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January 25, 2007

New ROI of blogging report from Forrester

Back in October, I posted our initial research on the ROI of blogging. Many of you contributed your ideas, thoughts, and criticisms – thanks so much as it was extremely helpful.

We’ve (finally) published the report – and actually, there are two of them. The first is “The ROI Of Blogging: The “Why” And “How” Of External Blog Accountability”. It’s available at URL for Forrester clients and also for purchase. I’ve included the excerpt below:

Many large companies stand on the brink of blogging, yet they are unwilling to take the plunge. Others, having dove in early, now face the challenge of managing existing blogs without the ability to show that they effectively support business goals. While blogging’s value can’t be measured precisely, marketers will find that calculating the ROI is easier than it looks. Following a three-step process, marketers can create a concrete picture of the key benefits, costs, and risks that blogging presents and understand how they are likely to impact business goals. This, in turn, enables marketers to answer the key questions, such as whether to blog or not to blog, or to make smart choices about an existing blog.

We also published another piece of research, “Calculating The ROI Of Blogging: A Case Study, A Look At The ROI of General Motor’s FastLane Blog” which applies the framework we describe above. Again, here's the excerpt:

Forrester used the process outlined in the first document in this series to calculate the ROI of General Motors’ FastLane blog; but, this is not merely an exercise to generate a number. Using scenarios, General Motors can understand the risk and impact of increases and decreases of a key metric — the number of press mentions — on the value of the blog. With this knowledge in hand, General Motors can make critical businesses decisions, such as whether to invest heavily in innovations that will rekindle press attention.

We developed a framework that allows companies to track and measure the benefits of external blogs. From the companies and individuals we spoke with, the most common benefits are; increased brand visibility, savings from customer insights, reduced impact from negative user-generated content, and increased sales efficiency. The hard part is coming up with metrics that reflect these benefits, and more importantly, how to value those metrics.  Here's the graphic from the report:

 

Blogbenefits_3

Let’s take for example the FastLane blog. One of the key goals of that blog was “to share information about its products and to start a dialogue between GM leaders and customers”. So a key metric would be to see how many times customers wrote a comment. FastLane has about 100 people commenting on the blog each month, which is equivalent to gaining customer insight on products and brands from a traditional focus group. We estimated that the value of this was equivalent to running a focus group every month at the cost of $15,000 a month, or $180,000 a year. Voila – there’s the value of the blogging benefit laid out in black and white. The case study contains a full-blown Excel model (Update: this is available only to clients) showing how we calculated the FastLane blog ROI in excruciating detail.

But the key metric that we think drives the value of the FastLane blog was the number of press mentions it received, which we valued on the basis of "advertising equivalence" -- how much would it have cost GM to buy an ad in the same news outlet? This is a long standing metric used by the public relations industry to measure its value. We found that this metric drove a significant amount part of the FastLane blog's value -- and that press mentions were decreasing significantly over the last two years. With this knowledge, GM can decide whether to take steps to increase press activity -- or to de-emphasize this metric in favor of other ones in the calculation of the blog's ROI.

As you can see, this process and framework is not cut and dry, black and white. Rather, it’s highly subjective, requires tremendous judgment, and is open to interpretation. But it is a starting point for an otherwise nebulous activity.

We invite you to provide your ideas and feedback as this is an ongoing exercise -- we believe we're just starting to scratch the surface when it comes to blog measurement. As the number of companies with blogs grows, we'll be able to add to and refine the framework.

Finally, here are some frequently asked questions that I’m getting about the ROI of blogging, which I thought would be helpful.

Q: Is there a standard ROI for blogs? A: Nope – sorry, it isn’t that easy! Just as there isn’t a standard ROI for a Web site, there’s no standard for a blog. It depends on what the goal of the blog is and also how much investment the company (and the blogger) puts into it.

Q: What’s the best way to measure the effectiveness of a blog? A: Again, it starts with the goal of the blog. I strongly suggest that companies start with the goal, develop metrics that measure the attainment of that goal, and find ways to assign value to those metrics.

Q: But aren't blogs risky? How do you take that into account? A: We definitely take risk into account by generating scenarios that show the impact of low-likelihood but high impact events -- such as a lawsuit.

