The new tone on social media ROI: from anecdotal evidence to systematic analysis

Abstract: After the review of five recent studies on social media ROI, it seems we are entering a new phase in dealing with social media professionally. Since the corporate use of social technologies is going mainstream, we are now getting enough data to make the leap from anecdotal evidence to systematic analysis. And clearly, data shows there are some lessons to be learned, since businesses had pretty mixed returns on their social technology investments so far. Pain points are a lack of economic metrics, confusing technology options in a rapidly evolving software environment, and insufficient integration into the workflow of organizations. Critical for success is not only the right choice of technology, but its combination with an open corporate culture and a focus on business results.

In February 2012, six years after his seminal paper on Enterprise 2.0, MITSloan Management Review asked Andrew McAfee, if there is “evidence yet that there are competitive advantages that come from doing Enterprise 2.0” and got the following response:

At the company level, it’s an incredibly hard research question to answer, because you’ve got to, first of all, identify who’s good at it; then you have to isolate all the other things that could be affecting their performance; and then you have to watch them for long enough to see if their performance improves. So, no, I don’t have bulletproof academic research yet that will demonstrate that this stuff leads to superior outcomes at the level of the firm.
But even if you can’t demonstrate with bulletproof research that competitive advantage comes, go back to Lew Platt’s challenge, “If only HP knew what HP knows, we’d be three times more productive.” Do they think they’d be better off knowing what their company knows? The answer is almost always yes.

So, there you have it. We still don’t have scientific proof for the ROI of social media, but it just seems to make sense and there is also anecdotal evidence that corporate use of social media pays off. Most people have probably heard of some extraordinary social media marketing case studies such as the Old Spice Guy or of IT companies such as IBM that put Enterprise 2.0 into practice. But there are also nagging doubts that examples like these might be singular cases surrounded by a lot of hype. While we are still waiting for that “bulletproof academic research”, we are are starting to see studies with a broader data foundation. Here is a selection of five noteworthy updates over the last six months that provide a pretty consistent view on where we are with social media economics:

  1. November 2011: McKinsey’s fifth annual survey of 4,261 global executives on “How social technologies are extending the organization“.
  2. December 2011: The Social Intranet Study 2011 by Toby Ward of Prescient Digital Media, based on a survey in collaboration with the International Association of Business Communicators (IABC) which was completed by 1,401 participants in small, medium and large organizations in all types of industries, from across the globe.
  3. February 2012: Altimeter Group, an “advisory firm for disruptive technologies”, published a report “Making the Business Case for Enterprise Social Networks“. This  report is based on an online survey of 185 professionals from various industries and backgrounds involved in the management or deployment of their corporate Enterprise Social Network and qualitative interviews among corporate practitioners, IT and communications leaders and senior executives of several Enterprise Social Network vendors and end users.
  4. April 2012: A study on “The Economics of the Socially Engaged Enterprise” by management and digital consulting firm PulsePoint Group which is based on a survey by The Economist Intelligence Unit among 328 senior executives in the US.
  5. May 2012: Google published a study on “How social technologies drive business success“. They had commissioned this study with Millward Brown, gathering opinions from 2,700 professional users across France, Germany, Italy, the Netherlands, Spain, Sweden and the UK.

After reviewing these studies, I have come up with four insights that were also consistent with my own experiences with social media project work over the last years.

1. Business use of social media has gone mainstream

Exhibit 1: Social Media adoption in companies. Source: McKinsey Quarterly 11/2011

Like it or not, it has become a matter of fact: social media adoption has gone mainstream. Seventy-two percent of the respondents to McKinsey’s latest global survey (Nov. 2011) reported that their companies are deploying at least one social technology, more than 40 percent said social networking and blogs are now in use (McKinsey, p.2, see also exhibit 1).

Prescient’s Social Intranet Study (Dec. 2011, p. 4) found that 61 percent have at least one social media tool available to some or all employees, the most popular tools being blogs, discussion forums, instant messaging and wikis.

