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Here's the shortest, simplest defense to anti-social media investors:

To not advertise using social media is to invite criticism through social media.  If there is no positive message from your company out there, then who will be your advocates?  All it takes is a few evil and convincing voices to transform any social media outlet into an anti-your company grassroots campaign.  It's far better to have your own voice already exposing people to your positive message.  This way, people will be able to contrast what these evil voices are saying with your positive message, and arrive at their own intermediate (yet more positive than the alternative) conclusions about your products and services.

Also, women tend to engage more in conversational and emotionally appealing advertising, and since women drive the vast majority of media purchases, advertising in social media for them only makes sense.  This type of advertising drives the huge revenue of a brand like iTunes, for example.  While men probably buy more iPods, women almost certainly buy more of the songs once they have the device.  It was the same with DVD players vs. DVD's.  For men, you can advertise with a giant billboard about the new gadget, but women want to hear about how they can interact with your company and services; what better way to reach out to this aspect than through social media?

As a SMM (social media marketing) consultant figuring out how to charge for services is the hardest part of my job. The main ways are as follows:

Charging a cost per visitor - the good part about this approach is that the client can set the price they are willing to pay and set different values to visitors from different sources.  The problem is that traffic is very hard to predict so setting a minimum and maximum payout is useful.

Charging a cost per link - if the aim of the campaign is to build links to the site or to a particular page you can charge based on the number of links received in a certain amount of time. Again this is unpredictable but is a good way to measure performance.

Charging for better search engine rankings - a lot of clients are just using social media campaigns as a method to build links and improve seach engine rankings. If this is the case its straightforward to price the campaign based on the time it takes and how much revenue the improved search engine rankings are likely to bring to the company.

Charging for time - probably the easiest way to charge is to just work on a set hourly or monthly rate. The fees are transparent and as long as the client sees ROI and trusts the consultant it works very well.

In most cases social media is just being used as a means to generate more traffic, better search engine rankings and more sales so it is not as difficult as it sounds to find metrics to evaluate the campaigns performance.

Feel free to check my social media site out at www.blogstorm.co.uk to see the kind of work I do. 

Well, I'm not going to win the prize with this post, but sign me up with the camp that's trying to shoot your "yet-to-be-funded strategy" down.

Not a lot of evidence from the Social Media department that anything has worked well beyond a few first-movers who got conventional press because of their innovative marketing. Establishing a presence in SecondLife is pointless unless you are a beloved brand, and setting up a blog that allows interaction (otherwise it's not social) opens companies up to criticism that they would largely prefer not to air in public. Then when you edit the content, you suffer a backlash.

Putting a site up on MySpace or Facebook has a similar risk in that you may find the college set offers more criticism or mockery than adulation. If the kids really loved your product, they would have put up a tribute site for it long ago without your help...and your lawyers would probably have shut it down before you even knew about it.

The closest most companies should come is a company blog, which is a discussional board where the company can talk about its products and services with the public - minus the corporate laywerspeak. You have to decide very carefully if you are willing to let the public post articles / comments / or questions that are visible to the public.

The use of YouTube to demonstrate products, or to enhance your corporate blog may make sense, since it makes the brand look more human. And real demos are always useful. But the social aspect of YouTube is that people can post responses videos and comments, and once again, that has unpredictable results.

In closing, let me say that social media tends to attract two types of participants: those that are avid aficionados of your products, and those that are angry. They are usually both outliers, and the mass of the users fall in to the middle of the bell curve where they think your product is "meh" and they won't interact with you online. Given that the damage from one negative commenter wreaks as much empirical goodwill as the praise of 5 happy customers, do you really think that the happy outliers outnumber the angry outliers 5 to 1?

So if you're committed to not taking my advice, why not start small and cautiously, and let the effort grow organically if it is successful and warrants increased investment. You can easily kill the program if it does not meet minimum goals. This will also reduce the amount of funding you are requesting from your executives, reduces the risk, and still provides the potential for long-term upside if you are correct.

