I was talking with a group of social media folks about metrics the other day and it made me think of a famous quote by William Goldman, the Hollywood screenwriter “Nobody knows anything.”

Goldman was talking about how nobody in Hollywood knows if a movie is going to do well. There are just so many variables that go into a production that it’s nearly impossible to predict how a movie will fare on opening day and beyond. No one has a clue, no matter how much they protest, how a movie will do creatively or at the box office until it hits theaters.

Tracking the effectiveness of social media is much the same way. It’s incredibly difficult to track spending to actual return on investment. Especially for brands that aren’t selling their products online. I won’t bore you with the analytics problems involved in even measuring links coming to your site from say Twitter, Facebook, MySpace, or YouTube. The problem is most brands don’t actually sell their products or a majority of their products on their own online store. How do you measure if Tweet influenced the purchase of chewing gum at the 7-11?

Chris Brogan says it’s all about the dollars. Meaning how much money is coming in currently vs before. He’s right that it’s about the money but how do you connect the purchase to the tweet when you’re selling insurance? Or if you’re selling potato chips, was it the POP or the sale price that moved the product in the aisle?

In advertising, we’ve been working with this kind of fuzzy math for years with television, radio, and brand advertising. But social media is on the Internet where people have been using Google Analytics and Omniture for years so it’s held up to a higher standard, even though it’s the shiny new toy. So what do we do?

We do what we did with TV. Look and see if our investment correlates with growth. But since the spending won’t necessarily create as immediate an impact, we also have to look at activity over time – examining trends in both purchases and brand mentions. If these things correlate, then you can begin to estimate a ROI. That said, it’s still very difficult to factor out other variables.

We’re fortunate people can’t say nobody know anything about social media ROI. But we should be honest and say, nobody know everything.

Posted on: October 16, 2009, by : Jimmy Gilmore