How do you calculate the value of an investment in social media?
Any investment attracts the need to try to quantify the returns, both to measure the success of the investment when it is too late to do much about it apart from ensuring the same mistake is not made again, and to prioritise competing investment options against a limited pool of funds available.
Accountants love the discounted cash flow, and real options type analyses that prevail, but how do you do these on an investment in media, social or otherwise?
It makes sense to start to consider “data chains”.
Cause and effect;
Influence and action;
Believable and buy;
These are all examples of the chains of connections that are on the surface largely subjective, but lead to an outcome that can be measured. The task of measuring the return on the exposure that can accrue from a presence in Social Media, and even conventional media, is fraught with challenges, but with systemisation of the pools of data generated from your sales, customer retention, prospect identification, web analytics, and all the other data collection options now available, you can start to see the patterns emerging that can be used to calculate a return, even if there is a “fudge factor” present.
At some point you simply have to acknowledge that behavioral patterns are not easy to quantify, and even harder to predict, but by explicitly acknowledging the chains of cause and effect that exist, you can start to anticipate, if not predict, the returns