Social media’s measurement challenge

The SxSW (that’s South by South West for the uninitiated) festival currently underway in Austin Texas has become a sort of Mecca for marketing and technology types and this year’s festival is probably receiving the most coverage in history. 

Following the festival from Australia isn’t easy, but there are plenty of great blogs and websites covering the sessions and developments in close detail.

For example, the Guardian’s website has a comprehensive coverage, as does the New York Times and Inc, which is keeping a very close eye on SME-related issues and trends to come out of the festival.

There is also a great guest post on media and marketing site Mumbrella from Douglas Nicol, a director at Australian advertising agency The Works, who posts his reflections on a session called ‘Marketing budgets have gone social – is it working?’.

The tenor of Nicol’s post and others I have seen on this session is that while social media marketing budgets are increasing – at a rate of about 30%, according to Nicol – there remains a clear problem in accurately measuring return on investment.

So far, measuring ROI is concentrating on the impact of social media on branding – that is, creating brand awareness, brand preference and brand engagement.

But there is still a difficultly in measuring how social media spending actually translates into sales.

“Altimeter studies note that 66% of brands are measuring engagement, but only 22% of them have been able to tie those metrics to conversion,” writes Jim Tobin of Ignite Social Media in his recap of the session.

This is clearly the next challenge for the proponents of social media.

While most entrepreneurs acknowledge the importance of having a presence on social media, many still struggle with how much time and resources they should be spending.

And while it will be of some reassurance to SME owners to know big brands are also struggling to crack the ROI question, we should expect the issue of measurement to become more prominent in the coming year.

Doug Nicol sums it up very nicely.

“Social media is out of the incubator in 2011 and if we don’t crack the code with a more ambitious ROI measure soon, we will never move beyond fluff and puffery.”