The Conversation Monetizes Itself

A few posts back, Kevin left this comment:
I attended a conference today. At one session, an agency presented Web 2.0 concepts, then talked about "Return On Interaction", or something like that, saying you don't need to monetize this activity. Then a co-worker got up, and said that you do have to figure out how to monetize this stuff, because businesses are in business to sell stuff, not just to have a conversation.

Ah yes here we go again. Business doesn't want to jump into social media and 'have a conversation' until it can figure out how to monetize that conversation.

You don't have to; The conversation monetizes itself.

Communication=understanding=more effective/efficient marketing=lower marketing costs.

The conversation monetizes itself.

UPDATE: David adds his take on 'The Magic Formula'.

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posted by Mack Collier @ 8:50 AM,


At 9:16 AM, Blogger Ryan Karpeles said...

Perfect explanation. I've been looking for an easy, practical way to convince people on the conversation monetization issue. Now I have a specific place to point. Thanks.

At 3:21 PM, Anonymous CK said...

Mack: did you see where I made some suggestions to the formula in the comments? I agree in full but thought there were some KEY points of ROI that could also be addressed.

Would be great to see what you think. Just FYI: I left it under your comment where you originally cited it as I really enjoyed your equation...and it's critical we show the business argument.

At 4:11 PM, Blogger Tim Jackson- Masi Guy said...

Exactly! I doubled the sales of this brand last year, almost exclusively on the strength of the community that has evolved around my blog. I advertise a tiny bit, but most people don't even know that.

The conversation monetizes itself.

At 8:26 PM, Anonymous David Reich said...

Business is about money, and the reality is, managers need a way to determine where to allocate resources. It can be on hunch, or it can be on a more solid measurement. I'd best most managers would go with the solid measurement, whatever form it may take.

If we're looking for ways to promote use of social media in marketing, then we'll also have to figure out methods of measurement that we're comfortable with. That formula may vary company by company, depending on how flexible management is.

At 10:14 PM, Anonymous Glenn Gow said...


If you are right, and the conversation monetizes itself, then you are making an argument that there is ROI in the conversation. This makes it a compelling business argument to continue the conversation.

You are also right in saying that businesses don’t want to jump into social media until it can figure out how to monetize that activity. AND, businesses are right in demanding to know how this monetization works.

Monetization = a successful business decision. Conversations without monetization are a bad business decision.

At 4:11 AM, Anonymous Kris Hoet said...

This reminded me of an excellent cartoon Hugh made about this topic a while ago.

At 11:43 AM, Blogger Patrick Schaber said...

This is going to become a polarizing issue in the coming years. For Web 2.0 and social media companies, you are 100% correct in your formula. I happen to also agree with you.

But there is the board room side where trying to explain that your marketing costs went down because people understand you better through your social media efforts might not be enough. When asked where I'm able to save money based on the returns from the company's social media efforts, I don't have a concrete answer yet. Will I be able to save money by cutting other mediums? I'm not sure.

Believe me when I say that I think your formula spells out the idea of social media perfectly. Over the next few years I think we'll be able to fine tune it.

At 11:56 AM, Blogger Toby said...

I continue to find it funny that every other marketing initiative must be tied to a business outcome/goal or objective. Why is it that social media is exempt in accountability? There are a multitude of success measures that may be applied from stronger branding through relationships to better product usage through expanded conversations.

If we want to position social media as a credible marketing strategy (and y'all know I do believe that), social media has to step up to the plate and hit the ball out of the park. I agree with David and Glen .. don't be afraid to make social media accountable. The authenticity of the conversation will not be diminished.

At 3:44 AM, Anonymous Philippe said...

I still have questions about the conversation:

Can any brand enter conversational marketing?

Should conversational marketing be part of the new marketing mix? (meaning that conversation pursues a marketing abjective)

What mix between monitoring initiated conversation (monitor what is written about your brand on the participative web and join the conversation) and conversations initiated directly by the brands (ask a particular question to the surfers or invite them to join a predefined conversation)?

I agree with Toby: should you put a KPI in place for the conversations you have with your customers?

At 11:07 PM, Anonymous Roger Anderson said...

I said I would not put the already available parts of my book on my blog but that does not mean I won't put them on another blog. So, here we go. Marketing and Sales 1. Everett Rogers', the father of the adoption curve, had a very nice 5 step path that the adoption of innovation must take - for everyone.
Everett Roger's 5 Steps of the Diffusion of Innovation:
1. Knowledge
2. Persuasion
3. Decision
4. Implementation
5. Confirmation

To this I added these three return steps:
1. Repeat
2. Replace
3. Re-evaluate
That is, after a person finally decided to buy your product and they use it they have 3 choices.
This is Map 8 (Sorry about the green - I have to fix that. It just made a nice gray shade for the book.

How does this apply - you can see that social media can raise awareness to the point of knowledge or understanding. Step two is the point where they consumer is now sufficiently aware as to decide to buy a version of the product. Maybe your version maybe another version.
At this point the final phase of marketing takes its place - convincing the customer to buy your product. The rest has to do with the ability to use and their satisfaction or lack of. If the customer does not like what they bought, they can replace it with a different one or find a different type of product altogether.

Where is Social Media in this? Everywhere. Your chance to influence the outcome of each step is to some degree dependent on your ability to be heard during the time each of these steps is occurring.

ROI - Use surveys and response forms to determine the effect. Find out where you are being discovered and of course rate the number of positive to negative postings. Many companies had a librarian who had teh job of finding every published mention of the company and rating the value to the company or brand. Now with Google that should be an easy job.

Sorry I got so long. I get preachin' and I have a hard time stopping. I know that the professionals out there know most of this but I also know that there are many amateurs who browse these posts as well.

At 12:51 AM, Blogger Nudge Marketing said...

I like the idea that "if a student fails to understand something its the fault of the teacher" when it comes to issues like this.

Sure we all know the advantages of web 2.0 marketing concepts (you're reading a blog after all) but if we (marketers) cant help these people to understand where the $$$ come from in such an interaction then WE need to change how we are selling it to them. That said I do like Mack's little equation :)

At 11:27 AM, Anonymous Becky Carroll said...

Just a little bit of an addition to your equation:

Communication=understanding=more effective/efficient marketing=lower marketing costs

Communication=understanding=improved customer relationships=increased retention + increased referrals

Savings in marketing (and in customer service, ultimately) are only one part of the equation. Peppers and Rogers talk about the ROC concept (which Kevin pointed out is still in its infancy). If more companies looked at their customers and tried to maximize the ROC, we would get closer to directly impacting the bottom line. This is what will move the needle for most executives!

Thanks again, Mack, for being so brilliant! :-)

Lower marketing costs + increased retention/referrals=increased ROI/ROC

At 11:19 AM, Blogger Dennis R. Mortensen said...

>>The conversation monetizes itself.

I actually agree with you Mack, BUT :-) I think it is fair to ask for ROI or at least some kind of KPI’s to monitor your efforts. Having in mind that this will be as competitive as any other online marketing optimization genre.

My take on: “What and how to measure Social Networking websites”

which somehow concludes:

Social Networking business objectives:
- Increase Advertising and/or premium member-ship Revenue
- Increase User Engagement

Social Networking advertising revenue KPI’s:
- Advertising Revenue
- Visits per week
- Ad units per visit*
- Ads served*
- Ad CTR

Social Networking user engagement KPI’s:
- User Engagement*
- Anonymous visitors to members conversion rate*
- Active member length
- Time since last login
- Total time spent on site

But hey – I am biased – working in the Analytics Industry and all :-)


Dennis, COO at IndexTools


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