Monday, January 29, 2007

Return on Investment of blogs - a critical examination

It would seem churlish of me to criticise Charlene Li who was brave enough to attempt to gain some idea of Return on Investment of blogging.

In particular, it is with some sadness that I make a number of points after she kindly accepted some of my papers in her initial scoping of the research and then allowing me to see her finished article.

I admire her work and the work of Forrester.

But we do have an endemic problem in marketing and it has insidiously worked its way into the industry's folk law.

At the core is a misunderstanding in the difference between advertising and editorial. I think that Charlene has fallen for this urban marketing myth. My views on the use of advertising equivelents (AVE's) is pretty well known and is based on a lot of work by many reserachers.

People are really quite clever and discerning. They do understand the difference between the two. Research by many people and notably Guy Consterdine had demonstrated time after time that people both see and read advertising, even advertising deeply disguised as advertorial, that is advertisements disguised as editorial, differently.

We also know from his research that there are special relationships between people and the publications they read which, I think we can reasonably extend to blogs. People get different gratification from different publications and that applies to blogs too.

Indeed we know this from online responses to these two forms of communication. People seek information by searching the bloggersphere and through their social links online. People do not seek out advertisements. Click through rates show that only a minute fraction of advertisements exposed to people, however much they are presented in context, are explored by the online community.

Dwell times for advertisements are also different with editorial gaining many times longer than advertising.

This reflects the work many of have done over the years with other media such as newspapers and magazines.

People see and precess editorial and advertising differently.

Then we go to the content and context of the two forms of communication. Advertising presents an semiotic image of the organisation as the organisation would like to be seen. They are offered in context as near to the ideal as the advertiser can achieve. By contrast editorial, especially editorial mediated by the Internet, is presented in the context of the editorial vehicle. It is the context of the blog, discussion list or web site. This has an influence on how people perceive the content.

Then again, the content can be presented in passing or in great detail. It might be the content of a whole and lengthy critique or in passing or it can be a fragmentary comment. It can be offered in approving or critical tones and it can be presented that endorses or subverts a point of view or third party views or analysis.

So not only is editorial different to advertising, it comes in many contexts, in many forms and in many ways. Measuring the value of these different editorial approaches is near to impossible and can at best be an extrapolation after detailed analysis of a huge proposition of a large corpus.

My only experience of attempting this was extrapolation of over a million press articles at Media Measurement and that only gave me for a moment in time some very broad conceptual certainties that could not be measured in simple monetary form.

The problem is this, even if you have some measure of values, they are of value only from the perspective you take. For example, a high value editorial to the Chief finance officer might be a nightmare for the legal team and an inexplicable shot in the foot for the salesman.

In the analysis presented by Forester there is another misconception. This is in how to calculate value.

The research offered attempted to make an assumption that in some way, the cost of advertising reflects the value of editorial. Cost and value are two different measures and should not be assumed to be the same in any way shape or form.

To get some idea of how different forms of media analysis can be used, this paper is perhaps the starting point for a professional communicator in the 21st century.

I then turn to the issue of return on investment.

ROI, even in its simplest form has many faces. The actual investment is, as Forrester found, very difficult to guess. The actual cost and alternative investment or replacement cost can be very hard to identify. Investment in one moment is of different value to another. Online, these changed values can be very quick and so what seemed like a good investment in July can judged a disaster in December. One only has to look at the financial markets to realise this and for a judgement on ROI over a period of, say, a year the numbers seldom stack up. It is fashionable to talk about ROI in marketing circles but there are very few management processes that truly reflect cost.

When ever we seek to identify ROI we have to distinguish between raw return and discounted return. In the case of the Forrester research there does not seem to be a distinction. Before a return can be used in a business context we have to discount the value of the return by the amount of return that could have been archived by using the resource in some other way. Like investing the money in a bank or other parts of the business.

These then, are my two principle issues. First there is no such thing as advertising equivalent for editorial. It is a myth that has entered the heads of the marketing community and second there is no such thing as return on investment unless you take into account the discounted value from a given perspective.

There is a lot of research available for those who wish to follow up on this topic.

Regrettably, Charlene, we differ on this occasion.