I have been resisting commenting on Charlene’s ROI of blogging because I sense a trend there that I fundamentally see as wrong. I am becoming increasingly disappointed in the perspective from Forrester as it relates to blogs. I say this having the greatest admiration for their research for 11 years. But the drive to treat blogs as a channel, (my take on their view) is fundamentally wrong.
Customer World published this extract from that report, and here are some thoughts to follow
Forrester has released a research report. The ROI Of Blogging: The Why and How Of External Blog Accountability.
Source: Customer World: Forrester’s take on ROI of blogs
To consider the ROI of blogs is akin to considering the ROI of a telephone set, a resume or a desk.
What do those three things have in common? They assist conversations, and provide context. That’s all a blog is, no more, and no less. Blogs are a brilliant manifestation of conversations. What’s the ROI of a conversation.
To have the word blog and ROI in the same sentence reflects old thinking on diametrically new methods.
ROI is defined as Return on Investment. The Investment part is always simple, by following the cheques. The Return? Return is the new revenue associated with the investment.
If a new branch is opened the return is the revenue associated with that location. If we open a blog, and customer1 speaks with the blogger via comments, is happy with the outcome and opens an account, where is that captured? (Problem for James). The web introduces a series of potential interactions as prospects move through their though process. Blogs are one part of the process.
Good luck with attributing ROI to blogs.
Relevance to Bankwatch:
Blogs are tools. Notepaper is supplied to frontline staff without an ROI calculation. Notepaper is a pure cost. Blogs are a pure cost. Get over it. The good news is that blogs are cheaper than paper. (15,000 employees times 12 of $2 notepads annually = $360K). Ask Ed at Wells, or William at Vancity how much they can do for that sum.
ho hum ….
Bankwatch 
You have a good point — blogs are a fantastic way to have a genuine conversation with your audience and it’s awfully hard to put a monetary value against it. But I take issue with your analogy — companies actually do take into account the ROI of a telephone set, paper, and a desk — do they buy a fancier PBX or settle with Skype? Do they spend a bit more on recycled paper or brighter paper for better contrast? Do they get the mahogany desk or the one from Ikea?
We wrote the report on the ROI of blogging because the reality of today’s business climate demands it. Certainly, the actual investment is small, but the bigger question is can the company incur the risk for an uncertain benefit. By spelling out the benefits in this exercise — all tightly linked to the benefits of conversation — executives begin to understand the true value of blogging.
Good post. But I think Charlene wins this debate. Sure there’s a boatload of assumptions that go into any ROI calculation, especially in the corporate communications area. But I applaud Forrester or anyone else who helps frame the analysis.
And although I love your statement about what you could do online with the $360,000 notepad budget, I don’t think very many sr. execs are going to consider blogs a cost of doing business like paper.
There are far more risks from blogging and it may not be right for every business, at least not yet.
Excellent comments Charlene and Jim, and thank you.
I certainly appreciate the need to develop an understanding of blogging in corporate land. Believe me I understand that!
Thinking about ROI … the times I have seen that used relative to the things I mentioned are only for amalgamated costs to support another initiative. I can’t recall ROI for desks or paper.
Nonetheless I take the point, and my post is fairly aggressive. For the record, I base it on listening to conferences, often amongst geeks, people I would characterise as non mainstream business, and their desire to ‘monetise’ blogs. I see this as a non-starter, and would resist to the n’th degree having any ‘monetisation’ associated with this blog for example.
Hmmm – interesting. I think the challenge with an ROI for blogs is the very small percentage of consumers of blogs who will do more than passively read. Evidence on web communities is that only a few percent, perhaps 5-10%, will ever interact – the rest will just read. This means that you will only get data on a very small number of your readers. Even if you could tie these readers to subsequent activity you would still capture only a small part of the return on your blog (ROB).
If you can tie blog responders/interactors with your customer information then what you might be able to do is enhanve the data you have for analysis – find characteristics of those customers who, say, complained on the blog and see if that helps you target unhappy customers more generally. This was what I tried to express when I blogged on this before – http://www.edmblog.com/weblog/2006/11/the_customers_i.html
If you could improve the analytic data then this improvement in lift might give you an ROI but it might be easier to say “the blog costs X, here are some known effects is that worthwhle?” than try to calculate a number.