Reference sites:

Reuters enters SecondLife: http://www.techdirt.com/articles/20061016/011245.shtml

Getting press for social strategy: http://www.techdirt.com/articles/20071031/145932.shtml

Beloved products are already in SL: http://www.techdirt.com/articles/20071010/003145.shtml

IBM needs to set staff standards on SL: http://www.techdirt.com/articles/20070727/113634.shtml

SL marketing not working well: http://www.techdirt.com/articles/20070726/111840.shtml

SL really just about a PR bump: http://www.techdirt.com/articles/20060814/133256.shtml

Facebook and MySpace have bad clickthrough rates. Turns out kids aren't thrilled about being sold stuff while they're hanging out on the site: http://www.techdirt.com/articles/20070712/104735.shtml

What happens when you try to control the discussion that you started: http://www.techdirt.com/articles/20071023/231730.shtml

WalMart tried and failed at establishing its own community. http://www.techdirt.com/articles/20070810/032158.shtml And now their area on Facebook has plenty of negative feedback.

I think the biggest thing to consider is why do you want to get into social media, i.e. what do you hope to gain by allowing people to participate? Just because everyone else is doing it doesn't mean it's a wise or necessary thing to do. Look at the problems Wal-Mart had when they tried to create a MySpace competitor; no one was interested because they knew it was just a marketing gimmick.

The next thing I'd consider is what type of media features would be implemented. There are many different kinds of Web 2.0 ideas on the Internet: wikis, video sharing, virtual reality, news sharing, social networking, forums, etc. The technology chosen needs to compliment the company while not looking like a me-too gimmick. 

Another concern is management of the site. Some sites have come under fire for "censoring" the participants, especially when it looks like the company is deleting information derogatory towards the company. However, sufficient safeguards need to be set to prevent abuse of the system.

These aren't the only concerns to worry about but they are a place to start. However, assuming that these problems are overcome, there are valid reasons to use social media. It allows a company to get a better understanding of it's customers, especially what the public is interested in. Many companies think they know what's best for the consumer and force something to market that isn't what people want. Or they dictate the terms of the product so much as to actually hinder its value to the consumer.

By using certain social media, a company can see what its customers are doing with its products and how they are enhancing them. This can lead to new advertising ideas and product enhancements, maybe even new product line. If someone is using the product in ways it wasn't intended for, then maybe there's a market for a different version of the product.

Advertisers pay big money to know who is interested in their products. Having an interface into the mind of the consumer allows a company to have more intimate knowledge of what makes him tick. A social site can be considered a form of market research; though there may not be any actual marketing going on, the site allows consumers to express themselves in ways they haven't been able to before. It can also generate more information than traditional marketing studies can provide.

With the amount of open-source software available nowadays, it's relatively cheap to set something up. A beta version can be implemented quickly for little cost, providing a proof of concept. If it works well, then consideration can be made to either purchase a more robust application or to round out the open-source appliations. If it doesn't work out, then there isn't a big loss; you may not have found what works, but at least you have found what doesn't work so you won't have to waste time on it in the future.

A major success could come in the form of an averted crisis, when a timely post on a blog disseminates a crucial clarification before a negative-but-untrue rumor spreads around the internet. While it may seem hard to measure that gain — the improvement over a "What if we didn't" scenario — there will be statistics.

The real question would be how much would it cost the company to not have a social media strategy in place? Calculate the damage done by a major crisis to the brand, measured in both lost business and long-term negative perceptions. You can argue that this "averted cost" should be distributed across the time the social media strategy is in place. That is, if one million-dollar crisis is averted in five years, the social media strategy has produced an average of $200,000 in "benefit" every year.

Defenders of the social media strategy can also point to the number of sites linking to the company's official statement on the crisis, the quality of that reaction on those linking sites, and the number of people who followed the company page's link to other pages for more information. Here's some other effective ways to measure these online responses to your firm's brand — both in quantity and quality.

• The tools at Technorati track the number of blogs linking to a web page over the last six months — and provide the page's rank compared to other pages. Would anyone in the board room want to hear that four times as many blogs are linking to a competitor's site?


• It's also possible to assess the quality of perceptions online. Compare the results of a search on the firm's name using various search engines, both before and after the launch of a social media strategy, and you'll see an unmistakeable boost in a firm's online presence.


