Epic ROI rant

Yesterday, I participated on a podcast with Ricardo Bueno, founder Ribeezie Media with co-host Stacey Soleil, director of social media strategy with KARMA Media Labs.

Towards the end of the podcast, they asked me about measuring the ROI (return on investment) of marketing on the Web.

I ended up in an epic rant of nearly three minutes. (Please listen.)

I was in the zone.

What do you think?

• Do we need to adapt Web marketing to the MBA formulas for measurement?
• Or do we need to be better at articulating to management exactly how web marketing should be measured?

I'm interested to know where you come down in this debate.

More on measurement: In a post yesterday titled How big is YOURS? I talked about clip books, the measurement of choice for traditional PR. I also have a free ebook called Lose Control of Your Marketing! Why marketing ROI measures lead to failure.

Comments

[David Gammel]

David, you rant and then list a bunch of measures for ROI at the end. I'm not sure what the beef is? Any exec should see value in those results.

[David Meerman Scott]

David, execs are insisting on a dollars and cents calculation.

"For me to invest $X in web marketing, I need to get $Y in return."

Then whatever ROI calculator is dreamed up becomes the only form of measurement. It is a holdover of things like direct mail that you could measure with a great deal of accuracy.

[BethCochran]

Interesting perspective. I must admit at first I thought it was a bit extreme, but it really does make sense. Measurement is important so you can track what is and is not working and continually improve. But where many CEOs and business execs fail is by not looking at social media (and other forms of communication) as an opportunity to engage and build meaningful relationships. Maybe we should change the meaning of ROI to something like Relationships Over Interruption...or something more clever.

[Miss Publicity]

David,

Funny you post something like this today...I just had a discussion with someone about this very topic yesterday. I often feel like I have to explain myself and answer all different "whys" for social media. Simply, they just don't get it yet. I am known as the "miss publicity" of our business unit within a large corporation. Turns out, I'm the only one doing these things in the entire company. I have made some headway, but I'm still feeling that it is not taken seriously. What can I do to better explain the "why social media" question to a 50 year old who has no idea how to Tweet, DM, or blog?

[David Meerman Scott]

@Miss Publicity - I ask these questions to executives
http://www.youtube.com/watch?v=6SyBWSFUrfM

[Russ Somers]

Awesome rant - this is your Howard Beale moment!

I do think it's worth questioning the value of Web marketing or anything else. You ask "What is the ROI of putting on your trousers in the morning." Trousers don't have an ROI per se, but if I begin showing up at work without them I'll soon be jobless.

Same with Web marketing. Depending on the Web strategy it may not boil down to a simple cost per lead or ROI calculation. But these days a company without Web marketing is showing up in the global workplace without pants, and will face the consequences.

[David Meerman Scott]

Russ -- I LOVE THIS. Great way to connect the several ideas in my rant. Thanks so much for jumping in.

[Smithwill]

Yep, you ranted alright. The difference between a billboard, TV commercial and other forms of advertising is that it's a one-time sunk cost. Social Mediatizing usually involves people's time which can be a distraction from getting other forms of work done. Or, if they're dedicated to promoting the company via social media, there still must be a productivity metric.

SMedia ROI is a valid question. That's why there are accountants.

[Jack Daniel]

A good, cathartic rant David, thanks for sharing it. The MBA ROI scourge permeates business today, it is also one we battle in information security. It is often similar in that people try to measure the intangible, or measure the tangible incorrectly. Just because you can assign a number, doesn't mean it makes sense. And the bogus metrics degrade the value of legitimate information because we end up distrustful of all data.

Gotta run, I'm going out with a yardstick to measure how blue the sky is.

[Maria Reyes-McDavis]

You are soooooo freaking on point! This is the best rant on ROI I've heard in a long time. Great points, great insights :-)

[John Patella]

Great rant.

Social media is much more measurable than traditional advertising, which ultimately requires a leap of faith.

I think we're just about at the end of the period when you have to explain or justify the value of social media.

Communications technology is always evolving, and social media is just that latest step.

The telephone was also once new and for a brief time people had to make the case about why it was valuable.

That time passed.

I think the key is to set expectations correctly from the start about what can be measured and what can't, and not to over-promise about what the efforts will deliver.

[Andrew Everett]

Love it!

My favorite line is about the ROI of spending a week calculating the ROI. The term "fools errand" comes to mind.

I had a conversation with a CEO who claimed her business makes data-driven decisions, but it took about two minutes of questioning to realize she didn't understand the data she was citing. This reinforces my belief that a lot of posturing about ROI is really just CYA, so an expenditure can be justified in case it is challenged. CYA is not a function of job level; it is a function of company culture.

Some things are measurable and should be measured, but statistics (smoke and mirrors?) is not a substitute for experience and intelligence.

[Amber Avines]

David,

I heard you on yesterday's podcast and became an immediate fan! Thank you for asking the smart questions and being such an articulate advocate for progressive marketing and PR (I also watched your YouTube video where you surveyed attendees across the globe about where they get information; I left a comment there, too).

I cannot wait to get a copy of your second edition book! And, I intend to play your rant on ROI for every Chief Marketing Officer I ever talk with about new media. It's golden!

Keep up the great work!

Amber
@wordsdonewrite on Twitter

[Stephen Eugene Adams]

I think we spend too much time trying to justify our ROI on marketing. Even when we can make the calculation, what do we do with it. If the calculated return is good, we love it, if the calculation is bad, we justify it. There are all kinds of ways to calculate ROI on direct mail, emails, special promotions, etc. if we use different contact points but what does it get you?
With all that said, we are living in a world of CMO's trying to justify their budgets with the CEO, so we still need to always be searching for a way to calculate ROI, even when it is meaningless.
I know that when I get people talking about my blog, my website, my articles, my postings, I have done so much more for my brand image than anything in the mass media arena.

