THE ROI OF THE TWEET:

Facing the Truth AboutTwitter as a Brand Tool

by Phil Baumann

@PhilBaumann

PhilBaumann.com

This document is a repurposing of a postoriginally posted on PhilBaumann.com.

Is Twitter a sales tool? Can it “drive”sales? If so, what’s the return oninvestment of a tweet? Most executiveteams today still view the world throughthe lens of the assembly-line. They likemetrics and clearly defined goals and well-thought decision trees. They preferstraight lines over curves with cloudydistances. They are largely justified intheir lines of reasoning.

But the Web has opened up a decidedlynon-linear fabric of novel media.Consequently, many organizations havebeen slow to adopt emerging media andtechnologies because they simply don’tsee the return on investment. Often,

they’re not even sure what the investment is. Or what the return might be. Or what thegoals or purposes or opportunities of subsuming the Web into their going concerns could befor them.

So this post aims to provide a clearer, if alternate, view of what’s at stake. We’ll look atmetrics. We’ll also examine how organizations can better understand the nature andessences of media – all media, old and new and media not even around yet.

If you work in an organization which has been struggling with keeping up-to-date, I offerthis to you so you can go into C-Suite and answer the tough questions without looking likean unprepared stooge. You owe it to yourself to understand the media you sell to yourexecutive team – and you owe it to yourself to ensure they understand how to properlyenframe media in the 21st Century.

NOTE: This is a long post. My aim here is not to prove that Twitter is not valuable tobusiness. Quite the contrary: I don’t believe enframing Twitter as a generator of financialROI is the proper way to view the service. But I do believe that evangelists must be able tosay to executive management something like this: We have crunched pro forma numbersand in our opinion Twitter is not really a direct (or even indirect) driver of ROI; we dobelieve, however, that Twitter can be a linchpin within a web of comprehensive webstrategies.

BRUTE FORCE APPROACH TO TWITTER

In order to provide some insight into the difference between Twitter-as-sales-tool andTwitter-as-public-utility, I believe pro forma metrics may help to reveal some importantproperties of a medium like Twitter. Too often claims are made about Twitter’s businessvalues – and usually the issue of metrics is explained away with vague optimism.But why not take a crack at metrics, if only to reveal a basic truth of Twitter? After all,Twitter’s simplicity makes it a utility with varied uses. By seeing that Twitter’s effectivenessin driving revenues (even indirectly), allows conversations to focus on a more robustenframming of the service.

I’ll call the strict Financial ROI enframing of Twitter the brute force method. The brute forcemethod makes several assumptions and follows an algorithmic, assembly-line logic. So hereare the assumptions:

• Number of followers are true fans – not just the count of followers according toTwitter – not bots, or miscellaneous people who aren’t invested in a brand.

• Followers are people who are likely to buy a product and who are actively payingattention to the Twitter stream of the business/product account.

• The tweets include links to actionable web real-estate where conversion is possible.• Customers make at most one purchase per month.• Clickthrough and conversion rates are comparable with traditional web metrics.• The effect of retweets is actually minimal on tweets about products (at least in this

case) and has been left out of the model.•

So let’s look at a hypothetical. Let’s tackle a difficult industry: Pharmaceuticals. For thisexample, we will leave FDA regulations and other constraints on the industry out of theequation. We’ll say that the company runs a Twitter account for a particular drug and tweetslinks about an OTC medication (again, we’re assuming these are “FDA-compliant” tweets –yes: laugh – conversations around Twitter can be that ridiculous).

We’re going to assume that the labor time for running the Twitter account is based on $50per hour. Furthermore, we’ll assume that only one hour a day of labor time is needed (forTwitter accounts with a very high volume of tweets, management will probably need manymore hours of labor time in practice). But we’ll be conservative.Here are a few scenarios (pulled the pro forma spreadsheet pictured above and which youcan view here):

1,000 Followers x 5% Clickthrough x 5% Conversion x $5 Margin x 12 Months– $12,500 Labor = ($12,350)

128,000 Followers x 5% x 5% x $5 Margin x 12 Months – $12,500 Labor =$6,700

1,024,000 Followers x 5% x5 % x $5 Margin x 12 Months – $12,500 Labor =$141,100

8,192,000 Followers X 5% x 5% x $5 Margin x 12 Months – $12,500 Labor =$1,216,300

In order to achieve over a million dollars in revenues, tweets would need to yield a ROI of9,630%! Use your common sense: it’s utterly delusional to think that ten tweets per dayover a year would provide that kind of return. Even to achieve over $1 Million, thispharmaceutical company would have to have over 8 Million followers! And each of thosefollowers would have to be devoted true fans. Think of the investment required to generatea tribe of 8 Million followers – the time, the electrifying tweeting style, the power to beloved.You can tweak any of the variables and crunch new figures. You can input a higher margin,for instance – but you may need to re-think clickthrough and conversion rates and follower

counts. Go work up a brute force model for you business or client and see what you get.Just be realistic and understand the properties of Twitter (or whatever other medium you’reworking with). That’s one of the problem I think (some) marketers have: they don’t reallyunderstand the media out of which they’re seeking to extract value.I won’t say that you can’t generate these kinds of numbers – but there are weaknesses andparadoxes in this approach which I’ll reveal in a moment. And yes, I’m fully aware of thegeneral effect of positive WOM but that’s not the point of this story. I’ll touch on brandawareness in a bit – wait for it.

