What’s the ROI of social media?

A friend of mine in NY is dating a guy who is a VP at Engauge Advertising (www.engauge.com)I met him last night in SF and great time. In checking out his company’s website I came across a section of a blog post I thought was interesting:

Back to the point. Gary says that when people ask him, “What’s the ROI of social media?”, he replies, “What’s the ROI of your mother?“. Of course everyone laughed and it became a hot phrase to tweet during the conference. And of course, when I searched the phrase on Google it turns out he says this a lot.

Not surprisingly, because its humorous but it also hits an important point about social. It was a great contrast to the previous speaker (who by the way was also fantastic), Avinash Kaushik, who talked about the importance of analytics.

I’ve been making this point for quite a long time. In fact, one of my most viewed and commented blog posts from the past is, “Analytics is killing social media“. My point then and still is that social is so much more than just what you can immediately measure.

So Gary asks a tongue in cheek question, but let’s make it a little simpler.

What’s the ROI on your friend showing you the book she’s reading and saying you outta check it out?
What’s the ROI from you getting a ride with a friend in their new Acura and during the ride they talk about how great it is?

What’s the ROI on your friend posting Facebook photos from the concert they just attended?
What’s the negative ROI on your friend telling you that you shouldn’t go to the new restaurant in town because the service is terrible?

These are things that are incredibly difficult to measure. Yet we’d all agree these types of recommendations are extremely powerful.

I once was speaking at a conference last year and I asked the audience what they’d rather have, ten people receive an email from their company OR one person telling their friend how awesome their company is. 99% of the audience said the one referral. I then increased the email side of the equation to 100 people. Easily 90% still said the one referral was more important. It wasn’t until I put 1,000 people on the email side of the equation that the audience was split. At this conference, one personal referral = 1,000 emails received.

Just because we can’t directly measure something doesn’t mean it’s not worth doing. Sometimes you have to let common sense guide you.