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October 03, 2006

Calculating the ROI of blogging

One issue that keeps coming up over and over again is how to measure the ROI of blogs. I’ve written about this in the past and have been stewing over how to go beyond the intangible “blogging is good for your business” exhortations to quantify blogging’s benefit to organizations.

Well, we’re getting close but we could use some help. My colleague, Chloe Stromberg, and I have been interviewing companies about how they measure ROI and realized that we needed to throw the net wider – this is where you come in!

The working idea is to create a framework for measuring the ROI of external blogging efforts for medium- and large-sized companies. Below is an outline of ingredients for the framework.  Please help us by fleshing out sources, providing examples, and adding/editing our ROI factors – feel free to add comments to this post or to email us directly (if you’d prefer, we’ll keep specific numbers and examples confidential and use them only as background).

In turn, we’ll cite significant contributors in the upcoming report and will also send the contributors a copy when it is published. The report will also include information we’ve gathered from our research, as well as our synthesis and analysis. I’ve also included a few links to resources we’ve found helpful so far.

The ROI Of External Blogging Framework

The ROI of blogs can be broken down into three components: 1) Benefits; 2) Costs; 3) Risks

Potential Benefits & Measurement

One of the hardest things to do with blogs is to quantify the benefits, mainly because there’s a blog for almost everything under the sun. For example, you can’t compare the ROI of Direct2Dell.com to Microsoft’s Jobsblog as they have completely different goals. Hence, measuring just traffic to a blog or the number of comments on a post means little unless the traffic or the comments are linked to value creation. This gets at the task of measuring intangibles – what does it mean for an additional visitor to come to the blog or contribute a comment?

One parallel to consider – how do companies measure the value of public relations? We found one paper by Fraser Likel, et. al. “Perspectives on the ROI of Media Relations Publicity Efforts” that was helpful in this area. Likel, et. al. break down the ROI of PR into four approaches: 1) return on impressions; 2) return on media impact (akin to market mix modeling); 3) return on target influence; and 4) return on earned media

I currently suggest that companies start with metrics that they already use within the company so that 1) the metrics are familiar; and 2) it makes it easier to compare the blog’s value to other marketing and communication channels. So here’s an attempt at some of the ways intangible value can be quantified. I’d love to get your thoughts on how feasible it is to actually measure these things and also, how your company measures blogging’s benefits.

                                   
 

Benefit

 
 

Appropriate   measurement

 
 

Consumer self-education

 
 

Higher conversion rate for blog visitors

 
 

Greater visibility in search results

 
 

Increased traffic from search to blog

 
 

Lower the cost of public relations

 
 

Generate the same level of awareness as PR

 
 

Reach an enthusiast community

 
 

Lower cost communication tool

 
 

Address criticisms on other blogs/news stories

 
 

Measure the slow down of bad news spreading

 
 

More responsive to consumer concerns

 
 

Track customer satisfaction and retention

 
 

Improve employee innovation and productivity

 
 

Track employee satisfaction and retention

 
 

Improved stock price with greater visibility into the   organization

 
 

Connect improved investor sentiment to blog readership

 

Potential Costs & Measurement

This section is pretty straight forward and is separated into set-up and recurring costs. Some obvious areas include blogging platform costs, training, policy creation, and employee time. The biggest area of feedback I could really use is how you have had to scale up as your blog has grown more successful. Have you had to invest in more hardward/hosting costs to handle the traffic? How much more time does it take to handle incoming comments, trackbacks, and spam? And there’s also the additional time it takes to monitor and comment on topics that appear on other blogs.

Potential Risks & Measurement

The perceived risk of having a corporate blog often overshadows all of the benefits that can accrue from them. One best practice I have seen is when the senior executive asked the blog champion to come back with a list of the top five things that can go wrong – and to also include the training and policies he would need to have in place to mitigate that risk. To calculate the impact of risk, it needs to be quantified. So here’s an example.

Let’s say that the risk is someone divulges confidential company financials just before an earnings release. The risk can be quantified as $1 million in legal fees to deal with the SEC and another $2 million in lost goodwill from the company’s brand and reputation. The risk mitigation plan is to provide $10,000 in training to the bloggers and to have all posts reviewed by Investor Relations. With these policies in place, the team expects that only 1 post out of a 1000 (0.1%) may contain any confidential company information, and that 1 in 10,000 (0.01%) would actually result in the full loss. Do the math and multiple the probability by the cost of the risk and you’ll come out with 0.01% * $3M = $300 in factored costs against which to weigh the benefits. The real impact on the ROI will come not from the probability-weighed cost of the risk, but from the risk mitigation efforts required.

