Social media ROI, or the art of counting monsters

 

 

Next time you’re puzzling over the return on investment, ROI, of advertising for a neighborhood business, first consider the monsters.

“If you look at Facebook as the little monster in the corner you have to feed every day.  And Twitter is another one. And the business’ website is another one. And email is another one,” says Greg Swanson, CEO of Itz Publishing,  a strategic consulting partner for online media, “the neighborhood business  now has 15 monsters in the room.”

“The question is not what is the ROI on each one, it is how the heck do I feed 15 monsters?!” he says.

A history lesson on small business marketing will clarify why this is relevant to advertising.

In 1990, if you were a small business looking to win customers in your local market, you spent 70% of your total marketing budget buying ads with legacy media — radio, TV and  newspapers. That means you spent the bulk of your money —  $7 out of $10 —  buying the audience from someone else who had one  – i.e. buying ads on radio, TV or in newspapers.

“You were basically renting an audience,“ Swanson says.

The small business spent the other 30% of its marketing budget reaching the audience it had built itself. It used marketing tools that included signage, posters, direct mail, discounts and a few other bells and whistles.

But now it’s 2012, and those numbers have reversed, Sawnson says. Today small businesses are spending only 30% of their total marketing dollars buying ads with a publisher, i.e. renting an audience —   including your website audience. And they are spending 70% of their dollars reaching the audience that they have built themselves.

“70-30. Which means that all media companies — whether you are talking about indie online media or legacy media — are fighting over an ever-shrinking part of the pie,” Swanson says.

The advertising/rental pie is very small.

This has been a 30-to-40 year movement on the part of small business owners, Swanson says.

That’s why Swanson thinks it’s time for local media to find a way to participate with small business owners and help them focus their 70% of self-built marketing dollars.

Today, the flavor-of-the-day for much of that self-built audience includes Facebook, websites, Yelp, Twitter, Groupon and other social sites that small businesses are compelled to participate in.

Using each of these tools poses a slew of questions. For instance, if  a small business works with Groupon, it has bought 1,500 new email addresses. It’s got a new audience to market to as well as a lot of questions. How often should I talk with my audience? What should I say?

In addition, every tool is measured by a different metric, Swanson says.  Social sites count likes, and clicks and views and opens and none of them compare well with each other. Social media marketing consultant Brian Solis has written extensively about this problem and has developed a rough system of measurement.

“The small business owner doesn’t have a clue how to manage this,” Swanson says. “A company like AT&T has highly sophisticated tools for managing social, but if you are the local advertiser, you are blindfolded in a dark room with a dart in your hand throwing it against the wall hoping the dart board is on the wall.”

In short, the small business owner faces more things to do with no greater budget, expertise or time.

That’s why to Swanson’s way of thinking, for the local indie publisher the sweet spot might be to ease the pain for the small business rather than trying to sell on a traditional ROI model.

The indy publisher could say “Let us provide you with a service where you can enter your information once and we will distribute it. And one of the distribution streams will be an ad on our news site.”

And so the ROI quickly morphs into social media ROI.

Though an unproven and controversial idea, Alan D. Mutter, who writes Newsasaur came out in support of the idea of publishers serving as social media managment boutiques in December, citing Forrester Research.

 A recent survey by Forrester Research, the market research company, found that 77% of the mangers of small and medium businesses are concerned about building their social-marketing presence. But nearly all of them say they are so bewildered about what to do and so overwhelmed with the ordinary chores of running their businesses that they want someone to help.

Swanson says that online publishers have an added quandary in that they often choose to sell banner ads – which are outmoded as an advertising model — coupled with selling to a news organization’s demographics. In Swanson’s opinion, neither takes advantage of the true capacity of the Internet to match buyers and sellers, but that’s another tributary we won’t go down just yet.

So as to ROI, how does this add up?

If you are a local publisher trying to sell ads to small business, and this small business conundrum jibes with your experience, you might try to understand the small business marketing mix of “rental” vs. self-build and see how you can work with the business to help maximize its channels, with your news site serving as an included channel.

Some might find following the small business money and easing the pain a more fruitful route than the more traditional path.

Let us know what your experience has been.

Sally Duros is a social journalist working toward the next generation of successful, credible online newsrooms. Connect with her on  and on twitter at saduros..

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3 Responses to Social media ROI, or the art of counting monsters

  1. sally duros says:

    I don’t know this for a fact, but thanks for the comment and the lead. Do you know anyone involved in this at Hearst?

    • My knowledge is a couple years stale, but that was the impression I got from a journalism conference soon after their Seattle PI went web-only. I don’t have any direct contacts on their sales side, though.

  2. Hasn’t Hearst been trying to do this for a few years with their newspaper properties, more or less — ditching the newspaper as the lead brand and marketing them as multiplatform marketing consultancies?

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