Welcome to our Special Guest Blogger Matthew Lees

I grew up watching television shows where each week there was a “Special Guest Star” on an episode each week. These guests provided a little extra to the show and usually were cool celebrities. Think of all the villains on Batman for example or the Brat Pack on “Vegas” or the vacationers on Fantasy Island…or for those of you a little younger, the guests on the Simpsons.

Following that idea, I’d like to introduce our Special Guest Blogger, independent analyst Matthew Lees.

Matthew is a well respected analyst in the Social Media and Online Community World (see his bio here). He is the author of reports through the Patricia Seybold Group such as:

1. Selecting An Online Community Platform
2. Best Practices In Crowdsourcing
3. Analyst Report: Lithium’s Social CRM Suite

After reading his research and reviews of his findings, I thought Matthew truly understood how to make social media technology work in an enterprise organization. So, like all good social media practitioners I followed him on Twitter (@mlees) and his blog. Matthew and I first met in person at one of Forum One’s Online Community Unconferences. We’d been reading each other’s blogs and reports and discovered that we come to the industry with the same high level focus… using these tools to improve business results. While Matthew focuses on the technology and its impact, we focus on the process and the users. Together, we cover the issues that all enterprises need to succeed in their social media projects.

We decided in late December over a crab cake lunch here in Maryland, that we should find a way to collaborate together. Our idea is to inform, educate, and drive the best practices we’ve developed to a broader audience with this blog and our twitter accounts. Matthew will be posting here over the next few months both independently and collaboratively with our team members.

If you have a suggested issue of topic for us to cover, please contact us by adding a comment on this entry or by using our contact form.

So, with that said welcome Matthew!

Mike Rowland, President

Social Media Metrics – Driving to Value

We’re members of the Online Community Research Network and recently received the latest report on Community Metrics derived from a survey of the membership. While we’re happy to see a lot of progress in the responses about tying measurement to business objectives, we continue to see confusion about measuring value. Over the past ten years, we’ve developed a methodology that can help online community and social media managers structure their reporting in order to focus on the value their efforts produce in terms of business objectives.

Looking  at the report’s question #12 (Were your community’s metrics created in support of your organization’s broader business goals or were they created independent of a corporate business?), the following responses were given:

• 47% Created to support existing business goals
• 31% Created independently but helping refine existing business goals
• 22% Neither of the above (summarized from three additional responses)

Looking at what metrics the respondents use to support or refine existing business goals provides insight into the confusion over what constitutes value in online community and social media efforts.

Question 19 asked “What are the three most important community key performance indicators (KPIs) in the reports you send to upper level management?” The answers are a startling contrast to the answers to Question 12:

1. Number of Page Views or Clicks
2. Number of Site Visits
3. Number of Unique Visits

Why are these responses startling? Because the metrics are traffic metrics not value metrics. These are base level metrics not KPI worthy metrics for upper level managers. (In fact, three of the top five metrics measured as detailed in an earlier question were traffic metrics too: Unique Visitors, Page Views, and Visitors. Only two were not: Registrations and Posts.)

What these two questions’ responses demonstrate is that the respondents are still struggling with determining value from their community work that truly builds into measurable business objectives.

When asked about ROI, 71% of respondents confused engagement and traffic metrics with value. Only 29% correctly identified a tangible value metric to use in measuring ROI.

To provide a little clarity in reporting metrics, let’s look at how Impact Interactions’ reporting methodology can help. First, our categories are structured as follows:

• Traffic - The basic building blocks that measure “How Many?”
• Behavior – The second level of metrics measuring conversion and engagement
• Value – The highest level of community metric where the activity has an economic or dollar value associated with it (This is what management really cares about!)

Some of the actual metrics that we use for clients are as follows:

1. Traffic - Unique Visits, Unique Visitors, Page Views, etc.
2. Behavior- Page Views/Unique Visit, Page Views/Unique Visitor, Active Members/Unique Visitors, New Registrations/New Unique Visitors, Total Registrations/Total Unique Visitors, Downloads/Registered Member, Content Added/Registered Member, Content Added/Unique Visitor, Downloads/Unique Visits, Full profiles completed, Referrals from Twitter/Facebook/YouTube, etc.
3. Value – Number of successful customer support resolutions in the community, Total Contact Sales Inquiries/ Total Unique Visitors (or Registered Members), Total Leads Qualified/Generated, Product Referrals, Positive Product Reviews as a % of Total Product Reviews, Direct Revenue Generated from Community Activities, Length of Sales Cycle for community member vs non-member, Average Purchase Size/Frequency for community member vs non-member, etc. 

