Return On Influence Can Return From Whence It Came

The Harvard Business Review recently published a post entitled “Return on Influence, the New ROI“. In it, the author suggested that marketers consider the use of “Return on Influence” as a metric for measuring social media activity.

What is this metric, you ask? To quote the post:

“Divide the total revenue generated via social efforts by the number of social media fans and followers, and you get a per-fan/follower value.”

There you have it – your “new” ROI – return on influence.
Really? Looks to me like that’s “Revenue Per Fan/Follower”.

Sorry, but this kind of black-hat math just doesn’t cut it. There are so many holes in the post, it’s hard to know where to begin (fortunately, Olivier Blanchard and Katie Paine did, in the comments). Still, I’ll take a stab, because I think it’s important that you, me and everyone in this space stop using BS metrics to justify social media activities and start to tie them back to business objectives.

I’ve written on this before (check out this post from two years ago) but here we go again…

1. Measuring a return requires that you compare outcomes to the input

How can you calculate a return on something without knowing what you put into it? My head hurts. This isn’t a true “return” metric; this is a poor attempt to calculate the value of a fan (without considering many of the factors in play even in that instance).

2. ROI is ROI, not Return on Imaginary Numbers

ROI has a formula. It goes like this:

(Gain from investment – cost of investment) / cost of investment

This isn’t up for negotiation. It’s a business staple. Please – if you value your job – don’t walk into a boardroom and try to sell your CFO on your fan numbers. Don’t try to sell them on retweets, or replies, or anything like that (they’re useful, but not in that context or for that audience). Show them the return that you’re able to generate for the business.

It might be hard to tie social media activities directly back to ROI, as there’s rarely a direct, solid line to be drawn (it’s extremely hard to say what, beyond the final trigger, influenced a decision to purchase, for example, but it doesn’t mean those things weren’t worthwhile). However, solid business objectives do tie back.

Which leads me to the next point…

3. Return on Influence has nothing to do with business objectives

This is something I’ve been putting a lot of thought into recently – ensuring that the social media activities we plan tie back to business objectives for our clients. Sometimes that’s sales. Sometimes that’s reduced customer churn. Sometimes it’s lowered costs.

It’s never “increasing the revenue per follower” or the “return on influence”.

 4. Measurement should be activity-specific

Imagine going pitching a metric like “return on PR”. The conversation might go something like:

You: “We calculate Return on PR by looking at the revenue generated from PR against the volume of releases we put out…”

Boss: “Get out.”

This idea is similarly ridiculous. Measure an activity, not a medium. You want to measure the ROI of a tweet? Fine. Figure out what it cost to draft/approve/publish it (time is money) and how much revenue it generated (assuming it was sales-focused). There you go – you can calculate the ROI of the tweet, and you haven’t broken a sweat yet.

Don’t try to measure the ROI of social media, or of “influence”… please.

5. Followers and fans don’t define influence

Every time someone uses reach metrics to try to define influence, a great hue and cry goes up. “It’s not reach, it’s context!” they cry. It’s true. Plus it’s a bunch of other things.

Folks like the team at Traackr have realized this, as have those at PeerIndex. Klout has cottoned-on, too, with its topic pages (although I’d still like to see them go much further down that road).

If you measure your results based on fans and followers, don’t expect senior leadership to buy into your plans for long.

6. Please – PLEASE – stop creating fake numbers

Like Ad Value Equivalency (AVE), this number tries to force a square peg through a round hole.

AVE aimed to show the value of media coverage if that same coverage had been a paid ad rather than earned media. It was bullshit, plain and simple, as it didn’t account for sentiment, credibility or any other measurement that fit around it.

There are plenty of other metrics thrown around that apply arbitrary (and, often, opaque) formulae to generate meaningless values for social media activities. I can’t stand them (plus, they violate the Barcelona Declaration of Measurement Principles, which the world’s biggest PR firms (ours included) have endorsed.

Please – let’s stop creating fake numbers and take a long, hard look instead at how we can tie our activities back to business objectives, and measure against that.

Fair?