Much has been written about the ROI that can be generated by Social Media, I’ve read many kinds of ROI’s, all trying to reflect efforts and its return.

But there’s a paradox when having a closer look at the two terms in relation to the new open business environement.
First let’s decompose ROI and Social Media.

ROI:

A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

Keep in mind that the calculation for return on investment and, therefore the definition, can be modified to suit the situation -it all depends on what you include as returns and costs. The definition of the term in the broadest sense just attempts to measure the profitability of an investment and, as such, there is no one “right” calculation.

For example, a marketer may compare two different products by dividing the revenue that each product has generated by its respective marketing expenses. A financial analyst, however, may compare the same two products using an entirely different ROI calculation, perhaps by dividing the net income of an investment by the total value of all resources that have been employed to make and sell the product.

This flexibility has a downside, as ROI calculations can be easily manipulated to suit the user’s purposes, and the result can be expressed in many different ways. When using this metric, make sure you understand what inputs are being used.

Secondly, let’s have a look at the definition of Social Media:

Social Media is media designed to be disseminated through social interaction, created using highly accessible and scalable publishing techniques. Social media uses Internet and web-based technologies to transform broadcast media monologues (one to many) into social media dialogues (many to many). It supports the democratization of knowledge and information, transforming people from content consumers into content producers. Andreas Kaplan and Michael Haenlein define social media as “a group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user-generated content. Businesses also refer to social media as user-generated content (UGC) or consumer-generated media (CGM). Social media utilization is believed to be a driving factor in the idea that the current period in time will be defined as the Attention Age.

When thinking of both terms and and how they can relate to each other, I conclude that the terms are “forced” in order to create meaning with current understanding and definitions.
The ROI of Social Media is like trying to ascribe ROI to a telephone line.
Part misinterpretation and misunderstanding of both terms and part the necessity to quantify in order to meet business objectives, are reasons why this enigma won’t be solved soon.

Return on Investment is a short term metric, a direct relation between cost and return is calculated, and (short term) objectives don’t have much room for tactics or actions that don’t add direct value to the ROI.
Here’s where the complication is, communication and interaction often do not add direct value to a quantifyable objective (for example sales).
The best example within Social Media is Trust. How can the long term process of gaining and retaining trust be expressed in a ROI?
Surely, when consumers do a purchase (be it a soft or hard conversion), it is the only quantifyable and “visible” action/reaction within a much larger process by the company and other consumers.

The latter is important and the crux within this question.
Social Media is causing a paradigm shift where all conventional wisdoms are becoming obsolete.
One of these wisdoms is the notion of two seperated entities, businesses versus consumers and the interaction between these two, ending up in sales, profit, revenue, ROI and so on.
A revaluation is necessary, in this transparent digital world, the seperation is disolving and consumers are complementing and replacing pieces of business processes.

If consumers become part of the business, how must these external entities be calculated and taken into account?
It’s not only the -direct- cost business cost what counts, but also the indirect and consumer-added related costs which should be taken into account in order to understand the new relationships and impact.

So, what is the real “ROI” of Social Media? I do not have a clear and sustaining answer yet.
A new digital landscape requires as a new way of conducting and quantifying business.
I believe the first step in this paradigm shift is to release the legacy of conventional business rules. Comparison -with old standards- is in this case a devaluation of the real opportunities and power of Social Media.
From there on, known metrics and KPI’s will have new interpretations which explain relations and money flows better than the current ones.

It’s a long learning curve and many challenges won’t be solved within months. Take the business effects of Social Media into long term strategies, set aside budget to research and test this phenomenon. In the mean time, transitions will happen and New and Old ways will meet.

What do you think the ROI of Social Media is?

Thought I would share my winning pitch for The Netherlands Deloitte’s Technology, Media & Telecommunications (TMT) Predictions 2010 Tech Visionary for futurist views on Social TV and Media Convergence.

I wrote it on the train on the way down… I actually forgot half of it and kind of made it all up again once I got up there. I had two minutes to pitch… in front of about 200 of Holland’s tech community who voted by SMS.

My name is Richard Kastelein, I am a Canadian of Dutch heritage and am currently working a Chief Strategy officer for a startup in Groningen called Worldticketshop as well as building a creative and innovation agency called Agora Media Group in London.

How many of you have young children out there?