As you can see, given these assumptions, this brute-force approach to Twitter doesn’trelease a lot of financial return (not for larger enterprises with capitalizations greater than$1 Billion). Sure if you run a relatively small enterprise and can cultivate a massive andcommitted fan-base in the long-run, there’s a chance Twitter may provide substantial gainsin line with your revenue stream. Of course, your margins may be larger (but as marginsgrow, you may encounter diminishing actual conversions). Most importantly: building atribe of true fans is hard work – very very hard work.

Yes, Dell has claimed it earned $3 Million from Twitter, but Twitter was simply an ancillaryservice to their wider web presence – and Dell indeed has over a million followers (and alarger margin than in my pro forma).

None of this means, of course, that Twitter has no business value. In fact, I would arguethat Twitter can an essential linchpin for overall web presences: Twitter enables apliant means to connect various media and web real estate together. It’s also real-timewhich means you can literally stream your presence and respond swiftly to shifting currents.But there are paradoxes hidden within the brute-force approach. Let’s take a look at them.

THE PARADOXES OF BRUTE FORCING TWITTER’S WINGS

There’s a sort of Uncertainty Principle underlying Twitter: the more directly youmechanize a given strategy, the more dilute the attention of followers becomes.For any Twitter strategy to “work”, the tweeting must be remarkable, attention-enlivening,creative. Tweets need to be interesting day-to-day, week-to-week, year-to-year. Annoyanceand boredom are easily un-followed. Value and connection and humor are followed moresustainably. Thus, the only way a business can hope to achieve long-term attention viaTwitter is to relentlessly be creative and captivating and social and valuable. Tweetingcoupons and links to products alone doesn’t work all by itself.There’s another paradox on Twitter: Promotion of Other is a greater promotional toolthan promotion of Self. This is one of the hardest concepts most organizations have tounderstand.

Retweet your competition.

If you can’t retweet your competition, you probably don’t have the confidence and faith inyour enterprise to stand out. If you’re not standing out, just what are you doing with yourmarketing dollars?

Marketing not only has to be effective but it also has to be respectable. For anindustry like Pharmaceuticals, anything less than respectable is unprofessional.

RELATIONAL APPROACH TO TWITTER

I hope I’ve made it pretty clear that achieving a robust Financial ROI of Twitter directly isnot a realistic proposition in most cases. If that’s your only enframing, I would suggest youforget Twitter.

I would suggest, however, that Twitter’s pliancy and immediacy and connectivity providemeans to many other ends. It’s basically just a telephone for our century. The mostvaluable enframing of Twitter is in a Relational context.

Building and sustaining relationships are bricks and mortar for all successful businesses.Smart businesses understand the paradox of the un-sales approach to relationships: themore sincere and mature the relationships, the better the conditions for businessdevelopment.

Sure, we can talk about buzz-concepts like brand awareness. (Of course, you could alsostick a finger down your throat and achieve a similar effect.) But I actually think that’s asub-set of the brute-force approach to Twitter. Once you make that your purpose onTwitter, you lose your followers’ attention. Brand awareness, at best, must be apleasant side-effect of much more remarkable ways to employ Twitter.

Yes, it’s a cliche but social media is social. If you have poor social skills, you better developthem now. Since relationships operate in non-linear geometries, you’re going to have tolearn to think beyond rigid lines. The Web can be an unforgiving and will eventually breakyou if you don’t have the pliancy to turn on a dime.

THE OPPORTUNITY COST OF STRICT FINANCIAL ROI ENFRAMMING

By hoping to achieve financial gain via an inhuman algorithmic enframing of Twitter, youforgo several important and valuable business opportunities. If I were a Public Relationsguy, I’d look at Twitter and say: Wow! We finally have a way to re-humanize ourcommunications and how we connect – I can finally go back and re-work those arcanemethods we developed when we had only broadcasting media.

The fundamental truth of the Web is that organizations composed of cogs – people withlittle incentive to shine their talents – simply don’t have the supple musculature demandedof a public sphere laden with real-time technologies.

Organizations must cultivate cultures of creative, ambitious, informed and swift-thinkinghuman beings. If you’re going to invest in Twitter, you better have remarkable peopleworking for you – do it yourself if you have to.

