My email answer to Werner and others with "ROI of Web 2.0 and social media" questions:
These are great questions—the short answer is no, not yet… the long answer is that answering those 2 questions and putting them to work in companies is the main focus of my current academic research and consulting. Here’s why:
1. How to compare social networking across cultures?. We know that individual reactions to website images, online branding may be mediated by Hofstede-like cultural factors. Large scale cross-national meta-data studies of Bass curves indicate that “social influence”, (a more operationalizable and quantifiable variable of the ratio of q/p in the Bass curve than “social networking”) varies quite significantly in different countries/cultures. In other words, social networking and viral/buzz marketing tends to work faster and proliferate more effectively in highly “collective” populations, although the higher risk and individuality threshold may make it difficult to “trigger” and reach critical mass. (See Chapter 3 of my book and end note Bass Diffusion Curve p. 200-1). These findings have a big strategic impact on multinationals, not only in their IT groups but their marketing and marketing/competitive intelligence groups.
2. How to calculate ROI or cost-benefit analysis for “social networking” in a global business organization?
a. The key is to start with per user economics and metrics. (See chapter 1 and endnote single customer/subscriber cash flow analysis p. 179). You can’t calculate ROI and cost-benefit analysis correctly for social networking if you start with an accounting basis of units or services rather than the lifetime user value.
b. Once you have the right framework and timeframe (lifetime relationship/p2p interactions, not transaction) it becomes much clearer how social networks generate, multiply and remix positive network effects (a more quantifiable and measurable concept underlying “synergy”)
c. The last step in ROI analysis is to show how a specific company captures that positive network effect value in their business model or organization—via direct or indirect revenue, ppc or brand recognition sponsorship, customer loyalty, talent retention or job satisfaction, increased speed or time to money, partnerships, knowledge management etc....
d. Another level of analysis to be considered is the enterprise level. Social networking and Web 2.0 strategy is becoming an important analyst criteria for judging the potential of a traditional industry company to be an innovative leader taking advantage of global broadband, mobile and web interconnectivity in the knowledge economy going forward. So that future earnings potential and P/E for a web 2.0-savvy company tends to be above industry average.
e. In other words, the information and knowledge management—share point or other-- that the IT groups put into place ends up having payoffs and returns in lots of cross-functional areas—marketing, product development, hr, speed, intellectual property, company capabilities, partnerships—as well as at the financial enterprise level. This is why for accounting purposes, the ROI needs to be tied to the number of people/users (inside and outside the company) not to narrow product/service lines.
I just put together a onsite workshop on “Social Media and User Lifetime Value Analysis” that you and your group could find helpful. Since my book is now available in German, http://www.oreilly.de/catalog/web2strategyger/
I’m starting to schedule seminars and presentations in Munich, Frankfurt and Berlin. Let me know if we should arrange a time to talk.