Putting It All Together

Once you have the benefits, costs, and weighted risks figured out, simply divide the benefits by the costs + risks to arrive at the ROI. The key is what to use it for – it’s not enough, I believe, to use the ROI calculation only to justify a blog. It should also be used to manage and optimize the performance of the blog on an ongoing basis.

So I hope you find this interesting and helpful – and I encourage you to add your suggestions, ideas, and examples to the discussion.

Additional Resources

Constantin Basturea’s del.icio.us page for the “ROI” tag. Constantin is currently at Converseon and was a co-founder of NewPRWiki, one of my favorite reference sites.

Perspective on the ROI of Media Relations Publicity Efforts”, by Fraser Likely, David Rockland, Mark Weiner.

Market Metrics: Measuring The Impact Of Blogs And Mainstream Media To A Brand”, a podcast interview with Deborah Eastman from Biz360 on Marketing Voices

The ROI of blogging and whether Jonathan Schwartz’s blog pays for itself” from Jason Stamper’s, Computer Business Review Online

Lastly, this is very last minute, but I will be speaking on Tuesday, Oct. 3rd at a free Webinar on the “ROI of Blogging”, hosted by Cymfony. If a link is available to a recording, I’ll post it here as well. (Disclosure: the host of the Webinar, Jim Nail, is a former colleague of mine at Forrester.)

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Charlene Li, Vice President bei Forrester Research, hat einen spannenden Blogbeitrag über den ROI des Corporate Blogging gepostet. Der Beitrag bezieht sich auf die Ergebnisse von zwei Studien des Unternehmens. The ROI Of Blogging Calculating The ROI ... [Read More]

Comments

David Phillips

Charlene, A most interesting project. I will follow closely.
Perhaps you may find http://www.managementclarity.com/intangibles.htm
helpful and also http://www.ingentaconnect.com/content/mcb/jcm/2006/00000010/00000002/art00007/citations;jsessionid=2ahi782e6hnne.alice


offers a view of values.

Relationship value is dealth with here:
http://www.ingentaconnect.com/content/mcb/168/2006/00000011/00000001/art00004
Corporate Communications: An International Journal, Volume 11, Number 1, 2006, pp. 34-42(9)

There are other considerations.

If the measure is based on return of sales generated attributed to each activity (press, radio, tv bought for time and space v not paid for v promotions) do they also include social media (blogs, wiki, podcasts, vertical search, SEO, RSS, SL etc) in PR or does that not have an effect? For example Arial which is exposed to perhaps ten time the 20,000 blog posts in the last year (and I agree it does not seem to have any expert optimisation of this asset) would be included in what kind of calculation?

Opportunities T o See (YUK).

Alternatively is this a measure of return on PR investment and if so:

Is this return on investment on the trading account or balance sheet (and how long is the tail - we know it is quite long on-line)
If cash, is this discounted cash?
Is this based on social media asset as well as press, radio, TV etc assets.
How long is residual value discount for press v social media. Is archive press now included on the balance sheet now that Google as Google News Archive with a repository of 4,000 Ariel citations and 4000 blog posts on permanent display, not to mention web sites going back in time and still available. (see also http://netpr.blogspot.com/2006/06/building-internet-assets.html)

The biggest PR evaluation bibliography is here:
http://www.managementclarity.com/big_bibliography.htm


We face a problem with accounting practice because of how they deals with assets (intangibles).

ROI is fashionable but is not often a helpful measure.

The tradition in PR is that all PR programmes should have SMART objectives (Gregory A, Planning and Management - Kogan Page) which is a better measure because such objectives will (should) have a known impact on corporate returns.

My preference is a measure of convergence between corporate values and contituent's values which identified effectiveness of the relationship.

A useful background paper is:
Furnishing the Edifice: Ongoing Research on Public Relations As a Strategic Management Function
James E. Grunig
Journal of Public Relations Research, 2006, Vol. 18, No. 2, Pages 151-176

Hope this helps

Stephen Turcotte

Charlene. Excellent! I’m happy to see that “Greater visibility in search results” is high on your list of benefits. Do you think that the SEO value of blogging is being given enough play in the broader ROI discussion? My advice for PR or communications people trying to sell blogging internally is to find out how much Marketing is spending on Paid Search(SEM) and SEO and a good blogging strategy can have a large effect on our organic rankings and quality inbound links.

My research shows medium to large companies spending $20k - $40k + per month to be listed in paid advertising in Google and or Yahoo. They also pay anywhere from $3k - $20k + for search engine optimization.