A narrow focus on Financial ROI will enframe a human context within a technological one. Inother words, it’s putting the right shoe in the wrong box.The opportunity cost of enframming the business value of Twitter within fincancial ROI isthe larger frame of possibilities which Twitter offers. The most important of these are there-humanization of corporate communications and the connecting of disparate elements ofan active online and offline presence.

THE ROI OF THE TWEET IS…

The ROI of the tweet is elusive.

The ROI of the tweet is what you make it.

The ROI of the tweet is the expression of your daily artistic creativity.

The ROI of the tweet can be mechanized – but at enormous expense and opportunity costand risk.

The ROI of the tweet is relational.

The ROI of the tweet is conditional.

The ROI of the tweet is contextual.

The ROI of the tweet is human.

How you enframe tools influences what you get out of them. Sales people enframesales uses around media. Marketing people enframe marketing uses around media. Publicrelations people enframe public relations uses around media.

The fact, however, is that the Web is Mother of All Media. It not only spawns new mediawith differing properties, the media it spawns all inter-relate among each other in novelways. We don’t have a Grand Unified Theory of the Web, but we can at least understand thefundamental properties of individual media. When I get asked how to “use such and such atool”, what people are asking is: What’s the theory here. But there isn’t any tested theory:at best we have intuition and reason and experience and imagination. Of course, if your lackthese then a theory probably won’t help you.

My recommendation to anyone interested in new media’s role in business is to go back tofundamentals. Language like “old media is being replace by new media” can lead you downmisguided paths. Marketing is more than messaging, of course, but it’s important formarketers and communicators and public relators to understand Media. Here are somequestions to ask yourself and your team about media:

• What is this medium? What’s is its essence?• What are the properties of this particular medium?• What are the possibilities of this medium?• What category(ies) does this medium fill: social, impersonal, synchronous,

asynchronous, unilateral, bilateral?• What does this medium enhance?• What does this medium obsolesce?• What does this medium retrieve?• What does this medium reverse? What happens when this medium is pushed to its

limits?• What happens when a person encounters this medium?• How does this medium relate to other media?• How might this medium change the world?• How should this medium be enframed?•

These are simple but difficult questions (I will expand on them in future posts). When wasthe last time you asked any of these questions? What have you done to acquire anorientation about new media? That’s the purpose of the above questions: to get you to panback from your accustomed views and assumptions and experiences and re-frame things inclearer contexts.

It’s also important to understand the different kinds of connections between media andpeople and things. Social isn’t the only connection. People have connections with productsand services – but those connections aren’t social. For example, the connection between acustomer and a brand isn’t social. It’s something else – knowing what that connection bindsmedium to medium or people to products helps you determine what media you choose.For instance, by understanding what a medium enhances, obsolesces, retrieves andreverses, you can better compare novel media with familiar media. You can develop insightsinto what features of traditional approaches can and can’t be ported into new media. Ifyou’re unfamiliar with McLuhan’s Tetrads, you can learn more here.If you work in an agency – PR or Marketing – you need to answer these questions so thatyou can equip yourself with the resources to properly view emerging media. It’s no longerenough to “get” Twitter or Facebook or Blogging: you must have a fresh philosophy aboutmedia in general because the Web is evolving. You need to hone an intuition aboutemerging media and these questions offer a good practice for you.

THE LESSON OF THE TWEET

The lesson here is that there is return on the tweet. But before you get to return youmust get to re-frame. This is going to be a turbulent century. It’s easy to get tossedabout and disoriented. Assumptions and methods which were once effective may no longergive lift. Orienting is itself a skill to be treasured.Focusing on one narrow objective like financial ROI before fully understanding an asset isnot all too wise. Not when your competition has figured out things you haven’t evenconsidered.

I have tried to address the legitimate concerns of “old-school” executives who rightlyquestion the expected returns of social media. I believe they are entitled to an honestaccounting about the limits of media. The smart ones will see the folly of attempts to portassembly-line thinking into territories in which it makes no sense to do. The smart ones willalso then be able to see things aright and perhaps your organization or client willunderstand the proper context and enframming needed to be remarkable.You can go the brute-force method and miss a much larger party. Or you can be somethingfar more interesting and ultimately financially rewarding. My advice on Twitter is to be aLovable Peacock: someone with the goods worth showing off but with a warm heart forthe flock. Many executives won’t like that metaphor. But then, not many businesses heretoday will be around in 2020.

So, what’s your take? Is my brute-force analysis flawed? Does it help to demonstrate and toadmit up-front that Financial ROI isn’t a wise enframing of Twitter? Does it advance theconversation?

Will you re-enframe everything you think you know? Will your Corporate Philosophy take towing…or fold?

@PhilBaumann

PhilBaumann.com

February 2010