I feel like ROI is a terribly misused term for social media and is so narrowly focused that it misses a whole scope of how social media is effective.

If Sales Guy works the social media channels and makes one sale bringing in $35 in new sales that day. Then the ROI if that particular moment is able to be determined. But what about all the people that one customer tells both online and offline? Via email or word of mouth where your analytics can’t reach? How are you measuring the ripple effect of your actions and applying them to the ROI of past moments in time?

These very real and very common side effects of good customer communication are not as easily measurable but still stem from that one situation where the ROI was pitiful, but came back later to pay off in spades as the ripple got wider.

I think one of the things people forget when trying to calculate the ROI of social media that more than likely it’s going to be a loss at first, that it’s about building a community and planning for the long haul. ROI has long been associated with quick turn around and has that very real perception of “if i invest today what do I get tomorrow?”

“Social media consultant guy” did a great job of explaining how to measure social media efforts on his blog and I wrote an eBook about social media ROI (available on my blog under eBooks on the left). Without a DOUBT social media is more measurable than a traditional campaign. You can gather data and analytics from every single visitor, info from every friend, and disect every conversation because it’s on the screen, but you can’t always determine the long lasting, or continual effect of conversation.

Do you think Dell, Comcast, Zappos, etc started out with the idea of “Well if this doesn’t make x amount after x effort then this won’t be worth it”? No, they started their efforts to help their customers. To fix problems (which in a public forum gives them good press automatically via their actions). To help cement the “bond” between them and their customers.

I’ll get off of my soap box now, but when it comes to the “ROI” of social media the investment isn’t really about you or your business, and that’s one of the reasons so many businesses have a hard time with it. It’s about your customers and investing in them (just like tech & cus service is). The ones who realize this are the ones who have been the most successful.

great breakdown, i had something similar on a post i wrote a few months ago

In addition to needing to understand the ROI, like Denis Cooper’s comment brings up, I saw a lot of downside too. In addition to the issues Ms. Cooer brings up, I was and am concerned about uniformity and consistency in messaging. I would be interested in the expert commenting on this issue as well.

In regard to your asking about the origins of the phrase in a nutshell, if I were to speculate, I would guess that it attempts to illustrate the concept of taking a larger concept and summarizing it into something very small. This summary would be so small that, if it were to be thought of in physical terms, it could be held in a container as tiny as a nutshell. While I have not heard this explanation before, I think it makes sense… and now I get the last word to those that scoffed when I decided to get a degree in philosophy!

You are wise to look at both the issues of selling Social Media as a business application and the challenges and opportunities related.
I am an older guy so not at the age you would expect to lead this charge into new media but I do have an outstanding marketing, brand and innovation background so I guess that has always kept me hungry to be a year or two ahead.
Here’s my two cents or, if I am correct, two billion, opinion.

Social media is a culture that has to be respected. Just like email was great before spammers abused it.
It has the potential, properly applied, to add great value in how we learn, talk to customers, create trust, value, meaning and as a company, use that insight to fuel growth and renewal.
I have been partnering with a team that has now put out a near perfect consolidation of the best analysis methods, new technologies and a social media component that will blow the measures you have listed, and separated as tangible and intangible, into the ultimate delivery engine for a number of large initiatives underway today – including innovation management, sustainability, renewal, being market insightful and at a lesser level, the old standbys…customer satisfaction, technology migration. energy management, resource management.
We had our first three presentations last week and many Fortune 1000 and F100 companies were present. Yes, what we are doing is as deep as it is complex, but the value we deliver as a continuous core process gives companies their best shot at business renewal and resiliency. We are targeting companies over $100M as they get it so if you have clients that size and see a connection, as we do, feel free to contact us. We want 6 companies to engage with to illustrate the outstanding ROI we will deliver.
That said, you are asking the right questions and heading in the right direction.

Our new company will be Sixth Central. I am working on the new web site this month.

Bill Van Eron