In five years, your children and mine will laugh at the old days when certain programs were available only at certain times. We will too.

On demand TV  is just part of the great change we are going to see in the future… where media will be ubiquitous, and will no longer be the passive experience we now see today.

It’s called TV Everywhere.

I am going to go through four quick points.

1.       Production. The rise of User Generated Content has already and greatly shifted the Internet landscape and will do the same for TV. Merged media will be everywhere, video, audio, photography, 3D and more.

2.       Delivery – Entertainment will be available in the cloud – everywhere, on demand and available to anyone, anywhere.

3.       Consumption – This will be profoundly changed due to the future convergence of the Web and TV, where web widgets become part of the TV experience and viewing culture will be radically changed due to the inclusion of recommendation engines which will offer true reflection of consumer needs and wants.

4.        And lastly, Monetization. Last year, it was noted by MTV here that content companies are now driven by control of Intellectual Property. And that has too and will change. Business models will change. I call it tCommerce and it will also be a paradigm shift for the TV industry. Last year MTV also mentioned that new business models will need to come into place. We feel that affiliation models will rise – profit sharing rather than profit hoarding. The ability to shop on TV will be seamless and simple allowing for revenue sharing between the broadcasters and advertisers.

Already new players in the social tv space are building API’s and SDK’s to allow developers to make the shift from iPhone and Facebook to new models on TV. Yahoo Connected has an Open API, Europe ’s HBBTV will likely be Open Source software as it’s based largely on Open IPTV and even BBC’s Canvas in the UK is pushing towards open standards.

I will wrap this up by saying that it’s my feeling that this could be the next ‘bubble’ in the market as TV is going be decentralized and it will, in the future, be owned by the audience in many ways. Unlike TV today…. Such as in the USA, where the networks are publically owned and contracting – with no sign of growth in the future.

Thanks for your time and feel free to contact me at the borrel if you are interested in chatting further. We are working on building products for this new space.

TechCrunch announces in its article Facebook’s Project Titan: A Full Featured Webmail Product that Facebook is developing a full fledged webmail product. Internally -of course- it’s seen as a Gmail killer. For some of the known features of Facebook’s webmail product, click the link above.

What I do find more interesting, is the question if this might be or not be, the Gmail killer?
Facebook has one advantage that Google does not have, the social network. Where Google wants to organize the world’s information, Facebook tries to be the global social hub.
70% of the time spent online is attributed to social networking, communication through email is simply an extension of it.
The question is if people would trade Gmail for Facebook email if that simplifies the activity and centralizes these activities on one platform?

What do you think, would people back away from Gmail to Facebook or are the perceived risks too high and has Google diffused so much that it’s not an option for many?

The book Groundswell was enlighting, how to create Social strategies and so on. It was an eye-opener for many to understand how Social Media can be applied and intertwined in marketing efforts.
One of their tools is the Social Technographics, which classifies how people use social technologies.

Forrester has announced an upgrade in the classification of their Social Technographics ladder, they added the Conversionalists to it.

It’s good to see the enhancement of the ladder, because it shows the evolution of the usage of social technologies.
Dynamics as less perceived risk, adoption, diffusion amongst their circle of people, social technologies upgrades and so on, make the Conversionalists a new and present group. This doesn’t mean that status updating didn’t happen before, but networks and interoperability of networks have made it so much easier for people to inform their connections on what they’re doing.

The Social Technographics ladder is an important tool in social strategy creation.
First of all it let you create a profile of your customer base, it will prevent the creator of deploying tactics on networks where your customer base is not present, or with the wrong activities.
At the right of the ladder you’ll see the activities per group, these have to be tuned in with the marketing campaigns you’re going to execute.
On a wider scope, you’re able to segment the audience appropriately which will increase the relevancy, quality and successes of strategies.

What does this mean for social media plans?
Microblogging or real-time updating has become an important way for people to interact with and inform their networks.  It also shows that people are becoming hyperconnective, a constant flow of short messages which are bounced back and forward between people and objects (read The Synaptic Web and the Flux of Information for the impact of the connections) to create an information infrastructure for private and business purposes.

Your target audience might have reached a critical mass to seriously investigate the opportunities of your Conversionalists, how to reach them and most importantly, how to empower them to create word-of-mouth enthausiasts. C2C (consumer to consumer) communication is a daily activity.
Your brand is what customers think the brand is, it’s in their hand, and the simplicity of status updates offers lots of opportunities to tap into this vast resource.

