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?

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?

(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…)

Kudos to our fine friends at Paladin Studios in Leiden for their release today!

Facebook, one of the leading social networks with over 350 million users, got a Serious Game on its platform today. Called EnerCities, it gets serious about the energy issues of our world. It is a casual city builder created by the Dutch game developer Paladin Studios. The project has a €1.4M budget, and is funded by the European Commission’s Energy Agency.

Rock-Paper-Scissors

“The game is about managing a virtual city”, says Dylan Nagel, who is product manager for EnerCities and co-founder of Paladin Studios. We took several elements from other city builders, and brought it down to the bare essentials.”

Players start with a small grid of nine squares and a limited choice of buildings. They then place structures like industrial plots and residential areas. When done well, the city levels up and grows in size. Each level brings more complexity, but also more opportunities for improving one’s score. Nagel explains:

“We tried to model the game after the real world. The triangle of People, Planet, and Profit is a balancing act which is at the heart of the game mechanics. If the player gets this right, it will reflect in the scores. This makes it essentially a rock-paper-scissors dilemma.”

Facebook

While EnerCities was originally designed for a standalone website, the choice for Facebook could be the driving factor for making the game successful. Says Derk de Geus, co-founder
and CEO of Paladin:

“We want to create a thriving community, where players compete for the highest scores and share their experiences with the game. Social Networks have the potential to make this happen.”

While the game does not have a persistent world like most Facebook games, there is a simple scoring system that allows players to compare their scores and rankings with friends. De Geus:

“Players can experiment with different scenarios. One time you play the industrial tycoon, the next an eco-friendly city builder. Either way, the decisions are tough and you will need to compromise. The idea is that you play with the world and experience the outcome.”

European Commission

The game is funded by the Energy Agency of the European Commission, specifically the Intelligent Energy Program of 2007. The €1.4M budget covers not just game development, but several other aspects.

De Geus:

“Roughly 20% of that money goes to the game itself. The other 80% is split between educational material, marketing and impact research, with most of the funds going to the roll-out of the game. It is essential that schools and teachers embed the game in their curriculum, and this requires significant effort. It deserves a big chunk of the project’s budget.”

In fact, Paladin Studios is part of a larger European consortium. The partners include educational institutions from The Netherlands, United Kingdom, Germany, Slovenia and Greece. In addition, there is an energy agency in Granada and an innovation agency in The Netherlands.

“So far it’s working very well, especially considering the international nature of the team,” says De Geus. “The one thing we had to get used to is the pace of the project. We are a small, agile studio, used to working at a fast pace. Working with the E.C. and educational institutions turns weeks into months, and months into years.”

Public Beta

The game is in public beta now on Facebook and on www.enercities.eu. While the current focus of the game lies on electricity, other energy topics will be included soon.

“There are several topics, like peak oil and energy saving, that still need to be added to the game. We are working hard to add these to the next release,” says Nagel. “The official release will be early next year. By then we will have the educational platform in place, and the rollout phase will begin.”

Links

EnerCities Website – www.enercities.eu
EnerCities on Facebook – apps.facebook.com/enercities
Paladin Studios – www.paladinstudios.com
Twitter: www.twitter.com/paladinstudios, www.twitter.com/enercities
Dylan Nagel – www.twitter.com/dylannagel
Derk de Geus – www.twitter.com/derkdegeus

For more information, please contact Paladin Studios at @paladinstudios.com" target="_blank">info@paladinstudios.com