Social Media ROI = Brand Equity + Sales

“Moments ago (when I typed this), Gary was talking about a person in the board room who was hounding him, “What’s the ROI of social media? What’s the ROI? What’s the ROI?” Gary’s answer, when he’d finally had enough? “What’s the ROI of your mother?””

Scott Stratten was asked the same question by a friend. What is the ROI of Social Media? He asked his friend what the ROI was on their friendship!

What’s the COMPLEX meaning of ROI?

In finance, rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return, is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment. ROI is usually expressed as a percentage. [Wikipedia]

What’s the SIMPLE meaning of ROI?

What do you get out for what you put in?

I understand when some people are fixated on the Social Media ROI topic. Watch this video of Gary where he talks more about this. They’ve been trained that way. MBA grads, business professionals, they’ve been trained that way. And they’ve been trained in the right way. However, things have changed. And we have to adapt. We have to adapt our thinking and our actions. Web 2.0 has changed how we do EVERYTHING. The way we work. The way we meet people. The way we socialise. The way we research. They way we learn. And on and on.

Gary doesn’t reveal details in his keynotes. Read Chris’ post to understand why. But there are details to Social Media ROI.

I’ve never seen an ad from Gary. This means that no advertising about Gary or his brand has reached me. Remember, I’m in South Africa, Gary is in the US. Yet, I’m a fan of Gary. I support his work. I blog about him, repeatedly. I model some of the things he’s done. I promote his work. I share Chris’ sentiments when he says: “I’m a fan of passion. I’m a fan of people who humanize business, and Gary is that 100%. No matter what, Gary is human, and so, I’m a fan. Thank you, Gary.”

There’s a word for this in the business world. It’s called Brand Equity.

What is Brand Equity?

Uncle Wikipedia says: “The study of brand equity is increasingly popular as some marketing researchers have concluded that brands are one of the most valuable assets a company has. Brand equity is one of the factors which can increase the financial value of a brand to the brand owner, although not the only one.” Read more.

I was taught this on one of the business courses I attended. When selling your business, your brand equity can increase the selling price of your business. Why? Because above the money in the bank and the assets you have, the brand equity is also valuable. Your perception in the world has value. Your community is valuable. They buy your products.

Apple has immense brand equity, wouldn’t you say? I’ve repeatedly said, online and offline, that I’m an “Apple fan-boy” because I simply love their products. Do I love them because they’re cheaper than their competitors. Nope. They’re not cheaper. I love Apple because of the quality of product, and the culture around the product. That’s brand equity. I’ve never heard anyone say “I’m a Microsoft fan-boy” – have you? Microsoft does have good products, and they’ve made a lot of money, but the brand equity is not as high, or in other words, it’s negative brand equity. The common perception of Microsoft is that we have to use them, but we don’t really want to.

Brand equity is valuable, but largely intangible. This is why Gary likened Social Media ROI to a mother. Is a mother’s love tangible? It’s enormous, but largely intangible. Consider Einstein‘s quotation in the image above: “Not everything that counts can be counted, and not everything that can be counted counts.” Think about it for a second. Reflect on it.

Let’s move on.

I’ve purchased Gary’s book Crush It! (a New Your Times Bestseller) as a gift at one of my Social Media talks. I also bought an audiobook of Crush It! which I still listen to regularly. Okay, two small sales. So what! So what? So they add up. There are thousands of people like me. Due to Gary’s online profile, he has signed 10-book deal, and The Thank You Economy, his second book, has already been published. Now we’re talking millions. That’s real money.

There’s a word for this in the business world. It’s called Sales.

We’re all trying to sell. That’s the only reason we’re in business. Advertising is becoming way too expensive, and the value of advertising is also decreasing. Social Media is the new wave of marketing. And it’s no bubble. Don’t listen to the naysayers. Listen to those who are walking the walk. People like Gary. And Chris. I won’t include myself in that list, but hey, I’ve made some sales through Social Media. I’ve been on radio, in magazines, in newspapers, that counts as brand equity, right?

Don’t let anyone tell you there’s no value in Social Media. There is!

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Breaking the rules

Being a conformist rarely spirals into greatness. It is those who have challenged common thinking and practices, that have become legends. Google and Apple had done brilliantly along these lines.

With the ability to add as many links and ads on a web page as you want, Google chose to design an ultra simple home page, with a logo, a text box, and not much else. That was the Google homepage. That’s how Google became a household name. While everyone was jumping at banner ads and flashy animated ads, Google stuck with simple text ads. There is the rise of PPC and Google AdWords, raking in $21 billion in revenue for Google in 2008.

With MP3 players flooding all over the world, their capabilities expanded. They had fm radio, recording capabilities, etc. Then the iPod was launched, and it was the most simple of devices, and it could just play music. It took the world by storm. The new iPod Nano can record video yes, but the product has been established, the entrance into the marketplace was simplicity.

Henry Ford said: “If I had asked people what they wanted, they would have said faster horses.”

Malcolm Gladwell wrote a very interesting piece for The New Yorker (May 11, 2009), and it’s all about breaking the rules and the rise of the underdog.

Gladwell says:

David’s victory over Goliath, in the Biblical account, is held to be an anomaly. It was not. Davids win all the time. The political scientist Ivan Arreguín-Toft recently looked at every war fought in the past two hundred years between strong and weak combatants. The Goliaths, he found, won in 71.5 per cent of the cases. That is a remarkable fact. Arreguín-Toft was analyzing conflicts in which one side was at least ten times as powerful—in terms of armed might and population—as its opponent, and even in those lopsided contests the underdog won almost a third of the time.

You can read the complete article here.

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CEO of the Decade

Fortune Magazine has named Steve Jobs, CEO of Apple, as the CEO of the Decade. That’s really extraordinary, especially considering that he stands alongside Google’s Schmidt, Buffet, and Gates.

After being booted out of the company 80s, he returned back in the 90s, survived two brushes with death, and some other challenges – and despite all of this Apple is now one of the most valuable companies in Silicon Valley./

Apple products like the iMac, MacBook, iPod, and iPhone are becoming household names, and have expanded far beyond the tech and creative communities. Apple is a culture. A Tribe. And it’s only going to get bigger, and better.

Fortune says:

He’s a visionary, but he’s grounded in reality too, closely monitoring Apple’s various operational and market metrics. He isn’t motivated by money, says friend Larry Ellison, CEO of Oracle (ORCL, Fortune 500). Rather, Jobs is understandably driven by a visceral ardor for Apple, his first love (to which he returned after being spurned — proof that you can go home again) and the vehicle through which he can be both an arbiter of cool and a force for changing the world.

You can read the complete article here.

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