The challenge though, which as a community needs to be looked at, is how we can make sure that users won’t have a constant information overload?
An effect for this example is that your current customer base and potentials don’t read your content as you’re not the only one asking for the consumers’ attention.
Another effect is that the content which is communicated has to be relevant (be it in time and network), here the Social Technographics ladder proofs its importancy. It’s better to create small vertical campaigns which reach smaller amounts of quality people. It might cost more (in time), but you’re assured of a better long term effect and word-of-mouth.

Like the Social Technographics ladder is being updated in reaction to the differing usage of the Web, the next phase is how to cope with all the fragmented information, both from the customer and business point of view.
Technology-wise, opportunities lie ahead to find the much needed solution.

What’s your first reaction?

Google Buzz is “a Google approach to sharing.”

Google is making an interesting move which is two-folded.
At the one hand, it’s trying to enter the social networking business, on the other hand it’s trying to do what it’s overaching goal is: organizing information, in this case, social information.
Google’s trying to get a grasp on Facebook and Twitter. Especially Facebook is unstoppable in its advance in monthy traffic.

What Buzz does is incorporating social tools in Gmail.
It has five features:

• Users can auto-follow people which he/she is frequently communicating with, be it email or chat.
• Sharing becomes much easier, the user will be able to share content from Flickr, Youtube and so on.
• A recommendation service where Buzz will help you find popular content.
• The user will get social updates.
• The user will be able to update his/her status, be it to the public or private.

Some features do look alike the ones which are available on Facebook and Twitter. Gmail is a perfect platform to deploy these social tools, a huge userbase of 170+ million, which will return Google lots of intel, on usage, functionality, usability etc.

One of my last articles, The Synaptic Web and the Flux of Information, referred to search and filtering and why filtering is becoming the mechanism in this highly communicative digital society.
Google Buzz will create Google’s own real-time stream of information, how will Google manage the flow for the user, in terms of keeping an overview and not being overloaded?
Yet another tool is not adding more simplicity to the overcrowded landscape. Looking forward how and if Google is able to convince its users to go for Google Buzz.

What are your initial thoughts?

With a userbase big as Yahoo’s one, it’s a logic result that Yahoo is figuring out how to leverage its users to create an Augmented Reality application which differs a bit from others.
Instead of tagging pictures to a geolocation, Yahoo’s goes social by making it possible to leave notes on specific surroundings, which can be read by the user’s network.

Read here the patent which is filed by Yahoo. Read up the detailed decriptions, some interesting notes are made.
The abstract:

Disclosed are methods and apparatus for capturing information that is pertinent to physical surroundings with respect to a device, the information including at least one of visual information or audio information. Overlay information for use in generating a transparent overlay via the device is obtained using at least a portion of the captured information. The transparent overlay is then superimposed via the device using the overlay information, wherein the transparent overlay provides one or more transparent images that are pertinent to and in correlation with the physical surroundings.

There are many Augmented Reality applictions developed or in development, the potential application by Yahoo differs in terms of existing userbase and possible mass adoption. The social aspect might drive adoption, being able to identify oneself faster with overlaying data, than any kind of data which is not close to someone.

Would this move make sense by Yahoo?

In an informative five minutes on Discovery Channel, numbers were presented on the Gaming industry.

Gaming is increasingly becoming a lucrative and competitive market with a huge global target audience.
The fastest growing entertainment industry, is indeed Gaming.

Figures compared to other industries (global turnover on the first day):
Game: Grand Theft Auto 4: $210 million
Game: More than 400.000 copies are reserved for the new Mario Bros game.
Book: Harry Potter (which part was not mentioned): $140 million
Movie: (forgot which one): $40 million

In terms of usage, FarmVille -which is the biggest Social Game on Facebook of 2009- has a whopping 27,5 million daily active users and a 72,9 million monthly users!

Gaming becomes more and more intertwined within our global culture, gaming often is a social event where people gather to play a game which they all fancy.
The Wii took this to the next level, by appealing to the conventional-non-gamers and attract them to game together with an innovative console, taking away perceived risks of this new target group.

