How Do You Value Your Performance Metrics?

How Do You Value Your Performance Metrics?
MediaPost's Online Metrics Insider
by Jodi McDermott , Friday, October 30, 2009

Return on investment of social media campaigns was a big topic a few weeks ago at the Social Ad Summit in New York. As brand advertisers are venturing further into the space, the instinct to put an ROI on their six-figure marketing efforts is only natural.
 
As an analyst, I'd say the method for measuring traditional online advertising is pretty baked.  We measure impressions, clicks, click-through rate and conversion. What are the metrics for measuring efficacy in social media, though?   As the shift of ad dollars within online to social media happens, the most relevant models emerging for advertisers focus on performance metrics. You "direct to response" advertisers know exactly what I am talking about.  For brands, the value is in the impression, but how does this mindset shift to valuing friends and fans or other social media actions?
Just a few of the examples of pay-for-performance metrics are as follows:

• Cost per click (CPC) - I am sure you are all familiar with this one.
• Cost per view (CPV) - I am specifically referring to video and sometimes to specific levels of watch-through, such as 10 or 20 seconds into the video clip.
• Cost per install (CPI) - this may apply to widgets or social applications.
• Cost per action (CPA, but not in the traditional sense) - this metric is configurable based on unique actions such as friending or fanning on Facebook, sharing, commenting or ranking.

So what you are willing to pay for each one of these performance-based actions?  And what measurable value will they bring back to your organization? Tying the value of the paid action back to the value that you get from having a user interact with your brand is a still-evolving process for most marketers.  It is a way for brands to have a dialogue with their customers and be part of the conversation. In many organizations, these campaigns are still coming out of the "testing" budget - albeit a larger allocation each quarter.

Getting to that ROI is not an easy problem to solve. For example, have you ever asked yourself if you can you put a value on a friend? Some friends you value much more than others because they "get you." Other friends fall into buckets of "a good person to have dinner with," "a friend that makes you laugh," or "a good business contact." You can probably rank-order the importance of each of those categories, but can you put an intrinsic value on them? 

In many cases you cannot, unless you are specifically tying the lifetime value of that "friend" specifically to how much they spend with your company.  The value comes from what your organization sees in having a user engage with your brand in a positive or negative manner.  It comes from knowing that the positive interaction resonating inside a user's social network to influence others cannot always be measured -- but we know it happens, as research has proven it.

The market has determined the value of an impression -- check!  The value of a friend, a fan, a post or install is still a little up in the air, but the market will help determine that as well.  Transactions are taking place and the ability to measure the actions of users is there, but the "true" value of how much a brand is willing to pay to acquire their friends and fans doesn't start with the action. Instead,  it extends into how brands build value with that relationship that they have created. How are you measuring the value of a friend or fan? 

Jodi McDermott is the Director of Data Strategy for Clearspring Technologies and blogs at http://widgetanalytics.wordpress.com. Contact her here.