Posted by Raj Dash

While companies are starting to adopt Social Media for online marketing campaigns, and even letting employees participate, the question of ROI (Return on Investment) arises, along with doubts about what metrics to measure. How do you know how effective your social media campaigns are if you’re not measuring any metrics, let alone an overall ROI? Below, we discuss ten important Social Metrics for companies.
 
According to 2009 Mzinga & Babson Executive Education study, over 80% of professionals do not measure ROI for their company’s social media programs. Granted, Social Metrics and their measurement techniques are relatively new, and this might account for the lag in tracking. However, there are some organizations measuring social metrics, which enables them to eventually measure ROI. Marketing Sherpa’s survey of 2,000+ marketers shows the following three social metrics at the top of what’s being measured:

1. Visitors and sources of traffic
2. Network size (followers, fans, members)
3. Quantity of commentary about brand or product

These are easily understandable common social metrics. However, with some C-level executives saying that they want to measure ROI from social media but don’t yet know the value of certain types of social media, there has to be more measurement and analysis. Monitoring data is only valuable if metrics relevant to a company are being tracked, analyzed, then applied to improving a Social Media Marketing (SMM) strategy. Each company may have some specific requirements, but here are ten important social media metrics to measure:

1. Social media leads. Track web traffic breakdowns from all social media sources, and chart the top few sources over time. If members of your social media networks are sending referrals, consider measuring this data as well.
2. Engagement duration. For some companies, engagement duration is more important than page views. For example, if you have a Facebook application, how much time are social network members spending using it? Is per-member usage increasing over time? Alternately, if people visit your your company websites from SM (Social Media) sites, how long are they spending? (Also consider tracking which pages they visit.)
3. Bounce rate. Are visitors coming to your site from SM sites but quickly leaving? Maybe your landing page needs better, more relevant copy. Maybe the information they’re seeking isn’t easily found.
4. Membership increase and active network size. This is the portion of your company’s social networks (e.g., Twitter, Facebook) that actively engages with your social media content (e.g., Twitter, Facebook Pages, etc.) Is your collective members, followers, fans network growing, and is there interaction with your content?
5. Activity ratio. How active is your company’s collective social network? Compare the ratio of active members vs total members, and chart this over time. There’ll always be some social network members who are inactive, but if you initiate a campaign to increase interaction, you should also measure the resulting data. Activity can be measured in a variety of ways, including usage of social applications.
6. Conversions. You want social network members to convert: into subscriptions, sales (direct or through affiliates), Facebook application use, or whatever other offerings you have in your overall sales funnel and that can somehow be directly or indirectly monetized. (E.g., subscription to a weekly e-newsletter can be monetized by giving other companies access to your list in the form of advertising.) Measure all types of conversions and chart them over time.
7. Brand mentions in social media. So, you have a highly active social network and members are talking about your company or the company’s brands. Measure and track both positive and negative mentions, and their quantities.
8. Loyalty. Are social members interacting in the network repeatedly, sharing content and links, mentioning your brands, evangelizing? How many members reshare? How often do they reshare?
9. Virality. Social members might be sharing Twitter tweets and Facebook updates relevant to your company, but is this info being reshared by their networks? How soon afterwards are they resharing? How many FoaFs (Friends of Friends) are resharing your links and content?
10. Blog interaction. This is actually more than one metric lumped together. Blogs ARE part of an SMM (Social Media Marketing) toolkit, but only if you allow comments and interact with readers by responding. If you’re doing this, encourage responses either directly in the comments section of blog posts, or via Twitter. (Use a blog widget that allows this.) If your blog’s content is suitable for social voting (Digg, Propeller, Mixx, etc.) or social bookmarking (Delicious, Stumbleupon) sites, install a blog plugin that displays the necessary sharing “buttons”, then track referrals back from those sites.

You can see from the above list that there are both key metrics and variations that you’ll probably want to monitor and analyze, depending on your business objectives. Not all of them are simple metrics to track, and as such do require either or both custom tools and custom reports. Supplement your metrics reports by noting any milestones in your SMM plan. Also, if you run any sort of social campaigns, measure the ROI on specific goals.  Social campaigns could use applications (E.g., Facebook applications like  Mob the Rainbow) to encourage social participation. Measure  application usage and resulting conversions. Finally, the use of complex measurements such as Multiple Moving Averages (MMAs) can show both short- and long-term trends, thus providing you with an overall view of the health of your sites and social networks.

Are there other metrics you measure that you feel are more important for your company? What tools do you use to measure social metrics? Let us know in the comments.

Startups that are searching for a business model need to keep score differently than large companies that are executing a known business model.

Yet most entrepreneurs and their VC’s make startups use financial models and spreadsheets that actually hinder their success.

Here’s why.

Managing the Business When I ran my startups our venture investors scheduled board meetings each month for the first year or two, going to every six weeks a bit later, and then moving to quarterly after we found a profitable business model.

One of the ways our VC’s kept track of our progress was by taking a monthly look at three financial documents: Income Statement, Balance Sheet and Cash Flow Statement.