[Bruce Nunnally]

I think that you are saying that it is good to measure the effectiveness of social media efforts, but it misses the point for many businesses to ask for a dollarization of that effectiveness. For example, improved social media may lead to greater product consideration. We would expect more consideration of our products to lead to more sales. We could focus on the $ value of the more sales in ROI terms.

But it misses the point of what we could be doing now that we have the customer's attention. We can gain greater interactivity, allowing us to improve our product, improve our messaging, re-invent our brand along the paths our Customers want.

So asking ROI on Social Media is like stepping into the spot light and then focusing on measuring how long a shadow you cast instead of on the rapt attention of your audience.

[Sachin Uppal]

Being a Fan of your work and the new rules of PR, I think you are bang on ranting here.

However,I am running a startup and I realize the importance of ROI. I have not spent even a single penny on traditional media and I am on track of breaking even in 4 months. However, for me to decide on which online activity to spend money on does require me to calculate the ROI.

I am hoping that your rant was primarily on the point where people argue Online Vs Offline ROI. However, I am still hoping that you do not mean to ignore the ROI completely for the online space?

[David Meerman Scott]

Thank you all so much for your comments and tweets.

I was out all afternoon and evening and am just now catching up with the great stuff here.

Should I get caught up in this rant again, I’ve added a few great lines:

@Jack Daniel: I'm going out with a yardstick to measure how blue the sky is.

@John Patella: What’s the ROI of the telephones in your office?

@Bruce Nunnally: Asking ROI on Social Media is like stepping into the spot light and then focusing on measuring how long a shadow you cast instead of on the rapt attention of your audience.

[John Antonios]

hats off David - it's really nice to hear a professional marketeer like yourself crush the idea of ROI! Ironically, I think the people who usually ask for it are people who don't really know what it is, and that is why i agree with you that they would believe anything an agency feeds them! Had they known what it was, they would question the numbers - I think it has become such a cliche question to ask with no intended purpose. just like when most people ask you how are you, they're not really interested in your well being, it's a just an expected question with an expected answer!
Would love to listen to the rest of the podcast!
Btw, how did the harvard thing go :)

[Derekabdinor]

Loved it.
the billboard on the side of the highway is like taking a shotgun to an elephant hunt. A pellet may hit some part of the target, but you're then only likely to be chasing a wounded animal or running from an angry one.

Not that I hunt..

[Bill Royce]

David,
Bjorn Edlund, who heads global communications for Shell, introduced the term 'Return on Relationships' to restate what ROI really means in a digital, networked age where engagement is the ultimate objective. The more you play with this concept, the better it works.
BTW, loved the rant.

[Don McCauley]

Just as there was never a measurement for billboards, there will never be a valid measurement for social media.

Social media creates awareness, not results. Various forms of advertising create results AND awareness and thus can be measured. How does one measure awareness? It simply cannot be done.

What is the answer?

"Mr CEO, over 70% of our potential clients are involved in social media. If we are not there, your company will potentially be completely invisible to over 70% of your potential clients. If over 70% of your clients are in the mall, you'd best have a storefront in the mall."

That should shut 'em up regarding ROI.

[ilya]

The comparison with landscaping and putting your pants on is cute (and effective), though I can imagine someone replying "well, I don't spend a million dollars on the landscaping or my pants."

But I think your point is that it's moronic to not do all these things, so of course you gotta do stuff on the web.

And the apples-and-apples reference to the things they DO spend millions on - advertising, direct mail, tradeshows - should hopefully drive the point home for folks that don't feel this in their gut.

Nice rant. But consider adding bleeps next time over the "freaking" - you'll sound more bad-ass...

[Chris @ Rizzo Tees]

David, you're dead-on here! It's a group of marketing people that KNOW HOW to run a billboard, KNOW HOW to run a TV ad, that continually go back to those forms of marketing. Not everyone knows how to leverage social media. They haven't read your books yet!

In a recent interview I did, I said, "It's not a question of 'How can we sell stuff using Social Media?' I couldn't care less about ROI - I'm building a community of people that believe in what I'm doing."

[Glenn Taylor]

Great rant! It's spot on.

The ROI issue is being used as a roadblock by many firms to easily block their entry to the opportunities available within these great new tools. To them, it's easier to stick their head in the sand and point to a lack of ROI data. They all use the web daily, but then state they see no reason they need to be reaching out and communicating there.

Relationship building doesn't have an ROI in the sense they are used to and feel they need to see. If most firms measured everything they do with this ROI yardstick, they wouldn't be able to justify their fancy sign out front, highly-stylized business cards, employee uniforms or coffee services.

Their is no ROI on pants! Classic!!

[trish bertuzzi]

First, great rant. I lost count of how many times you used the word freakin'.

Second, the rant needs to come with a warning label "children do not try this at home". A marketing exec who goes off on the ceo with this kind of rant will have plenty of time to go out and measure how blue the sky is.

Look, the ROI question for marketing has always caused people to go insane but it is a question that has to be asked to understand resource allocation. I went to 3 client sites and checked out their blogs. They blog frequently and guess what...there are ZERO comments. They are not engaging their audience. Writing blogs takes up time - can that time be better spent somewhere else?

Net/net - I think the ROI question is fair but I think the answer has to be different. Not # of leads or dollars but engagement and interaction with potential buyers. We all have that data so present it and educate the execs so they understand it. Just my .02 cents...