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.
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