For years, marketers have known they needed to participate in social media, but have struggled to quantify the financial impact of their social efforts. Management reports show 1000 new fans, 500 likes, 300 retweets. But what are those new fans really worth? The expensive video you posted: what revenue did that really generate, in this new age of declining organic reach?

Let us step back in time just a few years: Social Media often was sold as the „Revolution“ and the holy grail of marketing. But in reality many organization learned the hard way that Social Media is not a one way street – it strikes back some times. So before marketers have discovered Facebook or Twitter as a marketing channel they had to do their homework first. In many cases corporate communication were the first stakeholders that had to create a communication strategy for Facebook and Twitter, had to learn that communication is not just broadcasting anymore and that they had to provide resources to feed the content beast, to listen and answer to whatever their „Fans“ and „Followers“ had to say.

Naturally love brands had an easier play than unknown brands in regulated industries and many brands felt loved by the sheer amount of fans and followers who would subscribe „organically“ (meaning without the brand having to invest into paid advertising on social networks) to brand´s messages just because they loved the brands anyway. The more fans the better. It just feels so good to have more fans than your competitor, right? Brand managers felt the love and so huge investments were made to feed the content beast to please the fans and to spread the love. And soon marketers learned that on social media a brand´s communication goals can hardly be reached the traditional way – content needed to be „relevant“ to be seen by most fans and to drive engagement.

Until 2011 that seemed to work fine and Facebook marketing was considered free marketing (often forgetting that all the content, the editors and community managers, listening software et al already meant a serious invest). But then brands learned about the Edge Rank, Facebook´s secret filter mechanism that decides which content actually gets served to a Facebook user – and the outrage was not yet too loud when studies revealed that brand content only had a visibility up to 16% (meaning that 84% of fans never saw the brand content after they had liked a brand´s page once).

In 2012 and 2013 it was all about relevant content and fan acquisition. KPIs like #Fans, Engagement Rate and People talking about seemed to work fine for social media managers but not for CMOs of CFOs. But since many fans smell like success budgets were shifted towards paid social to drive the engagement rate of the content – and to acquire more fans. Suddenly the CpF (Cost per Fan) became a popular KPI and agencies were paid to optimize paid media campaigns to the max to acquire as many fans as possible. Because fans feel like love. Somehow social media land slowly experienced: if you boost your content with (paid) media you actually can buy reach, followed by engagement. So far so good.

In December 2013 the hammer fell down on social media wonderland: studies showed that the organic reach on Facebook dropped to 8%, in many cases even down to 5% – meaning that up to 95% of the acquired fans never saw the brand´s fabulous content that the hipster social media agencies of this world have created. Let´s summarize for a moment: for years social media managers have invested most of their efforts and millions of cash in content production and distribution to grow a fan base that now, in 2014, is basically worth almost nothing. Today any content that is NOT boosted by paid media has a visibility of a blind goat. All of a sudden content marketing on Facebook is under huge pressure, budgets are being shifted (from content to paid) and the early adopters begin to realize: Facebook is a mass medium. Just like TV. If you want reach you have to pay. Just like in the good old days of the soap operas: content was created to fill the gaps between the commercial breaks. On Facebook content is created to become advertising. Content is advertising and advertising is content. Welcome to madison avenue reality. Social media marketing is about to outgrow the walled gardens of esoteric thinking that marketing is now all different. It is actually not.

But what does this mean for the future of social media marketing – especially on Facebook? Facebook is just beginning to become the next big thing in advertising and one cannot afford NOT be on Facebook as a brand. The perception of Facebook as a platform that gives brands free „organic“ reach is rapidly changing to being a mass marketing platform. 2014 the media budget that brands dedicate to Facebook is – especially compared to TV – still fairly small. This will gradually change – but only when a brand manager can prove that Facebook is – cost wise – at least as efficient as other mass media. Just as a TV spot AND a soap opera cost money and delivers reach and generates engagement a brand channel on Facebook needs to be funded properly. And to prove the efficacy of social media marketing it is necessary to calculate the value added by the interactions on social media. The reach and engagement that fans and follower generate for a brand is called earned media. And it is the only way to actually prove the value of social media in the marketing mix.