As mentioned before, the Gaming industry is the fastest growing, and technology enablers will only push the growth further. Cross-media Social Gaming is the next step, take FarmVille, Mafia Wars or any other kind of Social Game and take it to the television.
The Wii already does this with Mario Kart, enabling players all over the world to game with each other through Internet connection.
By enabling Social Gaming as well through the television, the experience itself can be magnified by adding more features which relate better to the television device than the computer, therefore enhancing and creating new cross-media experiences.

The (social) Gaming industry will grow, diffuse amongst core-gamers and non-core-gamers, within daily lives and within our socially morphing framework.

What do you see as important developments and trends for the Social Gaming industry?

We are looking to take Social Gaming to TV via Social TV platform – think Mafia Wars, Farm Town, and even Second Life on TV.
We have developed and successfully broadcast Social TV in Europe bypassing the remote using telephony 2.0 (mobile and landline), advanced IVR and business logic servers, realtime 3D along with web integration.

We need partners. We need financial backing to redevelop the project.

… where viewers can create a virtual character, pilot it in the TV environment, meet, compete, play and even talk to other viewers/competitors via phone.

What is the Cross Media Social Platform (CMSP)?

The TV market is ‘on the move’ – competition is growing and digital channels via ISP’s and IPTV providers are now crashing through what was once the walled fortress of broadcast television. Interactive content and social media are the buzz and broadcasters are looking for both innovation and revenue generation models that fall outside of the traditional advertising box of the past. And the need for all types of content is growing exponentially, of which one is created by users themselves.

The Cross Media Social Platform is a unique product that not only offers a business model that encompasses current and widely spread advertising revenue – it also has added value by offering broadcasters the opportunity to earn money via telephony (Premium Rate Numbers and Premium SMS) via freemium modelling, as well as web and phone subscription models – where users can augment their profiles and characters on the web for TV and the web.

We created an interactive, virtual world on both television and the Internet that envelops social networking, community, user generated content, competition, and entertainment. And we are interested in developing this further with principles who were involved in the previous project. And it works on both standard broadcast or terrestrial TV as well as IPTV, Satellite, Cable etc.

See video of work we did in the past at Youtube

Visuals of the Cross Media Social Platform (CMSP)

Below you will find a basic CMSP architecture demo and a couple of screenshots.

It evens goes further, technology developments are evolving, partners have released an API enabling developers to create unified communications (telephone, cellular text message, instant message (Jabber, AIM, Yahoo, MSN) applications using traditional document-based web development flow. This sort of technology can be implemented in the Cross Media Social Platform, adapting to the needs and ways of nowadays communication.

Why Agora Media?

We have the experience and know-how, without having to invent the wheel and exploit this competitive advantage, we can respond very fast and accurate to the concretizing needs of the Social TV/Social Media/converging Media community and industry! We have a vast network of 2.0, cross media and technology pioneers, working closely with them to stay on top of trends and developments which will enhance the Cross Media Social Platform.

Why now?

The interest in Social TV is rising, the television landscape is changing, permanently. Media consumption is converging and increasingly socializing. More and more experiments, products and services are initiated and developed to meet these changes. Being on top of these trends and offering new digital cross media experiences to your target audiences and putting you permanently on the map!

Feel free to contact us if interested or wish to receive more information.

by Richard Kastelein (originally published at Atlantic Free Press)

Whilst the mainstream media players are quietly pushing their technology and innovation teams to the maximum across the world in a race to marry Social Media and TV, most of the public remains oblivious and left out of the loop, mainly due to offerings being in Proof of Concept (POC) stage or not even… and still on the chalkboard.
(more…)

(Originally published at Atlantic Free Press)

by Richard G. Kastelein

If we all thought the Facebook and Twitter social media growth phenomena were extraordinary, wait until Social TV hits your screens.

And it’s not as far away as you think — not only with the logical IPTV market, but also terrestrial TV. I recently attended the International Broadcast Convention (IBC) in Amsterdam, which bills itself as ’The content creation management delivery experience’. IBC2008 attracted 49,000+ visitors and 1,300+ exhibitors from more than 130 countries. This year is expected to be bigger. Last year, I was part of a team exhibiting at MIPTV in Cannes, and was expecting something a bit similar… but this was almost all about hardware and software and less about the actual formats and programs. However, this was not a disappointment. For embedded in the show there were some jewels… which have profoundly altered my view of Social Media, the future and the implication of reach that will touch billions not millions.
(more…)