Kurt

I do maintain a corporate blog, wel actually a combination of personal stories, industry news and corporate news. I don't think I will ever try to calculate the ROI of my blog. Why ? If you start thinking in terms of ROI and similar concepts, than the immediate danger is that the blog will become a real PR-marketing tool and consequently could (probably will) become 'censored'. It than becomes just a 'web 2.0' approach to distributing press releases.
The objective of my blog is just to write some stories and give the people (in and out my company) the possibility to get to know me from another perspective. By not considering the ROI, I feel I'm a lot more free in what I write.

Still interesting effort to try to develop this theme.

/pd

Nice. you now get to the meat of the question I asked here :)_

http://blogs.forrester.com/charleneli/2006/06/calculating_the.html#comment-18179010

Avinash Kaushik

Charlene: This is a great post. One of the more interesting facets is that measuring now is so "cheap". In the past there were numerous hurdles and it took a bunch of time or money, now you can get started for cheap and build from there.

Recently I wrote a post on my blog that attempted to define a six point framework of how to measure success of a blog. It is at a bit more operational / tactical level. It provides simple examples of how to measure something ambiguous as "engagement". Here's a link to the post:

How To Measure Success of a Blog
http://www.kaushik.net/avinash/2006/09/how-to-measure-success-of-a-blog.html

Thanks for stirring up this important conversation.

-Avinash.

Dennis Howlett

Before you can start on this type of exercise I believe it is important to contextualise what you're seeking to measure.

For instance, is the blog designed to:
Improve market awareness
Act as an alternative/replacement to PR
Be a focal point for industry specific discussion
Idea generation
An ego enhancer
Sales lead enhancement
Defensive PR
Internal communications mechanism

The list goes on.

Depending on what type of blog you're seeking to create, you'll likely come up with a different set of numerators and denominators. This is necessary because otherwise you can't do the very thing that blogs are supposed to do - contextualise information.

Here comes the tricky part. You can't realistically apply accounting type measures to blogs because they don't fit. Instead you need a blend of measures that reflect the blog's purpose so in other words you need to seek measures that cross departmental boundaries.

This will create enormous challenges and I suspect we need to look towards the world of human capital management in order to see what they're doing. This then allows you to build in art least some of the intangible elements so many see as difficult.

Early attempts at this are not going to be easy. How for instance do you define a measure for 'idea generation?' What are the value measures needed? Do we have the historical data that allows us to develop assumptions about value created from great ideas and even if we do, how well might that relate to today's situation?

That might seem over burdensome but then a central feature of corporate blogs must surely be 'discovery' aimed at providing insights that foster a culture of subtle change.

I will not pretend to be 100% on this as I'm an accountant by trade and I can tell you it's been very difficult to move away from traditional measures as reflective of how we measure ROI in social computing initiatives.

But. I absolutely don't accept it's not do-able. The problem as I see it is we have no historical framework of the kind we'd usually apply and HCM metrics are a relatively new and as yet not fully baked science. Which means we're inevitably faced with a loss of precision. We can overcome that by applying degrees of confidence variables so we can say there is a range of possible ROIs.

There is another facet of this exercise. In most ROI cases, what we're doing is taking a stab at a business case where there are clearly defined outcomes arising from easily identifiable inputs. In almost all cases, we ignore intangibles.

In this case, we can imagine the outputs and apply a value indicator. It's much harder to get a handle on the related inputs because they are usually (but not always) related to intangible costs for which there is no framework.

It therefore behoves those who would apply science to tread cautiously.

Susan Torrico

Extremely helpful information. I'm just starting to blog and this brought a lot of vague SEO concepts into much clearer focus for me. Thanks.

Kevin Reid

Even more complicated is how to measure ROI for a non-profit organization. I hope that this projects will help shed some light on this topic for this segment of bloggers as well.

Anna Sebestyen

Great job, thanks for your thoughts. I think having a well functioning corporate blog in a team style (like Boing Boing) also has a team building effect. Other employees who do not feel like participating in actively writing could be quoted ('thanks for the link, Jason' etc.).
So I think building your inner values could be also highlighted in the list. Maybe I just missed it? :)
Anna

Charley Filda

I found a site that I signed up to for blogging called Mind Deposit. The address is www.minddeposit.com. It's the best blogging tool I've ever seen. No ROI though. But that's not important if you are look for a good tool to organize and display your thoughts with.

Ray Wu

Nicely done. Measurements are hard to set and risks tend to be higher than rewards for a lot of large companies.

Sharran Srivatsaa

This is awesome. Having just started a blogging project for the Vanderbilt MBA program, this is a valuable resource to show the value-add. Thank you for taking the time to put this together!

Deniel

Extremely helpful information. I'm just starting to blog and this brought a lot of vague SEO concepts into much clearer focus for me. Thanks.

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