Q: Our CMO/CEO/CFO won't let us have a blog until we can show him/her the definitive ROI of a blog. Help!! A: It's not an unreasonable request -- they don't really understand the value of a blog and see just the potential cost and risk. By going through the exercise of defining and quantifying the benefits, costs, and risks of a blog, you'll be educating your C-level executives while also demonstrating the discipline that they expect.

Q: But this is heresy - you can't put the benefits of a blog on a spreadsheet! You've just got to believe that blogs are a good thing because they develop conversations with customers. A: At the core of my bleeding heart pumps the soul of a pragmatist. Sure, I buy into all of the positive, feel good reasons to have a blog. But when your manager asks why the company has a blog versus spending more time and resources on XYZ initiatives, it sure would be helpful to be able to show a spreadsheet of those blogging benefits in dollars and cents.

 

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Comments

Stephen Turcotte

Great work Charlene and co. I think this report is literally a key for companies seeking to understand how blogging can improve their bottom line.

Dennis Howlett

Charlene - great work but...the link to the Excel sheet is broken and it would have been good to see the case study as a 'for free' download so that context could be applied to the way in which the spreadsheet was compiled.

Unfortunately, we cannot do that.

Given you're asking the blogs to provide further feedback, I feel it would be a reasonable gesture.

tmandel

The measures seem good, and this is really useful work, Charlene!

At the same time, is there not something *pragmatic* as well about starting conversations with customers, even when the roi of those conversations can't be measured in the short term? I.e. in long-term retrospect, you'll be able to tease out the effect of market conversations on the company's position.

Given the modest cost of blogging initiatives relative to other marketing expenses, isn't *experimentation* warranted?

Todd Tweedy

Charlene, I like the framework you've introduced and have a few questions around the focus group value numbers you used in your example. When you came up with your $15,000 cost to run a monthly focus group what did you base this number on? Is the number fully loaded including all agency costs plus any recruitment, transcription, and video fees? Did you assume 10 participants each contributing 10 insights in one session? How long would the session run? 90 minutes? I think you know where I'm going. I feel the $15,000 for a single focus group session is a bit on the high side even if you did it in NYC. Futhermore, I think 12 sessions is too many since the "client" is not likely to run sessions during July nor December. Love to hear your thougths and am looking forward to reviewing the spreadsheet once the link is fixed.

Charlene Li

Thanks for all of the comments.

Excel link: I just tested it and it's working. I would love to provide the report for free as context, but can't given Forrester's business model. I'm working on it...

tmandel: I've found that some executives has such a block about blogging, that they can't get around it. They just don't believe that the "conversations" are worth it. And they aren't thinking about the cost -- they are thinking about the *risk* which seems to loom over their heads. It's a fundamental culture shift that they are facing -- letting their employees speak freely -- that makes it so difficult for them to let go of that control. So the moderate benefits don't seem to warrant the risk, and hence the no-go decision on blogging.

Todd, on focus group costs: I can see your point. I based on my focus group costs on what we typically see in marketing budgets. Of course, some will do it for cheaper, some will do it for more. In any case, I want to stress that the framework is flexible enough to accommodate whatever metrics or valuation you deem appropriate.

Jeff Nolan

Charlene,
You hit the nail on the head in pointing out the cultural gap most executives are experiencing and it's the direct result of the school of marketing that teaches them to speak to the market with a single voice, always be on message, and essentially not talk about the things that potentially volatile, irrespective of the benefit in doing so.

I don't mean this to be disrespectful to any of the very smart senior executives I've worked with, but the fact remains that we have really dumbed down an entire generation of executive leaders who have been taught to not speak their own minds but what someone else prepares for them. It's no wonder we don't see many executives blogging, that would require far too much originality.

The world of politics is basically in the same boat and ironically it is perpetuated by the media itself. When every word is scrutinized for meaning and innuendo why would anyone risk being off message even if it's potentially very important or valuable.