• Another metric would be measuring the quality of the press coverage. Google News makes it easy to generate an exhaustive list of all web-based news outlets — including thousands of the most authoritative blogs. These give a good measure of a firm's online reputation, and make it easy to compare the before-and-after responses to a firm's social media strategy. (And this also makes it possible to measure the quantity of these reactions. If a search for a firm's name turns up no reactions on Google News — you're effectively invisible to the online world. This is something that's easy to quantify.)
  
  Recently Google has even released a separate search engine that only returns search results from blogs.

There's an old joke that half the money spent by advertisers is wasted; the advertisers just don't know which half. But for the first time in history, it's possible to gather precise statistics on the effectiveness of any advertising campaign. Statistics from a site's access log can measure how many people viewed a specific page, where they came from, and (more importantly) which links they followed away from that page. It's now possible to know exactly how many people read a particular piece of information after following a link from a particular web page.

With all this, it's easy to document the impact of a social media strategy. Ultimate it becomes a one-two punch. A defender of social media can argue that the real cost to the company would be the lost business and negative public impressions that would result in the absence of a social media strategy.

But then they can point to specific benefits that the firm has already gained.

The purpose of social media marketing is to magnify and improve branding, PR, SEO and customer satisfaction initiatives with a platform that provides an unfiltered brand message.  Two categories of KPI (key performance indicators) from social media are defined below; Measurable numbers represent numbers to which monetary value can be placed.; Intangible benefits represent softer numbers, but often provide a far greater value to the company and project.

Measurable Numbers (Key Performance Indicators):

1.  Press mentions tracked to social media campaign:  Stories and articles concerning the SM strategy as well as individual posts should be tracked and measured for their PR value, comparing both the cost, the influence of the publication, and the comparative difficulty or ease of catching the attention of a publicist, reporter or columnist.  This is the primary value of social media in the first 3-6 months of the project.  A good campaign will catch the eye of marketing and trade publications as something new and unique.   

2.  Number and Quality of incoming links from blog marketing campaign:  PR5 (PageRank 5) links and higher command a price of $250 a year for permanent links, while in-text ads run $30-$40 per link.  Based on the number of incoming links, a savings in SEO costs can be calculated and tracked.  A blog, done right, will rank a PR4 in under three months.  If you join a community of high-ranking blogs, you can get hundreds of PR5 links and above (I use PR here as shorthand, knowing full well that PR is not the end-all be-all of SEO)

 3.  Keywords and Search terms:  The cost of  PPC (Pay-Per-Click) and AdWords campaigns should be compared to organic search results for desirable search terms found on the front two pages of search engines.  Compare the current cost of SEO and track it against results from a "properly executed" blog marketing strategy.  A good blog can cut down on PPC costs, and allow you focus those PPC campaigns on less generic words).  

I say properly executed, because a large number of corporate blogs are built from non-standard templates using less then SEO-friendly software.  Personally, I use Movable Type or Typepad, and customize it with specialized widgets that give outstanding SEO benefits.  Using a little-known software that doesn't have a built in community, and failing to optimize the blog or write proper content are the two others mistakes that cost you SEO.

4.  Traffic:  Putting a sitemeter on your site and tracking unique visitors, in addition to RSS subscribers or podcast subscribers, helps you determine how many people you are reaching, and their level of engagement is very high.  Yamaha Motor Sports has a blog that has great results tracking engagement, which equals a percentage of feedback per visit.  a 3% engagement means three comments from one hundred unique IP's.  The blog was much better in fostering engagements then the Yamaha forums, which were already heavily trafficked. The key for social media is customers have to chose to get your messaging, and can easily "un"choose you.  Thus a user in social media by definition is already engaged more than in other marketing.   

5.  Number of Sign-Ups, Conversions, And Sales:  This is last, because in all fairness, the numbers are hard to track.  Someone may come to your blog, read for a while, and buy something in the store, or from another site.  Social Media strategies fail when you need these kind of numbers.  It's better to treat the project as a branding exercise.  It doesn't mean you shouldn't track numbers, but it is important to set expectations.  Social Media should be measured in results like PR is measured.  It's what it is after all, PR online. 

