In this completely connected, totally viral, absolutely transparent, geo-targeted, digital world we live and work in… you have to be social. But how do you justify the time and expense it takes to maintain that presence?

Now that social media has passed the point of “why do I need it” to “what do I do with it” the quest to determine the ROI of social media has become more complex.

Since you are asking people to put numeric quantities around human interactions and conversations, which are difficult to quantify, trying to determine the exact return on your investment is not easy and in the long run, may not a good idea. To really understand the impact of social media and social technology on an event, promotion, brand awareness or even product sales, people need to measure the “ROE” … return on engagement.

At Medial Needle, we have been finding valuable “returns” manifesting themselves in ways not always anticipated at the onset as a result of our marketing efforts. More and more, we’ve come to see these unexpected fruits and proverbial rewards only appear because social media was strategically integrated into a marketing agenda.

For example, Media Needle recently executed a food campaign outreach program. While servicing a very small, archaic and insular cooking listserv, we uncovered a hive of influential webmasters; each with robust email lists and social media profiles. So what at first appeared initially to be a seemingly insignificant target community mushroomed into one of the campaigns top case studies. Clearly social media bears the markings of what we once more readily called “viral marketing”. Another campaign had us establish a quality dialog with a key target community. Despite a lull in activity on the client’s end, we maintained the relationship. Six months later, the two partnered successfully for a robust promotion. Anticipating these in conventional ROI terms, especially at the onset of the campaigns would have been impossible.

Thinking about social media in terms of a simple bottom line number puts the whole thing on an old school path of problems and risks, missing great opportunities. Essentially, you have to stop relying solely on the numbers. With social media the trick is to focus on what your numbers end up leading to.  ROI is an effect of quality ROE.

If your goal is to participate in the conversation, to enhance your relationship with your audience and become a trusted member of the community that surrounds your brand; then your ROE has been set into motion. Once you’ve paved this foundation, the more conventional ROI models of sales, registrations, new followers and fans etc. will begin to kick-in, proving the benefits of a well-engaged social media agenda versus a dry and uninspired one.

Finally, ROE like everything else social media related, has a variety of definitions.  Here are two good ones:  We wish to cite Jason Falls’ here http://www.socialmediaexplorer.com/2008/10/28/what-is-the-roi-for-social-media/

Sarah Evans’ different but complimentary tome here: http://prsarahevans.com/2009/05/15-ways-to-measure-return-on-engagement-roe-of-social-media/ as a valuable point of reference.

When someone else talks about your stuff, it's earned media

What exactly is earned media? I’m glad you asked. But first, let’s define paid media (sorry, it’s the best that Wikipedia had to offer). Paid media is just that. Exposure that you pay for whether it be television, print, radio, outdoor or online. If you paid someone to put your message there, it’s paid media. Don’t get me wrong, paid media is absolutely necessary and crucial to an integrated marketing mix. And, with the controls available today, you can reach a very targeted audience exactly where you want them for smaller investments than ever before. But, nevertheless, it’s still paid.

Earned media is the result of coverage, comments and conversation produced by press releases, chat threads, Facebook posts, Twitter tweets, blogging, commenting, reviewing, rating, social bookmarking like Digging, StumblingUponing (I made that verb up so don’t hate), Deliciousing (see previous parenthetical note), and video posting (I still love “Will It Blend?” and applaud Blendtec for doing it the right way) among other user-generated and brand-owner content development. Earned media is not completely free. You will most likely pay an agency like ours or an employee of your company to create, craft, post and manage earned media. If you are bootstrapping and doing it yourself, it still costs in terms of time and effort that could have been spent elsewhere. But let’s face it, you’d be paying to create the ads or media for your paid media on top of the actual media costs anyway. So, earned media still costs less.

Even better than costing less, earned media is more valid, engaging and connecting than paid media in a myriad of ways. It can come via a trusted third party – a friend, a media source, a blogger or a community you respect. It, by its very nature, sparks a dialogue that can open the doors for deeper connection. And, it engenders credibility (when done right, mind you) by offering information and conversation versus a come-on or enticement.

Word-of-mouth can be sparked by great paid media, but it’s the following earned media that makes it viral. Keep that in mind when you are planning and the word “viral” pops up.

Through this network, users can discover brands and products that may interest them based on the recommendations of their like-minded peers. The site also mixes qualities of Facebook and Twitter — status updates, photo albums, micro reviews, follower and friends lists — with its Yelp format, making it a one-stop shop for all things social networking.

The Good

• Viral goldmine: Clearly, the potential to reach consumers via Lunch.com is immense. And given that the site is still in its infancy, that potential will only continue to grow along with subscribers.
• User-friendly: Pages are exceptionally well organized and easy to navigate. Props to the information architect and designer. 
• Review ratings: Reviewers are ranked by their peers, based on the usefulness of their reviews, which helps produce product reviews that are actually useful, well written and less of the LOL/OMG variety.

The Bad

• Limited topics: Collectors of rare 18^th century stamps will probably not find other enthusiasts here. To cast the widest net possible, communities seem to revolve around the lowest common denominator, though interests will likely expand as the site does.
• Experts missing: Though peer reviews are helpful, when it comes to purchasing big ticket items like electronics, nothing beats the reviews of experts. Lunch would be well served by adding an “experts corner” or feed to CNET. A comparison shopping service also wouldn’t hurt.
• Timing: Had Lunch launched years ago, it might have been a formidable competitor to Facebook, but its arrival now makes it a little late to the virtual party. Alternatively, it may crush Facebook in the same way that Facebook crushed MySpace and Friendster. This seems an unlikely scenario to us as Lunch is less about friends and more about products, but ultimately time will tell and Lunch.com remains one to watch.

Check it out for yourself — Lunch.com — and then leave us a comment with your thoughts.