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June 05, 2006

Calculating the ROI of blogs – it’s not about the math

One of the most frequently asked questions I get about blogs is how to justify them on a ROI basis. In many ways, blogs are like PR – you know there is a benefit but it can be tricky to quantify it. Unfortunately, all too many businesses won’t move forward until they “know the ROI of blogs”.

I tried to address this question recently in a speech at the New Communications Forum where I said my blog could be associated with $1 million of revenue at Forrester. I shouldn’t have said that – I shouldn’t have tried to attach a number to my blog’s ROI because in the end, it’s a highly subjective, qualitative measure that’s hard to measure. This is because a blog’s ROI is built around building a closer relationship with your blog’s readers, be it your most ardent customers or your employees. It’s that investment in the relationship that turns intangible, unquantifiable blogs into hard metrics.

In my case, I believe that I can associate my blog with increased business and marketing value to Forrester because I write about certain topics only on my blog. If I wasn’t blogging about these topics, then I wouldn’t have had the content, exposure, and influence to interest those companies in becoming Forrester clients.

But I also consider my blog integral to all of my activities as an analyst. I discuss blog posts frequently with clients and the press and use it to solicit feedback and conduct research. How do you quantify the value of a discussion point? How do you quantify the quality of research? And how do you quantify the influence and the goodwill accrued to the Forrester brand? Companies could spend endless cycles debating and calculating the correct way to calculate the value of a blog and end up losing sight of the core value of creating a dialog with their customers.

Quantifying that benefit doesn’t need to be a long, drawn out exercise but I do believe that clearly stating the goals of the blog in economic terms is a good starting point for a corporate blogging strategy. Use those goals then as the simple metrics to determine the success of your company’s blogging activities.

So for you fellow corporate bloggers out there, how do you justify your blogging activities, if at all? Or was it just taken on faith that blogging is a “good thing”? Add your comments below or send me an email with your thoughts.

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Comments

/pd

"It’s that investment in the relationship that turns intangible, unquantifiable blogs into hard metrics."

What metrics ?? Are blog Methods, ROI , TCO Scorecards tangible in an F100 envoirnment ??

If so, how ?

We / I as a blogger find value in personally blogging. Yet, at an enterprise level the value props, are so difficult to build a traditionl Business case.

I am failing to see a case template for Consumption which includes Blogs as a method on strategic value props !!

No seriously Charlene, I am a die hard blogger- I know the chatter out there...yet the simple question of "show me the money !!" within the context of Blogs, throws everyone (even you) into "simple metrics to determine the success of your company’s blogging activities" ..

Again what metrics ?? Show me a template, that I can use, Please !! :)-

How does one justify efffectiveness, depth, leverage thru a blog ??

az

You have posted excellent blogs. But this one disappointed me. Yes the blog ROI is a topic we can discuss, but effectively how interesting is this topic? and further, you would assume that most people would link a good blog with ROI?
Please focus on the real topics then throwing up a blog about blog (too many people have fell into that trap).
Thanks.

David Armano

Charlene,

This may be coming at it from a different example, but when I started my blog—it was a decision to either do this or pursue higher education (getting a masters in Design Managment).

I'm learning so much by being involved in the blog community that I no longer feel I need the higher education (at least for now). Since I started my blog in Feb '06—I've been asked to participate in other respected industry blogs, I have a following and I keep up with my industry often times ahead of the curve because of how fast the blogoshere moves.

At my company—I'm being asked to tour our other offices and present my findings from my own personal experiences in blogging. And my Executive Creative Director calls my blog "one of his favorites".

So for me ROI is this:
Increasing Knowledge (for free)
Advancing Career
Connecting with smart + talented people
Staying on top of the industry

-DA (Logic + Emotion)
http://darmano.typepad.com

Robert Basic

let us think back about the good old mail. Maybe it can help us to think about the problem from a different angle. Yes, mail!

Do you know the ROI of your mail account? Does your company know the ROI? Sure, it does know the costs. Even IBM and Microsoft cant tell you the real value of mailing. You cant calculate the ROI of mailing systems. Nobody ever could. Even if its a 30 years old technique!