Intangible Benefits Of Blog Marketing

1.  Buzz And Credibility In The Social Media World: This is a segment of the market that you have to be in to understand.   As marketing dollars increasingly move online, the necessity of having an online platform to coordinate and aggregate your content requires an understanding of the blogosphere and a reputation for new launches.  A well-written and popular community blog represents an incremental and low-risk approach to the social marketing world that can be leveraged in all future marketing. 

2. Branding and Consumer Self Education:  Social Media allows you to tell stories with more depth and interest then press-filtered publicity.  The price of pixels also allows for a greater depth and more human-oriented approach to telling stories. 

3.  Improved monitoring capability in-house for company brand:  Having a blog voice allows for both a defensive and proactive online voice to cover corporate issues should they arise.  Communities of interest take months to develop, and if a negative story surfaces, it’s often too late to create goodwill in the blogosphere.  Clients I work with often have no clue why they receive spikes of traffic.  Having a blog or social networking site lets you take the pulse of your traffic, which helps you understand what's working, what isn't, and whether a story is going around the net that you need to know about. 

4.  Lowered cost of messaging through blog:  Running ads and public relations efforts through social media gives you an unfiltered platform at no additional cost.  It's a focus group that will tell you things you never thought about.  Every client, and I mean every client, learns something they didn't expect from blogging.  Other social media - there are things to learn, but it's a different field to play in.  Every site and community has its own set of rules.  Learning the rules for your own community is essential.  It's not something you want to learn on the fly.

Summary:  

When pitching to executives, keep it simple.  Focus on some very clear objectives (SEO, building up a list for e-mail marketing, getting in front of a specific online community (pet bloggers for Purina, home improvement bloggers for Home Depot, whatever works for you...)), and pitch them on those benefits.  Stay away from keywords or talking about Web 2.0, unless those are hot buttons.  Your goal is to learn the space and deliver benefits in small projects, allowing you to tackle larger projects in the future with a staff that understands Social Media.

-Jim Durbin

http://www.durbinmedia.com

The underlying format for ROI measurements needs to stem from the basic premise for a social media strategy:

Influence

 A social media platform will help connect the organization to the consumers but the tangible benefits won't necessarily be able to be measured in nett sales.

So why go online? in his book the Tipping Point, Malcolm Gladwell identifies a key group of people, "Mavens".  If through the use of a social media strategy you can build and maintain a relationship with some key mavens in your domain this would help establish your online presence and brand.  Through their connections you would be able to broaden your consumer base and then potentially realize net gains.

 What quantitative measures can be used to establish an ROI? through practical experience of building a knowledge management platform there are x measures that are simple to track and report:

• New Member sign ups (if applicable).  A gauge of volume interest
  
• Unique visitors per month. A gauge of new interest to trend over time. Site visits and individual items.
  
• Volume of comments per article as a ratio, an article could be a product entry.   A gauge for specific content interest, where is the discussion being focussed
  
• Track back links.  What are bloggers connecting to in their blogs and social pages.  A site like Digg is a proof of concept of how powerful this can be.  Hits grow hits through word of mouth.
• Social network size.  Using the same theory as used in LinkedIn a measure of how quickly the network grows aligned to degrees of separation.  Typically as interest grows and repeat visitors and mavens are connected to the numbers will increase closer to the organization.  LinkedIn does have a concept of Groups that could enable this to happen with minimal investment.
• Where possible member activity to see the life span of a community member.  Once a connection has been made it is important to try and maintain an active relationship.

These kind of quantitative metrics defines how quickly the community grows and this has a direct correlation to the effectiveness of the strategy.  The strategy should have a realization period as a series of milestones that allow actual growth against target.

 Over time it would then be possible to directly relate metrics, such as comments per post ratio, to actual sales/revenue.  This creates a correction loop to be built in to the strategy to tailor the platform based on a proven successful profile.