If I knew what I knew now, I never would have let that happen.  These financial documents were worse than useless for helping us understand how well we were (or weren’t) doing.  They were an indicator of “I went to business school but don’t really know what to tell you to measure so I’ll have you do these.”

To be clear – Income Statements, Balance Sheets and Cash Flow Statements are really important at two points in your startup.  First, when you pitch your idea to VC’s, you need a financial model showing VC’s what your company will look like after you are no longer a startup and you’re executing the profitable model you’ve found.  If this sounds like you’re guessing – you’re right – you are.  But don’t dismiss the exercise.  Putting together a financial model and having the founders understand the interrelationships of the variables that can make or break a business is a worthwhile exercise.

The second time you’ll need to know about Income Statements, Balance Sheets and Cash Flow Statements is after you’ve found your repeatable and profitable business model.  You’ll then use these documents to run your business and monitor your company’s financial health as you execute your business model.

The problem is that using Income Statement, Balance Sheets and Cash Flow Statements any other time, particularly in a startup board meeting, has the founding team focused on the wrong numbers.  I had been confused for years why I had to update an income statement each board meeting that said zero for 18 months before we had any revenue.

But What Does a Business Model Have to Do With Accounting in My Startup? A startup is a search for a repeatable and scalable business model.  As a founder you are testing a series of hypotheses about all the pieces of the business model: Who are the customers/users? What’s the distribution channel? How do we price and position the product? How do we create end user demand? Who are our partners? Where/how do we build the product? How do we finance the company, etc.

An early indication that you’ve found the right business model is when you believe the cost of getting customers will be less than the revenues the customers will generate. For web startups, this is when the cost of customer acquisition is less than the lifetime value of that customer.  For biotech startups, it’s when the cost of the R&D required to find and clinically test a drug is less than the market demand for that drug.  These measures are vastly different from those captured in balance sheets and income statements especially in the near term.

What should you be talking about in your board meeting? If you are following Customer Development, the answer is easy.  Board meetings are about measuring progress measured against the hypotheses in Customer Discovery and Validation. Do the metrics show that the business model you’re creating will support the company you’re trying to become?

Startup Metrics Startups need different metrics than large companies.  They need metrics to tell how well the search for the business model is going, and whether at the end of that search is the business model you picked worth scaling into a company. Or is it time to pivot and look for a different business model?

Essentially startups need to “instrument” all parts of their business model to measure how well their hypotheses in Customer Discovery and Validation are faring in the real world.

For example, at a minimum, a web based startup needs to understand the Customer Lifecycle, Customer Acquisition Cost, Marketing Cost, Viral Coefficient, Customer Lifetime Value, etc.  Dave McClure’s AARRR Model is one illustration of the web sales pipeline.

At a web startup, our board meetings were discussions of the real world results of testing our hypotheses from Customer Discovery.  

We had made some guesses about the customer pipeline and now we had a live web site.  So we put together a spreadsheet that tracked these actual customer numbers every month.  Every month we reported to our board progress on registrations, activations, retained users, etc. They looked like this:

User Base

• Registrations (Customers who completed the registration process during the month)
• Activations (Customers who had activity 3 to 10 days after they registered.  Measures only customers that registered during that month)
• Activation/Registrations %
• Retained 30+ Days
• Retained 30+/ Total Actives %
• Retained 90+ Days
• Retained 90+/Total Actives %
• Paying Customers (How many customers made $ purchases that month)
• Paying/(Activations + Retained 30+)

Financials

• Revenue
• Contribution Margin

Cash

• Burn Rate
• Months of cash left

Customer Acquisition

• Cost Per Acquisition Paid
• Cost Per Acquisition Net
• Advertising Expenses
• Viral Acquisition Ratio

Web Metrics

• Total Unique Visitors
• Total Page Views
• Total Visits
• PV/visit

A startup selling via a direct sales force will want to understand: average order size, Customer Lifetime Value, average time to first order, average time to follow-on orders, revenue per sales person, time to salesperson becomes effective.

Regardless of your type of business model you should be tracking cash burn rate, months of cash left, time to cash flow breakeven.

Tell Them No If you have venture investors, work with them to agree what metrics matter.  What numbers are life and death for the success of your startup?  (These numbers ought to be the hypotheses you’re testing in Customer Discovery and Validation.) Agree that these will be the numbers that you’ll talk about in your board meeting.  Agree that there will come times that the numbers show that the business model you picked is not worth scaling into a company. Then you’ll all agree it’s time to pivot and look for a different business model.

You’ll all feel like you’re focused on what’s important.

Lessons Learned

Large companies need financial tools to monitor how well they are executing a known business model.

Income Statements, Balance Sheets and Cash Flow Statements are good large company financial monitoring tools.

Startups need metrics to monitor how well their search for a business model is going.

Startups need metrics to evaluate wither the business model you picked is worth scaling into a company.

Using large company financial tools to measure startup progress is like giving the SAT to a first grader.  It may measure something in the future but can only result in frustration and confusion now.