— 28 October 2004 —

R to the OI

Paul is clacking the keys over at House of Squarespace today. Topic du jour, Blogs and ROI. The post stems from one of the comments in the post that preceded it on Blogging and Corporate Fear. Yvonne DiVita wrote:

…the single most common reluctance presented here is: what will I write in the blog? Small business owners perceive blogs are taking too much time, needing content they have no idea how to produce, and as an iffy ROI. Gee…that sounds just like the olden days when small businesses were afraid of websites!

We agree of course. Return on Investment (ROI) is a serious concern for many businesses. Well, the return part is anyway. From some of the conversations I have been in involving sentences like, “What’s the ROI gonna be,” I get the impression that people are actually focusing on what the return will be without fully understanding the investment.

Cash isn’t the only thing you will invest in a blog. Depending on the maturity of you company’s IT, you may only look at what things cost in terms of dollars, or hours. Many companies do both and more of course.

Investment First

Resources are finite. I always like to start with a “duh” statement. What you do with your finite resources will, in the end, be a good way of telling whether you were successful in your endeavors. Okay, I need someone to develop a “duh” tag for HTML.

When you look to start a blog, don’t get bogged down in what it is going to cost by solely looking at your cash reserves. Yes, you will have to give someone money to make it happen, but you have other resources you rely upon as well.

Time. This is the next biggest one after money. For some, it could be bigger than money. If this is you, let’s talk. Time is everything you will invest in the blog from thinking, to writing, to editing, to moderating comments. Rinse. Repeat. Over and over this cycle will continue, and once you start it, you have to continue it. Stopping a blog, whether things are going well or poorly, will cost you more than the time and money you invested in the first place.

Which brings us to reputation. When your company blogs, the subject matter needs to be engaging. You need to be open, as much as you can, to your readers. Doing so will almost certainly bring you more readers. But by doing this, essentially you are testing your company’s reputation with each post, and each visit from a reader. How can you go about measuring a return on that?

Well, there are a lot of tools on the web that will help you measure your reputation in relation to your blog, both qualitatively and quantitatively. But again, that is focusing on return. How about that initial investment? What is your reputation worth right now? You need to measure it pre-blog. In order to measure a return, you need to know what the investment is, and that means baselining your rep.

Going back to the idea of the maturity model, you may already know what your reputation is worth. If so, congratulations. Reputation is an intangible thing, the level of which is defined most by those that have a stake in your efforts. This will be investors (shareholders), employees, and those darn customers.

Return, or “Where’s my money?”

The more and more I think about it, the less and less it seems like a good idea to start a blog specifically to make money. If you think this way, you will be disappointed. The best reason I can think of for a business to start blogging is that you want to open a conversation with those stakeholders. Whether you want to actually converse with them, or influence them with your new online presence.

And this is where ROI breaks down. It’s fine to talk about ROI as a concept, but using ROI calculations are only going to help you with that whole money thing. And that “whole money thing” also assumes that there is a set amount of money for an effort that has a fixed start and end point. While you can set artificial end points (like using economic quarters), a blog doesn’t really end. And, as stated before, it shouldn’t. So how do you measure something that doesn’t end?

Two measuring concepts that use the acronym EVA could help you out. Economic Value Added (strategic), and Earned Value Added (tactical).

Economic value-added (EVA) is the after-tax cash flow generated by a business minus the cost of the capital it has deployed to generate that cash flow. Representing real profit versus paper profit, EVA underlies shareholder value, increasingly the main target of leading companies’ strategies. [ source ]

Earned Value Analysis is analysis of a project progress where the actual money budgeted and spent is compared to the value of the work achieved. [ source ]

EVA2, assumes actual amounts, and based on the inputs can help you better track efforts over time to understand how funding them is helping or hurting your overall efforts as they relate to the bottom line both financially and to your reputation.

Tracking over time helps to adjust the level of effort required versus the level of output needed to sustain the effort, taking into account the profit as well as the overall strategic goal of having a blog in the first place. If your blog is giving you big returns, using Earned Value Analysis will make it easier to compare blogging efforts to other aspects of your company, thus allowing you to better decide how to manage those finite resources.

Taking that Earned Value Analysis and applying it to your company’s Economic Value Added helps to strategize your company’s future plans as they relate to the financial and reputation risks and opportunities on the horizon.

As Paul states:

…if you wish to market your product or service there really isn?t many cheaper options than setting up a blog. You can develop a brand, an audience, mindshare, and many other assets even though you might not be able to measure them. You get to reach out to your audience in ways that ads can not, and in the long term, this will prove more valuable than who you select as an ad agency.

Eventually we will develop a BROI (just had to create another acronym). But Paul is right. Not to discount traditional advert methods, but blogging is a low risk prospect that also tends to incur little cost comparatively. Our evidence to this point is entirely qualitative, but familiar paterns are starting to present themselves.

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