Social media has been around for awhile now.  Everyone’s had a chance to wade in.  And the question of return on investment continues to rankle. But there have been a few positive developments.

Counting the number of hits is out. Understanding who the hits come from is in. And putting some kind of value on social media interactions is useful. Both David Berkowitz at agency 360i and the folks at Razorfish have tried to quantify this data and look at what it takes to create influence and affect decision-making.  A lot of this is just a new technology take on the psychology of human cognitive behavior published by Albert Bandura in the 1960’s and 70’s and still a guidepost for those of us who work in fields where we need to understand how people react to internal and external influences.

So what can we measure?

That’s the wrong question. We need to first think of how we measure. The key is understanding no one buys your services or donates to your cause after just one interaction–whether that’s through social media or traditional media.   It’s cumulative.  So an ROI equation might put a value on these different elements: one personal interest PLUS multiple personal connections/referrals PLUS multiple social media interactions PLUS traditional media/email/direct mail influences PLUS internal influences (I want a car that looks like that; I think the world needs clean water) PLUS a triggering event (click here to get info on this car; click here to donate to clean water) = one Transaction That Can Be Measured.  You need to be pro-active on every front.  More and more, the fronts intersect through customer-driven social media.

Who can we look to for best practices?

One group that is ahead of the pack on social media ROI is nonprofits. They’ve been early adopters, partly because of the low cost of entry and partly I think because a large percentage of their staff are young and grew up with this technology.  Also, nonprofits have always had to get creative about raising dollars and being effective on mission.  NTEN, Blackbaud and Common Knowledge just put out their 3rd Annual Nonprofit Social Networking Benchmark Report and it’s loaded with some interesting data in this sector.  The survey of 11, 196 nonprofit professionals asked about both professional social networks (i.e. Facebook, Linked In, YouTube, etc.) and “in-house” social networks being built through their own websites.

If a key ROI metric is engagement, then nonprofits can check off the community-building box. 89% of nonprofits have a presence on Facebook, with the average community size up 161% since the prior year’s report (6,376 members), and YouTube up 504% to 2,702.  And those in the super-charged fundraising category (see below) have communities of almost 100,000 members.

Peer-to-peer sites like CrowdRise, FirstGiving, Razoo and Causes are also getting traction as places to build engagement.

If a key ROI of nonprofits is money raised, then social networks are evolving in this regard.  The survey identified 27 “master fundraiser” organization who raised at least $100,000 on Facebook over the last year.  While more than half of these were large organizations with $51M to more than $250M budgets, almost a third were small organizations with $1-5M budgets.

Environmental, animal welfare and international groups lead the pack in terms of largest communities, most tweets, etc. as measures of engagement. This is not surprising. I frequently use advocacy organizations as examples of best practices in my social media workshops because they have been in the vanguard for years (including when direct mail was just getting its start as the “new” way to advocate for causes.)

What’s new in social media with real impact?

According to the Benchmark Report I noted above, one of the interesting developments in the nonprofit sphere is the use of “in-house” social networks — i.e. those who register users through the organization’s website. The ROI equation is flipped on its head as the benefit is to the user: by registering, he or she gets the benefit of curricula, best practices information, advocacy or health content.  The benefit to the organization is clearly a more engaged user community connected directly to the mission of the organization.

For-profit organizations could take a page from the nonprofit sector by looking at what makes social engagement effective: a fulfilling user experience, a community with purpose, and tools that build customer loyalty–whether that’s to a brand of car or a way of changing the world for the better.