Take a look at those metrics again. The first two categories of Traffic and Behavior can usually be obtained using the platform’s tools (like Jive, Telligent, or Lithium) or through your web analytics’ tools (like Google Analytics, Omniture, or WebTrends). The Value metrics take a little more work. In fact, to really be able to perform a realistic ROI calculation, you will need to get help from outside the community/social media area of your organization.

To derive an ROI related to marketing objectives from a community, you’ll need to access your CRM system. For a support ROI, you’ll need to know the cost per interaction in complementary/competitive areas such as a call center. The standard tools won’t get you there, you’ll have to build relationships within your organization in order to really build a solid analysis that ties back to business objectives. An ROI model built on traffic will contain far too many holes to be useful.

We’ve been helping our clients with these issues and have developed a strong set of best practices that can help you succeed in your reporting. Please feel free to share your insights into this issue and ask questions about reporting and analyzing your community and social media efforts. We’re happy to answer them and help reduce the confusion.

Online Community – Moving Beyond Metrics to ROI

We gave a presentation on building ROI models for online communities at the Online Community Unconference in Mountain View, CA on June 10th. It was added because so many of the participants stated that ROI and calculating the value of their community was the most important issue they faced.  So, we didn’t have time to build a true presentation, but rather lead a workshop for participants to learn more. It was lead by our president, Mike Rowland.

Here are the summary notes taken during the session:

• Have to first identify what is the economic value of the community to the organization offering it: (Don’t confuse traffic or behavior metrics with value)
  • Cost Avoidance
  • Increased subscription rates or lower churn rate
  • More frequent purchase rates
  • Higher purchase level/amts
  • Faster close for large item sales
  • Reduce lead generation cost
• Once you’ve identified your value metrics, break down your metrics into 3 buckets to look at communities:
  • Traffic – PV, visits, visitors, etc.
  • Behavior – What they do when the get there, who they are, download/visit, contribution/member, responses by employees vs. customers
  • Value – can attach an economic value to it. Need $ to get to a true ROI model. See above list.
• You have to build relationships w/ the folks in your company. Need access to other systems. You cannot build ROI from community analytics provided by software vendors or from traffic and behavior metrics alone. 
• ROI Frameworks:
  • Cost Avoidance
    • The person who proposes the question needs to verify the answer. This is a feature needed in the platform.
    • # of community support resolutions X $ complimentary support resolution (1-800 number) = total cost avoidance -> economic value
    • Track over set period of time (e.g. quarterly or yearly)
    • ROI = (total economic value – total costs to set up and run forum) / total costs –> over one period and as a percentage
  • Increased subscription or reduced churn
    • Customer database compared to community database
    • cust. database = Average churn rate (e.g. the number of months the avg user subscribes) X price/subscription = customer value
    • Community database – look at active members and see if the churn rate is better or worse.
    • Price will be the same, so you’ll have to see if the churn rate was more or less. If subscriptions are longer, than you have a higher customer value for community members.
    • Shows you slowed the churn rate down.
  • More frequent purchase or Higher Purchase level/amts
    • Use your eCommerce DB or CRM system
    • What is the avg amt customers spend/purchase?
    • go back to comm DB and parce out active members and compare to ecommerce DB (which ones spend more/purchase?)
    • Do comm members have a higher spend/purchase? active comm users X avg $ they spend = economic value
    • Need to trend this and see how it fluctuates.
    • what is the average number of items in completed shopping activity? (e.g. 1.6 items) Do comm members buy more?
    • Avg cost/item X avg # items = economic value
  • CRM decrease cost
    • Want to find what avg value of customer is
  • Faster close of sale (Good for large purchases like software or hardware systems)
    • How fast are organizations moving through your CRM system to sale?
    • Identify active organizations in community DB to compare them to avg organizations.
    • How long does it take the avg. organization to go through sale stages? What’s the cost/sale? Do active organizations in your community go through more quickly and spend more?
  • Lead generation cost
    • Similar to above, but use cost to generate a lead for average customer versus those which originate in community/social media campaigns
• How can you tell if a user came to your comm and then bought your product through a 3rd party reseller? You can’t unless your resellers provide access to their databases which is next to impossible to get.
• Users of support communities become brand neutral after their issue becomes resolved.
• Hidden costs of community for ROI Analysis, make sure you count these:
  • Servers
  • development costs
  • customizations
  • widgets
  • maintenance
• Make sure that you are amortizing your costs across the same time period as your economic value or you will skew your results.

