Social media embodies Silicon Valley values. Social media communities are collaborating in innovative ways to create entirely new approaches to business and communication problems. It’s no wonder then that many Silicon Valley companies have embraced social media as a platform to engage with users and customers. But Silicon Valley also values pragmatism and ROI. Many PR professionals and social media marketers shudder at the thought of fielding this question in a new business pitch: “Social media sounds like something we should be doing, but how does it measure up to other marketing activities that I use to support critical business goals?” At Page One PR, headquartered in Silicon Valley, we understand that this question should not only be expected, it should be welcomed.

From a public relations perspective, the value of social media is greater than any one ROI metric can capture. Digital communities are providing avenues for scaling the kinds of close customer relationships that weren’t possible just a decade ago. But especially in today’s economy, we need to reach for more defined metrics in discussions with marketers who prefer to speak in terms of ROI.

There’s another field that has made this shift with a great deal of success, moving from more abstract impression estimates to more concrete action-based metrics: advertising. Internet advertisers understand the power of the click. With the advent of Google Adwords and other search ad networks, the Cost per Click (CPC) metric has become a common method for determining the success of campaigns in influencing target audiences to take specific desired actions.

At Page One, we have started the process of converting Twitter and YouTube ROI into CPC metrics. My colleague Craig Oda wrote on his personal blog about this topic recently. A major goal of social media promotional campaigns is to drive traffic to content pages where potential customers can gain rich information about the company. The content pages may include corporate websites, registration pages, blogs, and videos. To give marketers a comparison to advertising activities, we can use the cost of Twitter and YouTube campaigns along with the number of clicks on unique URLs or video views to determine social media CPC. While I’m not saying social media campaigns should replace advertising, the comparison will be highly useful to marketers attempting to justify spending a portion of limited budgets on social media.

Let’s first compare advertising to Twitter CPC. Our client base is largely business to business high tech software companies. Although CPC in search ads for this sector can vary widely depending on the competitiveness of the bidding process for keywords, the $1 – $2 range is typical. In the month of May, one of our clients, an open source software company, averaged about $1.50 CPC for Google Adwords. For a fair comparison with Twitter ROI, it is important to include the entire cost that companies incur for ad campaigns – this includes the initial set up and testing of messages, keyword selection, and management over time. Many service firms charge about 15% of the advertising spend for basic management costs. This number can increase depending on the level of testing and analytics. Companies with small ad spends often pay up to 30-40% due to minimum fee policies. Including management fees, a $1.50 CPC could easily increase to $1.72 – $2.10.

Since Twitter is a free tool, the cost of a Twitter campaign is solely comprised of the people-hours that go into activities such as determining strategy and voice, updating the feed, engaging with followers, monitoring the Twittersphere, and reporting results to clients. We include all these services within the cost for the CPC, because even Twitter activities not related to unique URL linking can grow the feed and contribute positively to click rates. To make a fair comparison to the content of advertisements when calculating Twitter CPC, we only include clicks on unique URLs that point to the client’s corporate website, blog or other content that gives a prominent impression of the client in a positive light (e.g. a feature story on an external news website).

We are in the process of collecting data across several accounts, and an initial measurement based on the Twitter feed of the Linux Foundation, the non-profit Linux consortium, yields a $0.12 CPC. The Linux Foundation Twitter feed is highly popular and has been in existence since July 2008. We’d expect that younger feeds for less well known companies would yield more costly CPC rates. Rudimentary and partial data from June for the Twitter feed of Appcelerator, an open source application development platform, shows an approximate $1.00 CPC. The Appcelerator feed is another popular, high quality feed.

Now, let’s compare advertising to YouTube video CPC. Page One offers professional video production services. In the past, projects have included short client vision videos and comical videos at technical conferences. We host these videos on YouTube and other platforms, and track the number of times that people view each video. This process is similar to tracking clicks on a search network advertisement or interactive ad, but the content in YouTube videos is arguably richer than that of internet ads. The cost of a video campaign includes messaging strategy, scripting, professional videographer production costs, direction and promotion. In some cases, the cost of promotion may be difficult to determine when the campaign blends with more traditional PR services, resulting in overlapping costs. For instance, media relations activities may result in an article that links to the video. Since this increases the number of views, these activities should at least be considered in the CPC metric. We’ve seen that campaigns are most successful when PR is integrated with social media activities, creating a multiplier effect.

Our initial measurement of video CPC across several accounts shows an approximate $0.32 CPC for strongly developed campaigns. A vision video for Appcelerator yielded $0.14. A vision video for Cloudera, a high-end data storage and processing system, yielded $0.32. Both of these videos were associated with major product launches, so we’d expect relatively high view counts. Conversational videos at a developer conference yielded $0.50. A big difference between CPC for video campaigns and CPC for ad campaigns is that the former tends to decrease over time while the latter tends to remain relatively flat assuming that market conditions remain steady. Whereas the cost of a video is incurred at the beginning of the project, the cost of an ad campaign increases with time. To be sure, clicks for ads also increase over time but in proportion with the ad spend. On the other hand, if a YouTube video goes viral, it’s the gift that keeps on giving. You continue to get clicks without additional cost.

Since Craig’s initial blog post on this topic, we’ve collected more data and can now update our CPC comparison chart. We’ll continue to refine these metrics going forward, especially as we gain more Twitter data from our client accounts. We’d appreciate your comments and thoughts on social media ROI.

Tags: advertising, Adwords, cost per click, cpc, roi, social media, Twitter, video, YouTube

This entry was posted on Thursday, June 11th, 2009 at 11:16 am and is filed under blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.