Exhibit 2: Enterprise Social Network Goals. Source: Altimeter Group Report, Feb. 2012

People know from their personal lives how social media helps them to connect with others they share an interest with. So, it doesn’t come as much of a surprise that enterprise social networks are anticipated to improve collaboration and the flow of information (see Altimeter Group’s findings in exhibit 2). Many of today’s  professionals simply expect that they are allowed to use  tools at work they’ve grown accustomed to at home.  And if businesses don’t provide corporate social tools for their employees to use, they often use external ones. Google’s recent user survey across EMEA (May 2012) found that “almost half (46 %) of professionals want to make greater use of social tools: A third (32%) are using external social media, such as Google+, Facebook, Twitter or LinkedIn, for work related purposes every day. A quarter (23%) are using in-house social tools (set up for use by people within the business) daily, over a half (57%) use them at least once a week” (p. 2).

According to Prescient’s study, one reason for the rapid adoption of social intranets is that the cost of deploying social tools is relatively low: “[…] nearly half (38%) of organizations that have deployed intranet 2.0 tools have spent under $10,000 doing so; another 24% have spent under $10,000 – $50,000. However, the low cost of entry comes with a risk, and a potential cost” (Prescient: Social Intranet, p.5). It is often underestimated how much effort is still needed when the social technology is up and running. As a matter of fact, my own experience told me that many social media projects fail when only managed from a technology perspective.

2. So far, businesses have had mixed results

When it comes to results of social media use, responses from Prescient’s Social Intranet Study (Dec. 2011, p. 5) send mixed messages: 30 percent of organizations rated their overall satisfaction as good or very good, but as many as 26 percent as poor or very poor. Even more worrisome, only 28 percent of executives rated their overall satisfaction as good or very good, but 35 percent rated the experience with their social intranet as poor or very poor.

Exhibit 3: Social Business Maturity. Source: Altimeter Group Report, Feb. 2012

Altimeter found in their report (Feb. 2012, p. 5-6) that many organisations failed to meet expectations with Enterprise Social Networks, often indicated by one or more of the following scenarios: a) Initial enthusiasm is followed by slow decline, b) only one department really embraces the network, c) there is confusion on how “personal” (as opposed to work-related) the business network can be, d) the corporate culture hasn’t matured enough to understand, appreciate and leverage an enterprise social network. In fact, two out of five companies Altimeter surveyed were still beginners (6 %) or just running trials (33 %) without a formal strategy (see exhibit 3).

Exhibit 4: Four types of organizations. Source: McKinsey Quarterly, 11/2011

McKinsey clustered the types of organizations by the benefits they reaped from their social media use and tracked how they did over time. They distinguish between “developing”,  “internally networked”, “externally networked”, and “fully networked” organizations, based on the average mean improvement reported across the different benefits when social tools were used. McKinsey define fully networked enterprises as those with an improvement greater than 10 % when social media is used to interact both externally and internally. Externally networked are those with at least 10 % improvement when social media is used to interact with customers and partners. Internally networked are those with at least 10% improvement when interacting with employees. Organizations with less than 10 % improvement are classified as developing enterprises (see exhibit 4). As many as 78 % out of the 3,103 companies McKinsey surveyed were rated as developing organizations, approx. 12 % were rated externally networked, 7 % internally networked and only 3 % fully networked. According to McKinsey’s findings, it’s not only hard to achieve  success with social media, but even harder to keep it. Between 2010 and 2011, “Roughly half of the internally and externally networked enterprises slid back into the category of developing organizations; that is, they did not maintain the benefits of using social technologies that they had achieved earlier. Less than 15 percent of the companies in any given category moved up to the next tier […]. It appears that it is easier to lose the benefits of social technologies than to become a more networked enterprise, which suggests that significant effort is required to achieve gains at scale” (p. 7).

Exhibit 5: The Six Profiles of Socially Engaged Enterprises. Source: PulsePoint Group: The Economics of the Socially Engaged Enterprise, April 2012, p. 8)

PulsePoint Group’s sample size (328) was much smaller than McKinsey’s (4,261), and it was US only rather than global. However, like with McKinsey, Altimeter and Prescient interviewees reported mixed results. While PulsePoint calculated an average return on social engagement of 3-5 %, the most engaged companies achieved 7.7 %, which was four times the return of the least engaged (1.9 %). PulsePoint recognized six different patterns of social engagement. 14.6 % fell into the category of those with highest engagement and highest return, 18.5 % in the lowest category, the rest somewhere in between (see exhibit 5).

What is it that makes such a difference when using social media? Let’s first look at some major pain points and then at critical success factors.

