I believe that a lot of money will be wasted on social media initiatives and to make sure we don’t waste too much I think we need to build a framework for managing performance on the social web. I hope this podcast can be the start of a conversation about online performance measures and management as it relates to social media.

The hype and growth surrounding the space means that everyone is rushing in to connect with the huge audiences that are possible with successful social networks. Budweiser, Coke, Fast Company and many other brands have been deploying big new social networking initiatives. Facebook applications are being built right and left. Open Social means that even more social applications will be built for the other big networks as well.

However, while social networks like Flickr and cool Facebook apps are fun and social they may not generate significant commercial returns. Leading media and brand marketers know they need to be embracing social media, but risk falling into the same trap if they don’t focus on success and doing it in a way that makes sense for the social web.

My conversations with digital media executives lead me to believe that forward thinkers know they need to be managing distributed media across the social web and that they need more than just embeddable video players. They tell me they need guidance about what works beyond the BS they hear from vendors, how to measure performance and how to embed that into development processes so that future projects benefit from what’s already been learned.

There is lots of good thinking going on about how to measure performance on the web and some are even thinking about measurement in the social web. However, many are still stuck using traditional broadcasting or Web 1.0 models to define success and those measurement models are not going to be adequate for defining success and driving performance on the social web.

We need to rethink performance measures and the way we collect data from the social web.

 

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I thought it would be useful to provide some opening thoughts about how measures for the social web might be different and appreciate any feedback. To start, we need to identify what’s different about the social web.

From a long list of things that are different a few stand out to me as really important.

• User Contributions - On the social web, we have users producing content right and left. In addition, they are providing insight. Insight into themselves and insight into what is popular. This means that content with potential can, with some skill, be filtered and identified much more effectively.
• Distributed social media - The paradigm has changed from users seeking content to content seeking users. We see this new paradigm everywhere with downloadable media, embeddable videos and widgets that deliver content, services and more to users in a highly distributed way.
• Expectations that everything is free - The huge surge of low cost content supply means that users are willing to pay less and expect more to be free.
• Shifting business models - We are seeing the beginning of a major shift in business models from those that are based upon the economics of impressions to ones based upon the economics of community.

I believe that these changes shift performance measurement from being rather linear in nature to something that is more recursive in nature. By recursive, I mean that we are measuring a repetitious cycle where a change in one measure drives changes in other measures and is thus much more difficult to pin down. If we are not careful and discrete about measuring this kind of process the Heisenberg uncertainty principle applies as well - the mere act of observing a phenomenon changes its nature.

Below is a simple illustration of what I’m talking about (note this is just illustrative and not all inclusive). In the impression based business model of broadcast, revenue was driven by linear function of reach multiplied by frequency and by CPM (cost per thousand impressions). That same business model was largely the model that drove Web 1.0 business models which were based upon uniques, page views and CPM models. This same model can be extended to commerce based businesses as well by adding click through rates, conversion rates and price per purchase.

In the social web, I think there is a recursive process of users, engagement, user contribution, viral impact, visitors, and conversion spawning more users as the cycle continues over and over again in a recursive manner. In addition, I think that the units of revenue measurement will shift from CPM to RPU (revenue per user) because we are now not just getting paid for advertising, but also for lead generation, potential direct sales and other ways of monetizing users.

Some of these measures are new so here’s the short argument for each measure:

• Visitors - Without new visitors there is no growth. Separating visitors into new and returning and identifying where they come from is still important.
• Conversion - if we are shifting from impression based business models to community based business models then we need people to become users or members. This can be a simple measure and extended to capture how much information the new user provides.
• Users - Users do more than visitors. They consume and they produce - which is essential for scaling on the social web. Tracking users usage by signup cohort to understand how sticky the user experience is can provide insight into the durability and scalability of the site. You want to know if people will return and increase their usage over time.
• Engagement - The experience needs to be compelling enough for users to produce good stuff and to return to do it again. Simple measures like time on site, page views and loyalty still matter, but getting deeper into understanding how much of the capability you are providing (both on and offsite) get used and which parts drive engagement becomes important as well.
• User Contribution - The more users contribute, the more the content scales and that drives the potential for viral impact and if they provide insight into themselves or into attractive content that can be leveraged into RPU. There are lots of interesting measures that could be developed her fro both measuring the content the produce and the insight users provide.
• Viral Impact - Who can doubt the ability of viral content to drive trial and traffic. Measures for this are probably different depending up on the nature of the business and include bookmarks, email forwards, trackbacks and the spread of embedded widgets
• RPU - Revenue per User is what matters in a community. We want to look at total revenue whether it comes from impressions, clicks, actions, leads or any other source and the how much we can drive per user will determine how much cost we can absorb to attract and convert visitors into users and realize an attractive ROI.

The list could go on to look at cost drivers and how they are different on the social web, but that will be another discussion.

I believe that once we embrace these kinds of measures and embed them into our management processes we will see social media marketing shift from being a stream of fun (and maybe expensive) experiments into a community based business model that will result in more deeply committed fans, increased brand strength, better sell through, new revenue sources and higher ROI.

If you see good posts about measuring performance, have suggestions or feedback please leave a comment.

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