Why? You cant live without mail. Everybody has mailing systems now. 20 years ago some rare users had mailsystems. But know everybody communicates with each other by mail.

So, its not about ROI, its about communication infrastructure(!). The costs of infrastructure systems can be huge. Think about the transportation infrastructure (via highways, via railroad, via air). Very expensive, but if you havent invest into that, your economy will suffer badly. Its a vital factor!

As you need transportation systems for your economic goods, you need your communication infrastructure. If everybody uses mail today and suddenly tomorrow they use blogs to communicate you have to invest in your communication infrastructure once again as years ago into your mailing systems. But if you ask about the ROI you never will get into blogging :-) Therefore you will cut your future communication channel. You will suffer from the lack of investments in this area.

Is it so? I think you dont have to calucalte the ROI. Its not about ROI. Its about infrastructure. Indeed, its imperative to calculate the blogging costs (HW, SW, time, layout, ...) and compare it with the "tipping point". The tippinig point of blogging communication. Some corporation will invest if 10% of his customers communicate this way. Some will wait longer. Think back to mailing systems, when your first customer asked for your e-mail address ;-) Nothing happend. But when your 1000th customer asked for, you asked your IT guy.

So, maybe it isnt important to ask for the ROI. Its not because its a nice argument for blog experts to sell their stuff .-) Its because some business areas are vital. Your communication ecosystem is vital in some parts: phone, fax, mail and website. If you count blogs in you dont ask for ROI. Its a 1/0 decision. If you dont count blogs among your vital communication ecosystem, than, yes, than you have to ask for the ROI :-) Which you cant calculate imho. Some will say that (Stormhoek? Ask Hugh... no direct consumer effects, indirect effects by the suppliers / Shoppingblogs = more direct sales? )

Shiv Singh

Charlene,

I agree defining the ROI of blogging can be difficult. However, so too was it challenging to define the ROI in the early days of the web.

If you know the number of visits to the blog and the number of leads generated through conversations that began on the blog you can easily start thinking about a basic ROI model.

More broadly speaking, I have found that the good will benefits of publishing to a blog are immense for my organization. Customers like the candor and feel closer to us through the blogs.

Shiv

Monica Powers

Like so many brand-building efforts, blogging is one of those necessary things whose impact we can't agree on how to measure. There are many approaches on gauging the value of a brand in terms of tangibles and not-so-tangibles, but the ardent debate on how to do it best does not negate that brand's value. Unquestionably your blog has added value to Forrester. You could probably quantify that in terms of a dozen different elements, none of them more right or wrong than the next.

David Phillips

The intangible and balanced scorecard reporting debate rumbles on and this is part of it but I argue in The Journal of Communication Management that without relationships all other assets (tangible and intangible) are at risk.

Blogs are good at creating relationships, which is a fundamental social need for all humans.

I am not an ROI fan, the numbers can be skewed all too easily (is this ROI on discounted cash flow?). I am keen to see a return on assets and blogs as assets should show a significant return especially for that element of the balance sheet called 'relationships'.

Now we have to invite the regulators, accountants and economists to view relationships as assets.

Perhaps too, we can invite politicians. Perhaps the value of relationships can be measured by them in terms of, for example, peace and war – the most tangible ROI of them all.

kdpaine

I heard you speak at New Comms and you were GREAT! If you sat in on our session on how to measure blogs, you would have heard more on the ROI issue. To some extent I agree with Robert's comment above (and that echoes Shel Israel's point of view) that you don't have to justify the ROI of your pants, or mail system, or infastructure. But for many many organizations, blogs are not seen as part of the infastructure yet.
So we do have to come up with measures. For many, its the number of conversations they start or have --- Stowe Boyd's Converstation Index -- for others its Google Juice. I know for one thing that my google ranking has skyrocketed since I started blogging. And if I had to buy paid advertising that high up in a search, it would double my ad budget. I know, also, that my blog has won me several speaking gigs I wouldn't have gotten otherise. We calculate the effectiveness of our marketing efforts by looking at the cost per minute spent with a prospect -- so each of those speaking engagements is worth about 4500 minutes of prospect time. Sure, these are indirect measures, but that doesn't mean they're not valid.