Good news – the ultimate KPI for measuring the value added by Social Media is here: it´s cold hard cash.
Being able to measure the success of content marketing this is good news. Since it is almost impossible to measure the direct correlation between a brand post, a like or a shared video to the marketing goals of an organization or even the financial results of an enterprise it is time to look at TCO (total cost of ownership) of Social Media and the earned media value it creates. Undoubtedly the reach that a relevant brand post gains through sharing and liking of its fans is worth real money. Just as in classic public relations where success can be measured by calculating the Advertising Value Equivalent (AVE) of e.g. a full page PR piece (press release, interview, thought leadership article) by comparing it to the advertising costs of a full page in that medium. In Social Media we call this effect earned media value. The EMV can be measured in 3 steps:

Step 1

Measuring the EMV of a Facebook page or a Twitter feed of a brand though is not trivial. To do so would mean to measure EVERY interaction of a fan or a follower that amplifies the reach of your brands post. Every like, every retweet, every video view, every comment etc. It seems obvious that this cannot be done manually but needs a technical solution that pulls the KPIs automatically and stores them in a scalable database.

Step 2

Which benchmarks should these KPIs be measured against? Every click, every new fan, every engagement has a price. What is required here is the knowledge of your industry´s paid media cost (CpC, CpE, CpE etc.). This seems easy – but it becomes a challenge when you want to compare the performance of your social media team in LATAM against let´s say North America or EMEA. To compare apples to apples it requires deep global knowledge of realtime advertising and programmatic buying and media buying in general.

Step 3

How much is that fan interaction worth for your brand? The weighing factors and the methodology is where the secret sauce is. Different from financial reportings, balance sheets and the art of book keeping there is no national or global organization that provides a framework on how to measure the value add of (social media) marketing. Even though methodologies like the Balanced Scorecard and trends like strategic controlling have found acceptance in economics it is hard to justify budgets for „soft“ successes. Let´s be honest: there only 2 things a manager is interested in in the end: make more money and save more money. And this is exactly where the EMV has its strength. It makes Social Media comparable in the marketing mix – comparing cost and the efficiency of content marketing allows social media performance management at its best.

Measuring the value added by social media using the EMV has many benefits because it gives marketers a stronger voice within budgetary discussions.

It

• establishes a financial basis for social media performance goal-setting
• simplifies KPI development for an enterprise´ social media teams
• creates performance reports to compare and optimise the efficiency of your content (and your social teams) by product, country and region
• delivers a reward system for content marketing based on earned media value
• identifies cost-cutting potential in your global content marketing efforts

Any marketer that hopes to get away reporting KPIs like #fans, #retweets or engagement rate will face problems in the near future. If you want a bigger share of the marketing budget you will have to report in hard currency.

If you have further questions on how to measure the value added of your social media activities contact the author @rolandfiege and start the discussion.

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About the Author

Roland Fiege (1969) is Head of Social Strategy at Mediabrands Social (www.mediabrands.social). In his spare time he works on his PhD project researching measurement methodologies to measure the value add of Marketing on Facebook.

After a couple of semesters of studying business economics in the 90ies, Roland dropped out of University and involved in various startups, one of them being a leading IT security research and consultancy firm in Heidelberg, Germany. In 2010 he then finally finished his studies and holds a degree of an MBA of Mannheim´s Graduate School. In his thesis he applied the principle of the Balanced Scorecard to measure the success of Social Media Marketing and laid an important theoretical foundation in Marketing Performance Measurement. Before joining Mediabrands he was Senior Director of Social Media Marketing EMEA at MicroStrategy and was involved in Social Analystics Solutions that were later sold to Facebook (CAT Tool). Mr. Fiege is a regular guest lecturer at various universities and graduate schools and a published author of “Social Media Balanced Scorecard” (2012, Springer/Vieweg).

Roland lives in the city of Mannheim in the south west of Germany and a passionate father of a little son. He loves to spend his weekends cycling the nearby Odenwald region, has crossed the Alps several times and is a marathon finisher and enjoys his work life as a pan european business traveller.