3. Major pain points are lack of metrics, confusing technology options, and insufficient integration

Exhibit 5: Roadblocks to Deeper Social Engagement. Source: PulsePoint Group: The Economics of the Socially Engaged Enterprise, April 2012, p. 4)

According to PulsePoint Group’s survey, senior executives in the US made it clear enough: the single biggest roadblock to deeper social engagement of businesses is the inability to prove ROI, followed by legal or regulatory concerns (33 %) and a lack of strategy for change (32 %) (see exhibit 5).

One of the reasons why businesses don’t see the ROI is that they use the wrong metrics. Altimeter found that companies measure user engagement or frequency of use rather than business impact of their social networks.  This will certainly change, since  companies responding to Altimeter also felt that they measured the impact poorly (p. 7-9, similarly PulsePoint, p. 7)). Interestingly, one of the main reasons for this poor measurement might be that “[…] investments in ESNs [Enterprise Social Networks]  have been low — two-thirds spent less than $100,000 on their ESN in 2011, with no plans to spend significantly more in 2012. Thus, the pressure to provide concrete proof of value creation or ROI isn’t as present as other technology deployments” (p. 8).

Exhibit 6: Technology Scenarios for Enterprise Social Networks. Source: Altimeter Group Report, Feb. 2012

Another pain point Altimeter Group identified is the multitude of technologies available. When setting up an Enterprise Social Network, there are not only many standalone solutions on the market, networking features can also be included in collaboration platforms or enterprise application suites (see exhibit 6). Whatever the approach is, the main question to be considered is how to integrate the social network with all the other applications. That is not only true for the technology environment, but also for the workflow: “The likely scenario is for enterprise social networking to be integrated into the enterprise platforms we are already using, ranging from Outlook, to Office, to back-office business apps” (Altimeter Report, Feb. 2012, p. 11). Finally, the full power of social media will only be released, if everyone who needs to contribute has easy access, including those who are not used to social applications and those who don’t work in a desk environment (Altimeter Report, p. 12).

4. Critical success factors are economics, culture and technology

Based on the studies reviewed for this post and consistent with my own project experience, I see three critical success factors for corporate social media projects: economics, culture and technology. They are interdependent: each of them is necessary to allow for success, but only all of them together are sufficient to achieve it.

In terms of economics, it is critical to set a foundation with business relevant objectives and metrics. Altimeter Group have rightly argued that it’s necessary to go beyond the technology perspective, so as to release the business value of social media. They recommend to focus on communication and relationship gaps constraining information sharing and decision making within an organization. Some of these gaps can be bridged with social media which creates measurable value (cf. Altimeter Report, Feb. 2012, p. 12-16). As a result, rather than measuring technology usage, metrics should focus on business improvements achieved, e.g. the increase in sharing of best practices across a large organization.

PulsePoint expect based on their survey “that benchmarks (33%) and key performance indicators (30%) will be the top approaches for measuring social engagement in the next two years” (p. 2). When it comes to the business areas where social technologies can have the highest impact, PulsePoint found that companies expect more return from sales and product development than from brand reputation (p. 3).

The emphasis on business relevance is not only important to win over those 45 % of CEOs who still don’t see enough proof of value in social media (see 3. above on pain points), but also to get the buy-in and commitment of users. They need to feel that using social media is not just another time killer, but a source of value as they might have experienced it already  in private use. As such, social media use for business must not be an option for play through downtime periods but has to be closely integrated with daily work. McKinsey found that those organizations where social technologies were highly integrated into employees’ day-to-day work reaped the highest business benefits (p. 5, see also exhibit 4). For instance, if you can avoid reinventing the wheel in your daily work by learning from remote colleagues you haven’t been connected to before, you will experience the value and be encouraged to share your own knowledge.

Another important aspect of social media economics is that it has to be properly resourced. As already mentioned above (see 2. on mixed results), McKinsey found that it takes serious effort to gain and maintain benefits from the use of social media. The resources needed for social media success are often underestimated, because technology deployment is the only expense considered. However, the value isn’t created by the technology only but by the relationships between people using that technology. And relationships always need time, nourishing and development. Ultimately, community management is more important than top-notch technology features, because users will rather forgive some lack of comfort than lack of relevance for their interest.