James … the small percentage thing is important in all this. There’s an unofficial 1% rule that I covered before on wiki’s that says the same thing.
Charlene & Chloe achnowledges the shortcomings in the paper
“The exact benefits of blogging are impossible to measure. Many of the benefits of blogging
are indirect, and this causes a whole host of measurement problems”
I think in retrospect that one of the greatest challenge I see here with the ROI approach is that the outcome will be compared to other investment alternatives, and blogs will lose every time on that score.
Sadly, the only people I hear talking about “monetizing” blogs are people who don’t really understand what they are or what they can really do. If a blog is written with transparency and honesty, the ROI will eventually come; if a blog is set up with the intention of making money, it’s a buzzword or two away from being PR.
I understand why Forrester would have to produce research like this — I can only imagine the number of client requests they for guidance on how to monetize blogs — but my gut feeling is that the people asking the Blogging ROI question are the same people who shake their heads at Craigslist.
Dan … love that last sentence!
🙂
Just want to be clear: I’m not having a go at Forrester, or at Charlene specifically. They explain in the last line of their Groundswell post that they’re trying to walk the line between the Galbraiths and the Friedmans, and I appreciate the difficulty of that. I just hope they’re able to convince managers to deliver a caveat with their blogging ROI projections that ROI is a happy (and inevitable) side effect of blogs, not a raison d’etre.
Disclaimer: Haven’t read the report ($379 !!?), but have read the Groundswell blog. Am biased against measuring ROI of blogs
Colin you initial post talks about new revenue from an investment, which is not always required to generate ROI. Investment can also be for cost reduction, and if you see the final value column in the table extracted from the Forrestor report, it is all about reducing costs.
Charlene’s justification comment seems basically flawed in that it talks about varying the investment (e.g. cost of chair vs bean bag) rather that focussing on the cost reductions achieved by the investment itself.
The Groundswell blog itself explains one of the reasons behind creating the model, getting the $’s into the blog instead of on an initiative to replace chairs with bean bags.
Brings to mind a similar debate wrt CRM initiatives some time back.
What do I think? One can assign benefits to a blog but to translate that to $’s saved (or earned) should be understood to be an excercise in ‘dressing it up’ for management approval rather than an expectation of actually earning or savings $’s. (My God! Did I just actually say that!)
Taking cover for the next week of brickbats…
I’ll try and provide some covering fire Shreepad 🙂 Since this initial discussion, I have been thinking more about this. ROI calculations have a need to have a cost to perform the calculation. I have read the report, that Charlene kindly provided. I won’t divulge too much, but its based on benefits & costs, qualified by risk.
The costs of blog set up is nominal. The real costs would be the associated activities, including monitoring of the blogoshpere. (On a tangential note, I see this as a new competence for call centres) .
Then we get to the revenue. Of course blogs form part of the new marketing, but attribution of revenue is going to be hard. Its generally accepted, and the paper accepts, that blogs will build on the brand, particularly if the blog is done right, and reflects the brand attributes. This last part is hard, because blogs need a personality, and if the corporation has no personality, then thats a problem (Banks).
Brand performance is hard to attribute numbers to, in a believable way, which brings us back to your last paragraph Shreepad!
Perhaps a ROI for blogs can be useful. However, the outcome of the ROI should not be treated like an ROI for more classical investments as then, as Colin suggests, blogs will seldom be competitive.
Suppose ROI calculations are negative, then the blog is a simple cost. If ROI is positive, then the blog “costs less”. But the decision to start a blog should not be based on the ROI outcome.
In current times more and more people are willing to work with negative ROIs, with only costs to expect. Wikipedia has as far as I know only cost people time and effort. The person, and after that person the dozens of other persons, who wrote and modified the article about, let’s say the Year 1921, did probably so without profit/loss decision making other than accepting the “profit” of satisfaction to ‘do something good’ or ‘useful for others’.
This must sound almost weird outside the original context of the traditional altruistic or charity mindset, but it is a phenomenon growing all around us. And companies consist of people. Some of these corporate people might have contributed to Wikipedia, or have their own blog, or like professor Yunus, started with a simple loss of 27US$ given to one in need and developed a (Grameen) bank which certainly does its ROI calculations, but acts upon figures with an entirely new set of action tools.
The impact of the Forrester ROI approach depends on the person who applies it. I am not worried about it …