Yes, it is difficult to measure ROI on a social media strategy, but not impossible.  If you break down your campaign into the most basic parts, then you can track its effectiveness.  The main thing is to set your goals and then measure customer response towards achieving those goals.  And pick a goal that can actually be measured.  For example, "building brand awareness" is not an easily measured goal whereas "drive traffic to our website" is.

Tracking referral links (those sites that send people to your site) will easily let you know how people reach you.  If you're courting the blogosphere, then check your referral links to see if blogs are driving traffic to your site.

There's also the age old "how did you hear about us" question that you can ask on your website.  For example, I've had companies tell me that 30% of their total sales for a specific product originated with articles I've written.

The ability to correlate where someone learned about you and how much revenue they've provided to your business is key to measuring the success of a social media campaign. 

There are certain things you can hope for in social media, things like brand loyalty and viral campaigns and high profile blogs.  But you cannot guarantee them or measure them.  There are some things that you can predict by looking at similar efforts by other companies in your field.

Predictable ROI

- Site Visitors

You should be able to estimate the number of new visitors to a brand site or brand store via social media channels based on existing visitor counts.  Regular blog content should result in new search result listings and regular subscribers and links from other sites.  These visitors can be channeled into company sites.  The ROI comes from comparing the low costs of an open source blog platform to the costs of online advertising to get pay per click visitors.  The ROI of getting high Google search listings from blog entries could be compared to the cost of buying adwords or sponsored search results.

- Protecting the brand

Some online searching should be able to find instances where the companies brand or reputation has been harmed by forum, blog, YouTube or other social media content.  Bad reviews and product criticisms etc.  The loss of this content can be measured by calculating the number of readers that source gets, the percentage that are likely to be potential customers and the loss of those customers due to that bad review (eg. 5-10%).  A rebuttal from the company could reduce or remove that loss creating the ROI.  A rebuttal is better if it comes from a figure of authority such as a corporate blogger who is experienced at complaint communications.  The Ford Fast Lane site is an example where a company is not afraid to receive a criticism as long as they have the right of reply.

- Influence a debate 

Telstra via the www.nowwearetalking.com blogs are an example of a company using social media to influence a debate.  The ROI of this is comparing the costs of this debate compared to the normal costs of PR and marketing.

- Contribute more to society

A lot of companies have corporate contributions to charity.  Using Social Media to boost this commitment helps in two ways: 1) it can be used to get consumers to take part and boost the overall contributions.  2) It can spread the word and make the company an example of charitable giving.  For example blogs or a Facebook group used by staff running charitable events makes the effort more personal.  The ROI comes from getting more bang for your buck in charitable giving and increased brand goodwill.

- Creating more brand loyalty

A modest increase in brand loyalty should result in positive ROI.  Bringing fans of your products together into groups or as subscribers and commenters on a corporate product blog should help retain them as loyal to a product and attract more people to be loyal to that product.

Mitigating Risk

Any discussion on the ROI of social media should be met with some skepticism on the risks.  Companies such as Walmart and Google have had PR disasters in this area.  There are ways to reduce the risk of PR damage:

- Do not contribute on a controversial or emotive topic.  Veer your content away from the most controversial products in your brand.

- Use the right people for rebuttals and debates.  They should be experienced in this type of communication and remain informative and professional in all communications such as public comments and private emails.  They should know when to break off a debate.

- Leverage existing social media platforms such as YouTube and Facebook and open source blogging to reduce the initial investment and ROI risk. 

- Encourage internal staff to participate in social media efforts via contributions and comments and offer internal prizes.  This will help set the right tone for the content and build up to a critical mass of users. 

ROI and Social Media:

Depending on the product you may want to investigate some innovative approaches to a quick and positive ROI even on the initial "ramping up" social media expense. If, for example, your company has a strong online sales presence you can tag the extra traffic from the social media projects such that these sales are allocated to the Social Media project spend. A modest cost, high impact approach is very likely to yield positive results and can be used as a model and springboard for greater investments and refining the project for even better yields on the investments.

Social Media in General:

If an ROI presentation is unrealistic, but your inside corporate audience has a basic understanding of common internet metrics then it should be acceptable to approach the social media idea in terms of how it will be a very cost effective way to increase page views, website visits, unique website visits. From this information you can often derive an expectation of online and perhaps even offline sales, though this will depend on the robustness of your existing market research and on your market niche.

