The question I am increasingly asked is how do you measure social media and what is its ROI?  Given the economy there has been an increased demand for accountability and measurement.  The question is how do you apply this to a channel that is about brand awareness? 

There is the question of source material.  In many cases this translates into what web sites do you follow?

1. Your company web site(s)
2. Social media web sites (e.g., Facebook, Twitter)
3. Individuals’ personal blogs

What metrics do you measure?  Below are just some ideas.

1. Number of tweets
2. Number and ratio of positive comments
3. Number Facebook fans and Twitter followers
4. Links to personal sites that fans and customers have added to their web sites and blogs
5. Level of engagement with your company web site

Lastly, how do you establish causality?  It is difficult to determine if events in the social space are affecting purchasing behavior in the bricks and mortar space.  As my Statistics Professor said so often, “correlation does not mean causation”.

SodaHead.com seems to be the exception to the conventional wisdom that click through rates for banner ads are low.  SodaHead is an online community and according to a Wall Street Journal article a few weeks ago, “SodaHead ads enjoy click and conversion rates of as much as 10 times the industry average.”  As I wrote in an earlier post, click through rates for banner ads are typically much less than 1%.  The click through rate refers to the number of times a banner ad was clicked.  For example, if a banner ad was displayed 100 times and it was clicked on once, the click through rate would be 1%.

There are several ways that you can try to increase the likely click through rate.  You can optimize placement by displaying your banner ad on a website with synergy.  Alternatively, you can use rich media to make the ad more noticeable and engaging.  Personalization is also likely to increase clicks.  So how does SodaHead do it?  They ask provocative questions and engage viewers by asking for their opinions.

Though SodaHead has a high click through rate, what is their return on investment (ROI)?  My question remains.  What is the value of a banner ad?  As the Wall Street Journal article points out, SodaHead has yet to make money.

If there is a silver lining to this recession for marketers, it may be the focus on analysis and measurable results.  With every marketing dollar being scrutinized and questions being asked about return on marketing investment, every  tactic is being reevaluated.  For a long time, I have questioned the value of web banners.  They are easy to ignore and, as a result, have lower response rates than other marketing vehicles.  Advocates justify the low response rates by pointing to their relative low cost.  Others say that rich media will breath life into banner ads but I remain unconvinced.

Recent articles make me think I am not the only one.  Mike Shields of Mediaweek wrote about display ads a few weeks ago.  He quoted Greg March of Wieden + Kennedy as saying “Advertisers want to deliver impact, and I don’t think the impact for these ads is always that strong.”  Shields wrote that “click-through rates for banner [ads] rarely approach 1 percent”.  I have seen much smaller rates than that.

A recent BtoB special report on 2009 marketing plans, found that 30.6% of B2B marketers surveyed were planning on increasing their spending on banners.  This sounds promising except that other online tactics had higher growth percentages:  email 68.3%, search 50.0%, web-casting 42.9%, web site development 66.3%, and social media 46.6%. 

With new tools, analysts may be able to measure the impact of online ad campaigns, taking into account every ad served up to the user regardless of whether or not she clicks on it.  Hopefully we will soon be able to answer the question, what is the value of a banner ad?

This is a blog about marketing analytics.  I am a direct marketing professional who loves marketing, strategy and analysis and I welcome your thoughts and feedback on these topics as well.

First, let me tell you a little more about me.  At a dinner several years ago, a client announced to my colleagues that he knew how to make me smile.  He simply had to say that he had data.  It is very true; data makes me happy.  I love analyzing data because it can answer business questions and provide insight into marketing challenges.  At the end of the day, your recommendations are grounded by data. 

That is one of the reasons that I work in direct marketing.  There are lots of data elements that can be analyzed and almost endless possibilities.  For example, you can create models for targeting, conduct A/B testing, analyze response rates and calculate ROI (return on investment) by customer segments. 

This blog will discuss current trends in marketing analytics, various techniques and the field more generally.