My Imajinashin

I, like most strategists in the digital space have been doing a lot of thinking about social media lately – specifically understanding how to measure the success of a social media campaign or portfolio of campaigns.

We ask questions like: how can we make something go viral? or what can i do that will get people talking about a brand or a business? The reason we ask questions like this is that the investment in marketing channels has traditionally been managed the way one would evaluate an equity investment in a mature company.

An equity researcher conducts detailed research on a company and their markets and build pro-forma financial models based on historical financial data. Similarly with traditional tactics, marketers carefully research and model the future cash flows associated with funding a marketing tactic. While nothing is certain, there is enough history that allows a grocer for example to accurately predict the lift in sales they will drive by featuring a special on milk in their weekly flyer. Or, a premium perfume brand has a good idea of the impact that buying an inside cover ad in vogue will have on unaided awareness and how their sales funnel will convert that awareness into sales. As a result, marketers have been able to do a reasonably reliable job of choosing the right channels and tactics to build their brands and drive sales.

Social media marketing has two characteristics that makes investment decisions different to traditional media:

1. The virality that makes social media so compelling is difficult if not impossible to predict.
2. Success in social media means more than just driving immediate term sales. Along with immediate term sales, success means creating an asset in the form of a relationship that can be monetized over time.

So, if traditional marketing planning models itself off of investing in a mature stock (Relatively large, carefully planned and modelled investments) the two factors above suggest that maybe investment in social media campaigns should be evaluated more like a venture capital portfolio.

1. Venture capital and unpredictability

A venture capitalist looks at the potential for greatness in a company she is considering investing in and makes multiple investments with the philosophy that most will be dogs, a few may break even and one or two will pay off greatly. There’s no way of knowing which will be which at first – there are just too many factors involved. But, because the investments are relatively small, the one or two big hits pay off the investment in the entire portfolio.

This is true of social media as well. It’s impossible to know which campaigns will “go viral” but what we can know is which campaigns have the potential to be huge if they catch on. In social media, this potential is what we need to invest in. And since we don’t know which campaigns will be winners and which will be losers, we need to make multiple small bets knowing that many will not pay off.

2. Venture capital and long term asset development

A venture capitalist is less concerned with managing the quarterly or annual profitability of their investments. Instead, they focus on developing the most valuable assets they can over a relaitvely long horizon of 5+ years. The reason so many VCs want a piece of Twitter today is the potential value of the millions of twitter account holders. Not its quarterly cash flows from last year. Or next year for that matter. Same thing goes for Tesla who has built up a huge following as an early entrant into the luxury/performance electric vehicle market. Neither Twitter or Tesla has turned a significant profit and neither will in the short term. But they

I’m not saying that marketers should be willing to wait 5 years for a social media campaign to show it’s value. What I am saying though is that a big part of the value in a social campaign is the opportunity it affords marketers in the future through the development of an engaged audience that can be communicated with in the future. Either monetized through ongoing promotion or engaged with to derive insight into future product development and business model development.

So, between the need to make multiple, small investments and the focus on long term asset building being as important or more important as a measurement of success than short term revenue, its clear that the decision to fund a social campaign is very different to the decision of investing in traditional marketing.