Chris Parente

Charlene:

It's a bummer so much gibberish gets posted as comments. Hope you have someone cleaning out regularly.

Re corporate blogging, maybe another way to defend ROI is to gradually incorporate into a company's communication strategy. I wrote a piece that was published by Bacon's Navigator describing a three step process that I think is very defensible to a corporate audience. Interested in anyone else's take:


http://navigator.bacons.com/current/three_steps_incorporating_blogs.asp

Michael Cheng

An article from Intranets Today (see link below) by Martin White answers the question of ROI in the context of implementing content management, search solutions, etc. for corporate intranets. He answers the question of valuation brilliantly by creating risk assessment as an "adjunct to financial appraisal". In the end, he summarizes by saying "I am not saying that there is no need for an ROI approach, or that (it) does not have value, but a VP of finance who is not a ...believer will soon find the weak points in your strictly numeric value calculation." As for applying this to blogs, perhaps valuation could be assessed via Opportunity Costs... i.e. which competitors are using blogs, how quickly the market place is migrating to virtual space via networks, which propects would have committed rather than turn to competitors via their networks, etc.

http://www.intranetstoday.com/Articles/?ArticleID=5789&IssueId=198

Marketing Headhunter

To quote Warren Buffett: "I don't need to know a lady's weight to tell you if she's fat or not."

Likewise, the general benefit of your blog seems obvious, while the exact ROI may be harder to pin down. Certainly if it weren't for visionaries (like Shel Israel) praising it and giving you link love -- which also boosts your Google rankings and page rank -- I never would have discovered it.

I'd bet that the "soft" benefits include testimonial power and a possible increase in speaking engagements and media mentions. These things create a "halo efect" around both you and Forrester. The "hard" benefits include direct referrals and the added organic SEO traction.

Of course, there's no way to test the ROI without taking down your blog to assess the drop off in these benefits. Bad idea.

While the debate rages: I don't have any money to give you as a client, but I certainly might refer many of my clients to you -- 95% of whom are members of the Internet Retailer 500.

Eric Baillargeon

Simply, and I almost never seen used on blog or even worst in Web site... Contact address of any blog or any other contact information on Web site should be UNIQUE to that media.

1-800 number in Web site or on a blog AND email address should not be seen else where in marketing document or business card ! Then you or your customers will wake up on that specific line or email account...

Simple as that !

Henry Abbott

The benefits of blogs are multi-faceted and many of them are unmeasurable: I just found out one of my blogs most ardent fans runs a record label. I'm going to ask him to help me find some original music to use as a podcast theme. How cool is that? What's that worth?

I run a blogging agency. Today one of our clients, for whom we help run a team blog, was invited to be guest on WNYC, which has close to a million listeners. What's that worth?

You and I are talking right now, and we've never met. Who knows what that means? Maybe it's huge?

I face the ROI question every day, and I am convinced the answer for us blog promoters is this: the benefits come in all shapes and forms, the vast majority of which are entirely unmeasurable. However, those few measurable benefits? The trackable revenue directly generated by the blog? In this early stage of blogging (when blogs are, sadly, not yet seen to be as essential as pants) those revenues should exceed the cost, or corporate blogging is never going to pass the bean-counter test.

But the good news is, that is a modest and achievable goal. In practice, it's doable. Even though all our blogs are young, one that we charge $3,500 a month for generates $10,000 a month in revenue. Another, for which we have charged only a few thousand dollars thus far, has already netted an $800,000 exclusive listing (and a visit to WNYC on Monday) for our real estate broker client. A few more stories like that, and this blogging thing might really take off...

Mike Harmon

Charlene,

I like the idea of figuring out ROI for a corporate blog, but -- this early in the game -- it seems that "I" is just as difficult to calculate as "R."

I struggle to quantify the investment thus far (since most of it is in time -- which is a soft / opportunity cost.)

At the same time, any data to support a return on said investment appears to be anecdotal at best.

Two variables in one equation = one hard math problem.

So for now, I'm trusting my instincts and forging ahead without being overly concerned about it.

The connections made possible by corporate blogging open up so many new avenues for building relationships with stakeholders. It's just going to take a little time for all parties concerned to start nodding their heads.

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