Category Archives: Accounting

The ROI on Social Media: Time to bring in an accounting framework

CMA Magazine

It’s time for Social media and social commerce to step up to the plate when it comes to accountability.

I’ve seen a lot of talk about the benefits of social media often without supporting financials that make for a solid business case. What I have seen so far tends to be a typical set of flimsy metrics, that, while indicative of incremental performance, do not explain causality to the bottom line. Other cases have used the term “ROI” very loosely without regard to the rigour of GAAP financial accounting methods. In short, I felt that it was time to speak to the issue. With the help of Syncapse, TD Bank and McDonald’s, I have opened the discussion of the kind you may want to have with CFO if you’re intent on moving the social media agenda forward within your organization.

The article can be found in the Premier issue of CMA Magazine – a newly revamped version of CMA Management Magazine, geared to the Digital Age.

http://www.nxtbook.com/nxtbooks/naylor/SMAS0111/#/20

I have always been fortunate to have a long standing relationship with CMA Magazine. Back in 2003 I wrote my first article titled “What Management Accountants Should Know About Market-Driven Quality”. 

Over the years, I authored 4 articles and one book of guideliness (when I partnered with Bradley T. Gale, formerly of the PIMS Institute) the recurring theme has been about financial accountability. This has always been important to me as a business manager based on my belief that if the impact of an activity cannot me measured, specifically in a ways that draws a link between money invested and return on that money invested, then it should be questioned insofar as its contribution to the performance of the enterprise. This does not suggest that everything needs to delivery hard financials re. EBITDA. What is does mean is that every activity has to have some associated set of metrics that help to explain the value of that activity and its relative contribution.  Whether you use hard financials or a series of performance metrics across all functional groups, measures are required in order to gauge the return on effort.

Being a manager means being accountable for your actions.

Ted Morris – 4ScreensMedia

Toward A New Media Scorecard

Many Cups of Earned Media Value

I recently penned a soon-to-be-published article in a management accounting magazine – or should I say  “paid media”  publication – about valuating  a firm’s social media effort within the accounting framework.

My thinking was triggered by Syncapse, a social media management firm, who released a study in 2010 called the Value of a Facebook Fan: An Empirical Review.  As an example, they determined, using data collected from a survey of 4000 brand users, that a Starbucks (SBUX) fan on Facebook was worth about USD$235.22 on an annualized basis. The comparable figure for a non-fan was USD$110.95. If I read this correctly, Starbucks’ Facebook fans of 17M strong are worth about $4 billion annually in sales. 

Another study, the Fast Food Industry Media Value Report, by General Sentiment, a New York-based firm specializing in sentiment analysis, brings together online WOM, web traffic and online news readership data as the basis to estimate Earned Media exposure value. In this report, aimed primary at the QSR industry, the quarterly Media Value estimate for Starbucks is USD$67M or $268M on an annualized basis. This compares to the roughly $50-60M adspend on paid media, of all forms, by Starbucks.
 
In each of case, the Syncapse and General Sentiment analytics generate some big numbers. When I look at the financials, the numbers actually make relative sense: Starbucks’ market capitalization is $24B, revenues are $10B and EBITDA is $1.9B for the most recent fiscal year. They have 17,000 stores are in 50 countries and have a brand legacy reaching back to 1971.
 
While I’m not suggesting that these numbers are conclusive, they do merit consideration as they attempt to quantify, in financial terms, the outcome of using social media platforms. It’s time to think a little more deeply about some new measures of performance and update the Balanced Scorecard. This might just be the ticket for the CMO and CFO to join forces in moving the New Media agenda forward. 
   
– Ted Morris, 4ScreensMedia