Dave

great summary piece & highlights charlene... hope i can get to see the entire report!

another measurable benefit you might want to reference / include is CUSTOMER SERVICE cost.

when i was at PayPal running our developer network program, one of the primary reasons we put together the PayPal Developer Network and launched our first blog was to:
* provide updates on recent product releases & features
* get that information out as fast as possible, and
* reduce customer service contacts & cost

altho there were/are other channels for improving customer service / reducing cost (we also had forums & message boards, a regular email newsletter, and other website updates), the blog and its associated RSS feed was one of the quickest ways for us to get information out to our users & developer communities about product updates. several times when we rolled out API changes -- or introduced bugs that we had to fix -- this was our simplest & fastest communication channel.

while i don't have a considered approach to calculating how much this may have saved us in customer support costs, i know that we saved our users from having to make a number of inquiries via telephone and email, and that translated into reduced load on our customer service agents.

anyway, again appreciate the article & quantification of value to blogging... helpful for lots of folks i work with :)

regards,

- dave mcclure

Ajay Mungara

Charlene,
You are right on target with your Benefit/Value/Metric framework. It is very critical that corporations need to clearly see the business benefit of blogging before blogging gets the required management support. I think "saving on the customer insight" is a key benefit for large corporations (product feedback we get via the blog comments).
Blogging as a vehicle also helps connect with your audience on a very personal level where customers will be able to talk to real people hidden behind the curtains of large corporations. It is really nice to know some real person with real product insights in a corporation (instead of the message being filtered by many layers of PR & Marketing). This is all about building openness and trust with your customers and this can be really hard to measure.
For example: Microsoft’s Channel 9 website helped create a more human connection with the company and I think it played a role in uplifting the PR image of the company. So, how do we measure this benefit?

chris reagan

Charlene:

When 'we the consumers' uncover a timely, considered and considerate method of dialogue with a firm's products/services, we benefit as we investigate whether that firm is our vendor-partner or simply seller. Firms that embrace our queries, both earnestly and dynamically, make us happier -- this confirms or guides our purchase.

Company blogs can embrace and nurture the discerning, influential, impactful consumer. Surely, blogs will soon allow interaction well beyond simply posting questions/offering comments. Yet, this furthering of Blogs leaves a strictly empirical ROI question just a bit out of reach.

John Cass

ROI is the achieved return on investment rather than what might be. In your study do you show the actual return on investment? Perhaps what savings GM made from the research data the company gathered from the blog?

I actually find the GM blog a strange choice for a case study on the ROI of blogging. The GM Fastlane bloggers rarely if ever answer any comments from blog readers. While GM does explain that the company could not answer all of the questions and comments from readers in several posts, most blog readers don't read those posts. I have chatted with a few of the readers and most were not happy with the lack of response, and had become rather discouraged about GM, even more than before.

You mentioned the benefit "Reduced impact from negative user-generated content".

Not answering blog reader comments appears to be generating negative word of mouth for the General Motors. Did you measure the consequences of not responding to a blog reader comment in your study?

François

Hi Charlene,

Great post! But link to the excel file is still broken (page not found).

Thanks for your help

DofAM

Very good post. In many ways this is a great way to measure the success of blogging.

Per a comment I left on Two Point's dialogue about your post, I think blogging is very similar to PR. You may think it’s different, but in many ways third party credibility — which is my definition of PR — is garnered. Whether that’s placement in a search engine or a cross link to another blog is irrelevant. The visibility of the entity is raised by other parties.

ahs

Thank you for an excellent article, Charlene. The framework is helpful for clarifying blog objectives and measuring effectivess.

Vince Kuraitis

Forrester folks: is this issue framed correctly? is the issue of doing a blog -- or more broadly whether to participate in social marketing -- better framed as a strategic decision rather than one about ROI?

"Andy Grove, the boss of Intel, the world’s biggest chipmaker, recently summed up the online pioneers’ attitude when asked about the return on investment from his firm’s Internet ventures: 'What’s my ROI on e-commerce? Are you crazy? This is Columbus in the New World. What was his ROI?'" Economist, May 1997

If GM is worried about the ROI for its blog, they are looking at this through the wrong lenses. Not being privy to the Forrester analysis, I ask "Is ROI the right measure? Is it meaningful for most companies?"

