Hung up on social media ROI? What about the cost of NOT using social media?

Photo courtesy wwarby via FlickrLast week I had the privilege of leading one of the working group discussions at PR + Marketing Camp here in Seattle along with Jeff Sandquist of Microsoft's Channel 9. A major topic of the day was social media ROI.  

Even though a 2009 survey found that 84% of marketers don't actually measure the results of their social media programs, the concept of ROI is getting an increasing amount of attention. That's not surprising. We're well past the "gee whiz" phase with social media. As corporate marketing departments put more money and people into social media outreach, top-level executives at those companies want to see some tangible (read: bottom line) benefit from spending it. Yet, while there are now many more analytical tools available and a growing body of work that puts some structure around the concept of social media ROI, after the day's discussions I came away thinking that the industry as a whole is nowhere near close to reaching a consensus on what to measure, how to measure, or how to translate the results into something that non-social media-savvy executive can grasp.

Which is a problem. Because it's becoming more evident that companies that don't engage with their customers using social media are putting themselves at serious risk when something goes wrong. One example is Over Easter weekend last year, Amazon faced a fast-moving firestorm of criticism when gay and lesbian titles disappeared from its sales rankings without explanation. A single blogger raised the issue on Saturday and literally overnight #AmazonFail became a trending topic on Twitter. Amazon, which had no real social media strategy or presence on any of the major social networks (and still doesn't), struggled rather ineptly to address its increasingly vociferous and angry customers and outside critics. The story made the leap from blogs and Twitter to the mainstream media in a day. Had Amazon been an active social media participant, it might have been able to tamp down the flames before they got out of control by engaging with its critics immediately and directly.

So, what's this have to do with social media ROI? Well, here it is: in the two trading days after the rankings issue blew up online, Amazon's stock price fell nearly 5 percent even though the broader markets were largely flat and Amazon had no other news that might have caused such a drop in investor confidence. That 5 percent translated into $1.89 billion (with a B) of market capitalization for Amazon. We're talking real money.

Now, this turned out to be a minor hiccup for Amazon. By the end of the second day, they had explained the ranking issue away as a technical glitch and #amazonFAIL fell off the Twitter leader board. Amazon's stock price resumed its climb and the company suffered only mild bruises to its reputation. 

But what if the problem hadn't been so simple to fix (like the problems Toyota is facing right now)? Or what if, instead of a high-flyer like Amazon, the company had been one that is on less solid ground with investors? Those losses might not have been so easily reversed.

The lesson? While it might be hard to measure social media ROI, not having a social media strategy can be very, very costly.