One point to remember is that the value of communities really is derived from active members, not all members. So define your active members with criteria that meet your behavioral key performance indicators (KPIs). For example, an active member can be someone who posted in a forum, downloaded a featured whitepaper, uploaded content, or viewed a webcast in the past month. For B2B especially, it doesn’t have to be an activity within the past week as most B2B community members average 2-3 visits per month unless they are deep into the sales cycle.

The number one issue to watch out for when building your ROI framework is the use of proxies. If you cannot get the data, don’t guess at a proxy for the value because the more proxies you utilize the bigger the house of cards that you build.

Lastly, value can be a set of different items. For a subscription based community value can be both churn rate differential and purchase levels. ROI is not a single value formula, it is a multiple value formula in most cases as there is marketing value in support communities and vice versa. So make sure that you are at least attempting to capture as much of the value drivers as possible in your analysis.

Want to learn more about online community or social media ROI? Contact us today or leave a comment.

B2B Communities – What Works

We gave a presentation at last week’s Online Community Unconference (site is open to the public as of June 19th per Forum One) in Mountain View, CA on B2B Communities. We weren’t surprised by the number of attendees looking to learn more about the best practices for running a B2B Community, but were surprised a little bit by some of the misperceptions on managing them.

Top Best Practices for B2B Communities:

1. B2B Community Members have higher expectations than B2C members. You must engage with them as they want to engage with your company just as much as they want to engage with their peers.
2. B2B Communities require internal SMEs to engage early and remain committed to meeting member needs until external SMEs can compliment the internal SME efforts.
3. Third party applications like Twitter and Facebook should not be used as external competitive communities, but rather should be utilized as beacons to drive traffic to your community and key information.
4. You can measure the ROI for B2B communities, but you cannot get there by using only community software metrics and/or web analytics packages like Omniture or Google Analytics. None of these provide true value metrics that have an economic value associated with them. To get to ROI, you must build relationships within your organization so you can obtain real data on customers, leads, ecommerce transactions, etc.
5. When budgeting for B2B communities, be realistic. For example, no single vendor of software or web design or implementation services will ever come in exactly where they quote when you want additional features or customization. So build a small cushion into your budget to be safe.
6. To attract business decision makers, you must focus on how they will use the site… not how you want to market to them.
7. The higher the level within an organization your potential members have attained, the lower the amount of time they will have to spend on your site. So don’t waste their time!

In short, B2B communities can deliver impressive results when managed properly with a focus on those segments who deliver the value to your organization. Don’t be all things to all people, that strategy is doomed to fail. To learn more about the best practices for B2B communities, please download our presentation , ask questions in the comments area below, or contact us.

What’s Happening

Impact Interactions to exhibit and present “B2B Social Media Strategies That Work” at the Internet World 2010 London

Members of the Impact Interactions team will be hosting a conference exhibit at the Internet World 2010 show in London from April 27 to 29. We’ll have our latest whitepapers and social media briefs on using social media and online communities to drive business results. Additionally, our president Mike Rowland will deliver several presentations during the event showcasing Impact Interactions’ experience with global B2B social media projects. The client team from SAP’s partner channel in EMEA working on the Best Performance Challenge will join Mike to demonstrate how social media can enhance partner enablement, lead generation, and sales in a highly competitive industry.

We look forward to seeing you there. You can find us at exhibit area 7067, next to the Social Media Theater. Please stop by and meet our team.

New Blog Post by Matthew Lees on the Online Community Unconference event in NYC February 10th

Our team did not attend this ForumOne event in NY due to the large storm which worked its way north and east. Given the 3 and 1/2 hour drive from Maryland to NYC, we want to avoid getting stuck on the way home Wednesday on the NJ Turnpike! However, friend of Impact Interactions and Guest Blogger Matthew Lees did! He has graciously added his findings and thoughts on the event on our blog.

