After a recent project, I converted a spreadsheet I’d created into a web-based Social Media ROI Calculator, thinking it would be a good start, and that I might elicit some feedback. Feedback has poured in, both positive and negative.  Obviously, I failed to emphasize the notion that I was posting something that was not meant to be definitive, but as a starting point.  Out of this, though, a few thoughts come to mind.

One Size Does Not Fit All

I’m frequently asked if I think Social Media is a worthwhile endeavor for an organization. And I’m always discovering just how beneficial it is for some, while not for others. So, how we measure the Return on Investment is going to be different for each organization.  At the end of the day, the details of your ROI calculations are going to rest on what assumptions are acceptable by the stakeholders – thus, the calculations need to be based on the organization’s culture, and how the organization defines itself.

Preexisting Costs – Should they be considered?

I like to use preexisting costs in my ROI calculations, as they are hard and fast numbers that we can use -  that is, if social media actually fulfills the same outcome.   But in using them, we are not validating the value (or ROI) of those costs.  We assume that the organization has accepted those costs.  True, it is an assumption – and if it’s OK with the stakeholders that we make that assumption, I don’t see why it isn’t valid. It isn’t necessarily my job to evaluate an organization’s spending outside of my domain.

Consider the Risks

There is a lot of praise-singing being done about the benefits of Social Media, but little attention is being paid to the risks.  They are real.  If an organization doesn’t do it whole-heartedly, it could lead to a negative backlash.  It could lead to shouting matches.  Risks should be considered and discussed.  I haven’t found a case yet where the risks out the potential benefits, but any thoughtful discussion should include them.

Social Capital and Social Media

The concept of “Social Capital” is rich territory, and while the concept shares the word “Social” with social media, I haven’t read too much aligning the two.  But aligned they should be!  (Francis Fuyukama and Robert Putnam are both good authors to start with).  Consider the notion that in a community with better schools; the houses may sell for more.  The investment into the schools is realized by homeowners as hard cash.  Even a neighborhood where people are friendly may experience greater resell value – that is a type of social capital. And while social capital is difficult to measure, if we look to some of those people in economics and sociology, we might find that they have developed measurements that can be adapted in Social Media.

A Library of Benefits and Risks

So, the whole notion of an ROI Calculator is probably flawed.  It just isn’t going to do everything for everyone.  Olivier Blanchard  thinks that using the value of PR stories is hokum.  For others, it might be quite valuable.  I’m of the mind that what I’d like is an even larger list of costs, real benefits, and intangible benefits.  Then, on a case-by-case basis, I could use the items that were appropriate.  Stakeholders could then accept or reject assumptions as they see fit.