That said, technology is still the necessary enabler. Google’s recent EMEA survey  confirmed that professionals want to make more use of social technologies to support their work, and if they don’t find them inside the organization they might use them outside (see above, 1. Business use of social media). More than that, those frequently using social media are most likely to be succesful in their jobs and work for high growth companies: according to Google’s report (May 2012, p. 5), “80% of high growth companies are using social tools to improve ‘connectivity’ (such as collaboration and knowledge sharing)” and “86% of frequent users have recently been promoted, 72% say they are likely to be promoted, compared to 61% and 39% of nonusers”. Providing these people with tools they like to work with can give a boost to their energy and make them multiplicators inside the organization. They just need to get technologies that will really help them do their job. For that, it’s more important to get the basics right than to indulge in features, and – as Altimeter Group pointed out (see above, 3. on pain points) – the social platforms need to be integrated with other business tools. E.g. it shouldn’t be hard to transfer content from one tool to the next, and the workflow should be linked naturally. So, the decision on technology shouldn’t be made just based on cost and features, but within the context of the enterprise environment it has to be integrated with, in terms of the workflow and the human resources needed to develop relationships.

Last but not least, even the best integrated tools and the best business metrics in the world won’t guarantee success with social technologies, since they need to be accepted socially before becoming useful. And this often creates a challenge to the corporate culture. As the Altimeter Group have put it: “Social represents a fundamental change, simply because, at its essence, it encourages sharing.” (p. 12) Sharing means open accessibility and exchange of information, often also called transparency. It is feared by many organizations, mostly for two reasons: It goes beyond organizational boundaries because it is based on interest rather than hiearchies. And it opens the door to public criticism. So, for good reasons both Altimeter (p. 18-19) and PulsePoint (p. 2, 6) have highlighted two success factors for social engagement: organizations need to learn how to deal with open critique, and leadership must champion the use of social media.

Against all odds, permitting negative comments by employees or customers and addressing them in the open makes businesses stronger, since it proves how an organization can learn and is taking their constituents seriously. The fear that critique might be abusive is in most cases not warranted because communities can be effectively moderated by guidelines and will also self-police behavior (Altimeter Report, p. 18-19).

However, this openness will only work when supported by top-executives. They are the catalyst for change. They need to encourage sharing and show their belief that it makes their organization better. It is also important to understand that openness is not an end-in-itself. Openness enables sharing across organizational boundaries, so that people can connect and collaborate where they otherwise wouldn’t. However, once people have found each other based on their interest or expertise, they will refocus in more private groups. This is a great point Altimeter made in their report (p. 14).  An open corporate culture doesn’t mean that everyone shares everything all the time, it just means that people are allowed to connect and collaborate based on their interest rather than defined by organizational silos. Since executives are the guardians of organizational boundaries, they need to show that they are okay with that and participate in the effort. Executives using social technologies will endorse the culture needed to reap the economic benefits everyone expects.

Georg Kolb



Twitter is…

twitter_stockxpertcom_id34401621_jpg_2b99f135618055055f3ee33e169b89b7There has been much talk about what Twitter is, and many people also tried to define dos and don’ts for its use, be it for personal or business purposes.  I have certainly learned a lot from these efforts, in particular from those with good ideas such as Chris Brogan or those with a strong analytic sense such as Jeremiah Owyang.

It is symptomatic, though, that people talking about Twitter often have opposing views, the simple reason being that it is still emerging and can be many things to many people. So, I welcomed David Pogue’s take (which was inspired by Twitter’s co-founder Evan Williams) that Twitter is what you make it. David wrote his article from the perspective of an individual user, but I think his statement is also true for corporate applications. More about that in a minute.