Impact Interactions Attends PluggedIn Event in NY

Our president had the pleasure of attending the most recent PluggedIn event for emerging social media technology companies at Yeshiva University in NYC January 12th. While most of the companies were focused upon mobile aps and Twitter aps, we did see a few companies working to make social media work more efficiently. A new blog post will be written shortly on our experience.

Impact Interactions in the News

Our president, Mike Rowland was featured on Business.com’s Smart Business Results Blog.

The Watchers… Copyright Police

For those of you waiting for the Google/YouTube vs. Viacom et al case to settle out before pro-actively searching your site for copyright violations added by members, here’s a name to remember: BayTSP Inc.

While many of us who work in the online community industry have known about BayTSP, a great article in yesterday’s Wall Street Journal “YouTube Magic: Now You See It, Now You Don’t” gives a fabulous peak into the world of the copyright police. A couple of really interesting points in the article:

• BayTSP charges clients between $100,000 and $500,000 per month to help them protect their copyrighted materials
• Employees are paid minimal wages to do this ($11.00/hour or so)
• They don’t reveal their clients in their publicity or on their website

Doing a quick Google on BayTSP reveals that their clients include Viacom, Fox, Paramount, Columbia Pictures (Sony), and many other of the major entertainment companies.

While the article makes it appear that BayTSP is concentrating on the big major websites such as Google’s YouTube, the search shows that they go after both big and small web sites. After all, a violation is a violation. There are many posts in the communities for Peer-to-peer (file sharing) networks about members getting the cease and desist letters from BayTSP on behalf of their clients. Some of those who received the letters are only downloading or uploading music and movies to the networks. Seems that Limewire is a favorite target….

So what is the business upshot to all this? Simple. If you are going to allow users to upload content to your site whether its pictures, videos, or even news articles you need to be proactive in reviewing it and deleting it before a company like BayTSP finds it. Why? Because with the fees that they are charging, BayTSP and others are not a free moderation service. Multiple violations and letters will surely bring a lawsuit to your office. How much will it cost your organization if there is a lawsuit? Let’s take a shot at figuring it out:

1. Cost of BayTSP service over the course of a year for a media company to find violations on your site and send letters to you: $50,000/month (only a portion of the total fees to BayTSP) for a total of $600,000
2. Legal Fees: $100,000 for attorney review, paperwork costs and time, as well as filing costs
3. Lost royalties: Tricky, but figure that if you have 100 clips that violate copyrights each month and on the copyright holder’s site, those clips generate $1,000 in ad revenue (PPI) per month on the media company’s site, then you have a lost royalties amount of $1,200,000.
4. Your organization’s legal costs: Internal General Counsel – 100 hours of time at $125/hour or $12,500. Outside Legal Counsel – 100 hours of time at $300/hour or $30,000. (And this is just to respond to the initial lawsuit and answer the initial complaint, not perform discovery or file any counter suits.)

On a combined basis, you might be looking at an amount of $1,900,000 plus before damages for a single copyright holder (media company). Perhaps you’ll be able to settle for $1,000,000 and enter into an consent agreement to remove copyrighted materials on your own in the future. But what of the other media companies that learn of your violations? Because you know that your members are not going to only put Comedy Central clips on your site, they are also going to use copyrighted songs for their own videos, news clips from CNN and others, as well as photos and articles from major newspapers. Over time, the failure to manage and moderate these contributions gets very expensive…

Put these costs against the costs of hiring a moderation firm to pro-actively remove copyrighted material in advance of anyone reporting it to you through a cease and desist letter and it really shows the risk/reward of not being proactive is off the charts.

Good moderation can range from $60,000 for small sites to over $1,000,000 for large sites annually. When you put the costs of moderation against the possible costs of a lawsuit (and the corresponding negative publicity for your brand and your career), what would you choose?

Do you want to learn more about this topic? Contact us. With over seven years in moderating user generated content for large organizations, we are well versed in protecting your company from these types of issues while providing an excellent online experience for your site’s customers, members, and visitors. Impact Interactions can review all the user generated content placed on your site by members, whether it’s blog entries, comments, message board posts, photos, or videos.