pre-determined, linear routes from exposure to conversion to advocate”. This statement is absurd. Obviously people need to be exposed to a product before they purchase it (even if that exposure is merely seeing it on a shop’s shelf), and certainly before they become an advocate. A “linear route” is an inevitable component of any behaviour that results in a sale.

Apparently though, the sales funnel is extinct and “marketing success depends on customers seeing, engaging with – and sharing – your content within their trusted social networks”. I don’t deny that content marketing is effective. It’s not exactly new after all (it was being used 150 years ago). But it’s not the only route to success; indeed it’s probably not even the most effective route to success in most cases. Direct response marketing still works, as does buying shelf space in a shop, and (dare I whisper it) mass market advertising.

But, as SDL say, “No one is waiting to be wooed by elaborate campaigns”. Were they ever? Well, yes, I suppose they were once but we haven’t had a supply economy since the 1960s. Perhaps SDL haven’t noticed.

Even old fashioned digital channels such as search marketing and email are dismissed by SDL. Instead, millennials, we are told, “typically discover new and interesting things online” via social networks. I am sure they do. So do I. After all using search or reading your email inbox wouldn’t be a very efficient way of doing this. But just because social media is a popular way of discovering new things, that doesn’t mean email and other outbound marketing techniques don’t work as marketing channels for existing products.

Oh, and we shouldn’t assume that because social media is a great way of discovering new things online, that it is impossible to tell people about new things off line, for instance via TV ads – after all we all watch TV (even millennials) and the vast majority of TV is watched live so you can’t skip the ads.

What does this mean for marketing? According to SDL, you should “Begin by focusing on the personalized experiences your customers want – not campaigns. Make it a priority to build customer experiences that are ongoing, consistent, meaningful and mutually-rewarding”. Well, yes of course a good experience is what customers want – although I think it would be hard for most brands to build “personalised” experiences: how would you do that for the 900 million people who ate Heinz Baked Beans in the last year for example? (Proud to be one of that number.) “Campaigns”, not personalised experiences, are the only way for almost all brands to reach the maximum number of prospective customers.

But it’s all about trust, I hear SDL say. After all “49% of consumers don’t trust digital ads; 38% don’t trust emails; and 36% don’t trust information in branded apps.” I am sure that’s true (in fact I am surprised the figures are so low), and I am sure that similar figures would be found for TV ads and posters. That’s not really the point. A lack of trust in a brand’s advertising doesn’t mean it will be dismissed from a consumer’s consideration set.

In fact SDL seems to be saying that millennials are different from the rest of us and have discovered that advertising doesn’t always tell the whole truth. So anyone in their 30s upwards believes everything they see on the TV then? Hmmm…

Oh dear, there is so much to take issue with in this shrill and deceptive whitepaper. It repeats so many of the things I have heard at digital marketing conferences over the last 20 years. When, when, when will people in content marketing, social media and digital generally have the confidence to accept that, while digital channels are important, they sit alongside existing techniques, and don’t replace them?

Sorry, I just had to get that off my chest.

Measuring social media engagement

Facebook engagement rates fall as your fan base gets higher. At first sight that seems odd. But of course it isn’t.

Most people tend to engage with brands infrequently on social media. Seduced by a particular post they may “Like” it on a whim, but then stay away from your page. They have little motivation to comment on or share other posts unless they are real fans. And of course unless you are spending serious money, chances are they won’t see those other posts.

So most Facebook “engagements” come from people who have recently become fans. The larger your fan base, the longer your “average” fan has been with you; and because of that, larger fan bases have lower engagement rates.

This is a problem for people using a common metric for evaluating social media effectiveness: the formula “Likes + Share + Comments / Fans” as it can make it look as though your campaigns are getting worse over time.

So how can you evaluate effectiveness on Facebook and other social media platforms? There are a couple of ways.

First there are some comparative measures. For instance you might want to compare engagement rate of different types of posts or different campaign themes. This won’t solve the problem of lower engagement rates with larger fan bases but it will help you focus on improving your campaigns.

Second you can measure engagement of recent fans. By dividing the number of engagement actions (shares, likes, comments) in any one period by the number of new fans acquired in the same period you will get a useful measure of true engagement that should be comparable across time periods.

Purists might argue that the engagement actions in any one period may be coming from people who became fans in an earlier period. That’s true; but I am not sure it matters much. For a start it is probable (at least, if you are using a period of 1 month rather than 1 day) that the number of actions from “old” fans will be low; but also if you compare different months you will be comparing like with like.

Ultimately though, “engagement” on social media is a measure of limited value. So what if people have engaged with you? What matters is their behaviour. Measuring that by using your web analytics to track visits generated from social media together with dwell time, page depth, loyalty and conversions is a far better way of measuring the effectiveness of your social media campaigns.

Isn’t $16 billion just a teeny bit expensive for WhatsApp?

$16 billion. Not even Facebook can call that small change: by some estimates it is equivalent to 13% of the company’s value. So why did Facebook spend such a lot of money on WhatsApp?

Revenue? Well so far WhatsApp are claiming they won’t be putting advertising on the platform. It’s purely a subscription play.  At $1 per year per user, WhatsApp’s 450 million users have the potential to generate half a billion dollars a year. But that means Facebook paid roughly a 30x multiple on revenues.

And that’s only the potential. Users get WhatsApp free for a year. If conversion rates after the initial free period are low, or if churn after the second year is high, then that half a billion dollars may look optimistic.

Of course WhatsApp’s user base is growing – at around 1 million a day. But even at that rate it will be 3 years before they reach 1.5 billion users and the potential for a more reasonable 10x multiple can be achieved. And 3 years can be a long time in digital technology.

So if it’s not about the money, it must be about something else. There are a couple of possibilities: developing markets and teenagers.

The first is the growth potential in emerging markets. WhatsApp is growing strongly in markets like India. Crucially, it works well on the feature phones and simpler smart phones that are popular in emerging markets. At the moment WhatsApp is a very separate brand from Facebook. But who knows whether the two services won’t be more closely integrated in the future. If that happens then WhatsApp could be a springboard for Facebook (and its ad revenues) into markets in the developing world.

The second possibility is the teenage market. While Facebook is still extremely strong in this market there are signs that it is growing weaker – as mums and grannies join up and make it less fashionable. So if Facebook feels it is loosing the teenage market could WhatsApp be a way of retaining them?

Both of those theories depend on WhatsApp and Facebook becoming better integrated in the future. That might happen. But if that isn’t the plan, then surely the intention must be to strengthen revenues in some way, either by increasing the subscription rate or by selling advertising. Well, Google didn’t know what their business model was going to be when they started!