What counts is that Twitter is growing fast. According to, it recently reached 14 m users in the US, that is up 76.8 % just within the last month! The Wall Street Journal stated that Twitter goes mainstream. This kind of message usually makes geeks hop off and watch out for the next train to be boarded. And, lo and behold, Steve Rubel just announced that Twitter is peaking. True or not, given that social media has become a global phenomenon, it is always prudent not to rely on the US only. In the German speaking part of the web for example, Twitter is far from going mainstream and far from peaking either. A recent estimate says that there are approx. 27,000 active users speaking German. While this might not be a big number, these people are still worth watching, because they are often highly opinionated and highly networked. Chances are that someone with hundreds of followers on Twitter also has hundreds of friends on other networks and syndicates her Twitter updates to them. Equally important, Twitter users are increasingly the first to break news. Even with “only” 27.000 active users, it’s still pretty likely that some of them will be closer to the next newsworthy event than any journalist can be. Spectacular events such as the emergency landing on the Hudson illustrated that in an impressive way.

twitter-home-pageSo, what does this mean to Corporate Communications? Let’s start by quickly recalling what Twitter actaully does: it is a web site where you can publish short messages of up to 140 characters (“tweets”). Other users can subscribe to these messages and reply to them, publicly or in private. As a result, users are observing a stream of short news from the people they follow, either on their PC or on their mobile phone.

While this is a seemingly simple service, its use for corporate purposes is not that obvious. Here are a couple of observations on what it can be or has been for others, but ultimately it will depend on you what you make it and how it adds value to your business. As far as I can see, three areas of applications have emerged:

1. Radar: What is true for all social media is in particular true for Twitter: you should watch, if and how people are talking about you, simply because it can have an impact on the reputation of your brand. Whenever there is something happening with your business, be it good or bad, Twitter might be the first source where it’s echoed, because it works so easy and fast. It is like  a newsticker sourced by the crowd. For example, when pain killer brand Motrin came out with a controversial ad targeted at moms, outraged mothers instantly vented their disapproval on Twitter. If there isn’t any mention of your brand just yet, that might change quickly, so I would recommend to make sure that it is covered by your regular social media monitoring. However, it is a different question, if and how you might want to engage with Twitter users. That depends on the results of your monitoring, but also on the profile of Twitter users relevant to your business. If you do decide to engage with them, you might want to consider the following options – or find a new way.

2. Monologue: One of the early myths of the social media community was that it is always about dialogue and conversation. Interestingly, some of the more successful business applications of Twitter work as a monologue. In fact, much of what’s happening on Twitter works as a syndicated stream of monologues. It sometimes can even be disturbing when two people start a conversation that is only relevant to them, but syndicated to all their followers. Anyway, some businesses use Twitter as a newsticker for their stakeholders. It doesn’t come as a surprise that this approach is especially relevant to news businesses such as CNN. But this also works for any business that has news to share which fit this particular format. E.g. Dell has found that for them Twitter works pretty well with sale alerts. In December last year, InternetNews reported that over a period of 18 months the computer company had made $ 1 m in revenue using Twitter to announce their special deals. The social piece in this kind of application is that Twitter users forward (“retweet”) the news to their followers. Twitter is not only about monologues, though.

3. Dialogue: Some companies have found that Twitter can work for customer service. Cable company Comcast is one example, the airline JetBlue another. For them Twitter is a source to identify complaints or questions that might cause damage to their brand, but also the platform to address them. When they respond to an issue all other customers already following them on Twitter will see the response and benefit from it or add another request. The result is a lively connection to customers that didn’t exist before. The same channel can also be used to ask customers what they think of specific offers or ideas. This kind of live search is certainly one of the most fascinating aspects of Twitter. If the inquirer has a large enough following,  the users usually respond to requests like this with incredible speed and creativity. It’s like an instant poll with real-time responses. I would have to agree with Michael Arrington that Twitter’s ability to help brands finding customer opinions and to help customers finding news on brands in real-time are enough reason for Google’s rumored interest in an acquisition.

With all that, is Twitter here to stay? I don’t know about the company, since they are still working out their business model and negotiating deals with Google or others. It currently is also magnified by a remarkable media hype that will eventually come to an end. But I do believe that social networks based on short messages do have a future: for the benefits I have outlined above and for those that are to be discovered yet, but also for the short message culture we already established across the globe. Igor Schwarzmann pointed me to this striking fact: in June 2008, there were 2.7 bn mobile phone users worldwide, 1.8 bn of them actively using SMS which means that globally there are twice as many active SMS users as there are active users of e-mail. Give them access to the Internet and they are ready for Twitter! Another way it could go is that important social networks such as Facebook or LinkedIn build on the twitterlike “status updates” they already have by adding features for mobile use.  There are already some users “cheating on Twitter with Facebook” for the more integrated experience full-fledged social networks can provide.

Georg Kolb