What's the ROI of a blog?

We had an interesting conversation with a prospect for our new CGM Dashboard software. As usual we explained that it was specifically geared for consumer generated media parameters such as comments, trackbacks, nature of comment, type of comment etc. there was a lot of head nodding and hmmming and then at the end the PR guys said "but what’s the bottom line? When I go into my boss he expects to see a dollar sign like an ad value equivalency or something. Don’t you have that formula? "

After counting to ten, biting my thumb, walking around the building twice and taking about a dozen deep breaths, I politely explained that this was NEW media, not OLD media. That if he was looking at blogs like just another medium to pitch to and collect clips from, that he wouldn’t have any bottom line at all. Then I suggested he go back and reread the Cluetrain Manifesto.

It's always amazing to me when people try to justify their existance in the 21st century using tools with the mental equivalent of an oil lamp to guid them. The reality it that if your boss wants “ROI” from blogs, he/she better start by defining what kind of “return” they thing they’re going to get. Sure, there are stories about folks that start blogs and all of a sudden sales increase – that’s a pretty measure of success. But it doesn’t happen very often, and it you better have a really enticing blog if that’s your expected return.  Using Howe’s Conversation Index is a great way to measure the success of your own blog, but it’s not going to tell you if your overall blog strategy is working.

If you’re pitching other people’s blogs hoping for a “mention” you’ll be very lucky indeed to see any return at all. Bloggers are interested in ideas, concepts and controversy, not pitches, new products or hype. Not that there aren’t a lot of organizations that would be helped by having a blogging strategy that engages customers and influential’s but then the return is the level of engagement, the number of comments and track backs and perm links to and from your information, not the number of “hits” -- And no, there aren’t standard “multipliers” or “reach numbers” for blogs. I’m sure that now that Nielsen owns intelliseek and buzzmetrics we’ll see something soon, but at the moment, other than a very few blogs that publish their own “circulation figures” (and unless and until they’re audited I wouldn’t believe those figures) .

And if you’re wondering what the “ROI” is for blog monitoring – instituting a program to make sure your reputation isn’t suffering at the hands of the Blogerati, just ask Michael Dell what he lost the week his stock dropped 20 points as a result of an unhappy customer ranting in cyberspace that exposed to Wall Street Dell’s Achilles heel – lousy customer service. Most people would agree that it’s worth many thousands of dollars to know that your billion dollar reputation isn’t at risk.

Comments

[Kami Huyse]

Katie; I can imagine your consternation, but ad equivalencies just don't seem to want to die. I think that the measures we have (like comments, trackbacks and links) now are measures of influence. There is quite a good debate going on amomng PR bloggers about Technorati's use of Authority. This word is a little overextended, but I like the idea of the influence of a blog.

On a technical note, how will you measure trackbacks and comments? Will you be able to count them on a blog like mine for instance, that uses Haloscan (a third party) to host these two items?

Finally, last year, Dane Carlson posted his, "What is Yoru Blog Worth" widget based on research by Tristan Lewis. This is the old ad equivalency again, but bloggers loved it since his widget generated a bit of code that you could post on your site.

You can check it out here

[David Jones]

Funny...I had this conversation with someone today at a very old, very traditional alcoholic beverage company. This is a company that's bleeding market share and spending lots of dough on TV ads. I'll keep plugging away, but it's nice to know you offer a service that I can name drop in the future.

[Antony Mayfield]

Well said, KD. It's when you stop trying to force old models (measurement, analysis, influence) onto this new space that you can begin to find new ways of understanding and engaging with it. Ad equivalency was a poor yardstick even in the old ways.

[Trevor Godman]

A couple of other thoughts ...

If you want to measure return on investment, then you first need to have a reliable measure of your investment. Conventional measures of marketing ROI generally use some kind of media cost as part of the starting point. And without a media currency for blog-type comment, that's difficult to achieve. I had a bit of a rant about something very similar here ... http://www.blogger.com/comment.g?blogID=17496306&postID=113939099144992778

As well as being very old media, trying to measure direct return on investment is also fraught with problems. It's all very well measuring short term impact on sales (even if it's possible), but much more difficult to calculate the long-term contribution to brand equity.

My firm (Millward Brown http://www.millwardbrown.com/) is interested in both metrics around CGM and measuring the contribution of marketing to long term brand equity.

For the time being, neither quantifying the 'investment' nor measuring the true 'return' is easy.

[John Wagner]

Katie:

Exactly what week was it that Dell's stock dropped 20 points, as you say?

Jarvis started his campaign against the company on June 21. The stock was at $40.45. His last post was July 11, and Dell was at $39.78.

The stock decline since then is almost certainly related to the company's disappointing Aug. 11 earnings announcement. Wall Street cares far more about earnings than it does about one blogger's poor service experience.

Over the past year, the price of Dell stock has declined about 25 percent but it never lost 20 points in one week.

In fact, Dell recently announced earnings growth, sales growth and market share growth. So one could make the point that the "Dell Hell" campaign had limited impact.