In the GM example, how much did they have to invest to create and promote a blog? ...perhaps a few salaries, some PR $$...a small company could do this for 5 figures, even if GM might have gone into 7 figures.

So what's the big deal? Let's assume GM spent $10 million and they doubled their money...this is a rounding error for a company like GM. GM marketers, who spend hundreds of millions on marketing -- should be rewarded for moving the meter on market share, not for supposed ROI on a small line item marketing budget item.

Andy Sack

Great post. As I spend more time blogging myself, I've been thinking about it's value. This piece is very helpful....and thought provoking.
Andy

Steven Burda

Good read, Thanks!

- Steven Burda, MBA
www.linkedin.com/in/burda

Brian P Halligan

Charlene,

Great post! I think the model you folks have developed is a pretty thoughtful one.

I thought you would be interested in this interview w/ ZBIZ.TV where the topic was also the ROI of BusinessBlogging:

http://www.zbiz.tv/category/hubspot-brian-halligan/

Rachel Clarke

Charlene, looks like a great report. I'm guessing this is going to give me a great base to extend it to other forms of interactions and work with clients to an agreed metric.

Revgi

Using blogs for the last 3 years and a half, I really appreciate your survey. It's the right message to send now that corporate blogging is moving ahead but I would like you to consider an additionnal frame of analysis in this ROI calculation which I have used in several case studies too... as it take into account the 4 following axis:
- Short Term vs Long Term ROI
- Direct Impact vs Indirect Impact of ROI

Please let me know your comments on

http://nano-marketing.viabloga.com/news/forrester-sees-roi-in-the-blog-adventure

Cheers,
Gil

Have

Ivan

Very useful article, thank you very much.

Damon Billian

How did I know that Dave McClure (a former colleague) would be on this post? Great guy..

"another measurable benefit you might want to reference / include is CUSTOMER SERVICE cost."

I agree with Dave here & companies shouldn't just think the benefit comes from only having a blog (forums, message boards, etc.) Almost as importantly, all of these platforms (blogging, boards) are where customers come together to help one another & tend to answer questions that would normally go into a CS channel.

jc

Interesting! I just started a blog and this will be alot of help. Thanks!

Glenn

Sorry to be a killjoy, but the whole blog ROI calculation falls down as it is based on comparing purchased advertising to editorial content, which is not a "long standing metric used by the public relations industry to measure its value" but a highly discredited way of measuring PR value. I suggest you all read the post by PR measurement guru K D Paine on this point:

http://kdpaine.blogs.com/kdpaines_pr_m/2007/01/shel_israels_wo.html

Devon Dudgeon

While blogs can provide customer insight, they should not replace focus groups. In the former, you have a self-selected audience commenting about a topic of their choice. In the latter, you have a targeted/individually-selected group of people answering a defined set of questions in a controlled environment.

By the way, what is the ROI of your blog?

Charlene Li

DevonInspiration: I've calculated the ROI of my blog -- and unfortunately, I'm not at liberty to discuss it in detail as Forrester is a public company and the information would be material. However, I can share some of the ways I measure the benefits. They are namely: 1) press references (posts get quoted without any additional work on my part); 2) press call me for quotes; 3) clients and prospects call me for additional follow-up on ideas discussed on the blog; 4) some of these prospects sign up as Forrester clients; 5) some of these prospects and clients engage Forrester in additional advisory and consulting work. And one very valuable benefit is that I get great feedback from people like yourself, which is invaluable to my research.

Suffice it to say that the blog pays off handsomely, given the time and monetary investment we put into it. Take a look at the number of new blogs from Forrester and that should be evidence that the company believes in this medium.

Devon Dudgeon

Thanks for your response and I'm glad your blog is paying off.

mike

i have studied ur book the initial research and i really have got more information and so its the fantastic book
very well.

cosmetics

Charlene, looks like a great report. I'm guessing this is going to give me a great base to extend it to other forms of interactions and work with clients to an agreed metric.

tobias

Hi Charlene, great blog. And the studies sound really interesting. Too bad they are not available to the public without paying a fee.

I have a question: may I use the table graphic showing benefits/metrics/values in my thesis on Corporate Blogging?

Cheers
Tobias

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