Although it may pose some strategy challenges it is may be most effective to work within your existing corporate marketing structure and offer those teams the advantages that come from enhancing their efforts with social media. Steve Rubell of Edelman has a lot of insight in this area from his adventures spearheading Wal Mart's creative online approaches - following him on Twitter and asking some questions could yield some good ideas about how to proceed with a "big team" effort as opposed to a stand alone project that may get more internal resistance.

It is critical to note how launching a social media project will immediately create a sizable stream of advertising impressions and brand awareness that is very likely to come at a lower cost than through even a very cost effective online pay per click campaign (I'm assuming you are talking about a separate "social media" campaign that is separate from a conventional pay per click campaign. Ideally of course you'll blend these together in creative ways - e.g. market the company via a Facebook page *and* via the new targeted Facebook advertising). Also note that the social media will have a *dramatically* lower cost than conventional media and most importantly will last much longer. Magazines are thrown away, where internet footprints last ... forever. The true cost of a social media campaign really needs to be amortized over the many years it will "last" online. Impact of social media elements (Myspace page, Twitter, etc) tends to increase over time even with no additional expenses rather than lose impact as with a TV or Print campaign that has ended.

Also important is the fact that "early adopters" in the social space are getting rewarded for their early entry with relatively higher levels of exposure than you can expect in the future and with what will come to be superior search and media rankings due to the fact that Google and other search media tend in many cases to rank social media and blogs over websites, and consider "old links" and old efforts deserving of higher rank than new ones. It's already getting late to get into the social media game so it is realistic to see time as being of the essence. The earlier they "get in" the better your effort will be rewarded, and it's now very clear that everybody will eventually get in the social media bandwagon.

Although it may be undesirable to ramp up a social media strategy on a shoestring budget this can be done as indicated below, and it may be an effective way to show how powerful the results can be with a modest investment. If you go this route I'd suggest you try to get, as much as possible, commitment to spend "much more" once the initial efforts start showing benefits in terms of the metrics discussed above.

Following are some quick and easy ways to launch a social media campaign with low initial cost and time. I'm trying to list these media elements in order of their impact per unit of time:

Twitter: Simply sign up and check in with a few personal notes and link to interesting information about your company. Post twice per day with links to website information pages. Time needed: 10 minutes per day. Ideally use an intern or team member to become "the face" of the company and interact with prospective users and promoters.

Facebook. Set up a corporate page, interact as appropriate with those groups that might be interested in your product, encourage marketing team members to open a Facebook profile.

Myspace: Depending on your product Myspace may have limited value, but I have heard of some great success stories with highly targeted advertising at Myspace for high end services. Myspace, with 200,000,000 members, is larger than Facebook and clever viral marketing can have extraordinary results here.

Stumbleupon.com: This "website ranking and finding" social environment has exploded in popularity. Investing a few hours would begin the process of planting a company "flag" in this environment.

Flickr: Flickr remains a powerful social network and might not be easy to "enter" because you don't want to appear to be manipulating these social spaces too commercially, but note that Google and other search engines value the size of the online footprint of a company. Even company picnic pictures, when properly tagged pointing to the company website, can boost organic search listings. I've been running some interesting Google experiments in this area and have heard from the search engines at conferences noting that image search has a lot of potential for ranking benefits.

Google Orkut: Not popular in USA but big overseas, especially Brazil. If this is a target market set up a profile.

MyBlogLog. Yahoo's recent social networking acquisition is heavily used by many technology and business bloggers and has disproportionate influence. For non-tech companies this is worth the time to improve "exposure" at blogs and websites which remain heavily tech-centric. Remember, your internet footprint and ranking will include sites, blogs, and references that are not otherwise relevant to your niche.

Yahoo Mash: Still in beta (OK to email me for an invitation though) .
This is Yahoo's Myspace. Low current visits, low priority.

Give your team some time and flexibility to manage these social profiles to help spread the word.

Good luck with the presentation!