Social Capital - making sense of the ROI of social media
March 22, 2010 by allan
We’ve been talking for a while about how to measure the impact and value of what people and brands do in online social spaces. And what’s the value of a conversation? There is no silver bullet to this, but having a good model of how it might work is going to be a hell of a lot more constructive than sitting around in Social Media ROI denial. We’re working on our own model and we’re calling Social Capital.
What is Social Capital?
Social Capital is the value exchanged in online social spaces. It’s really quite simple: People earn Social Capital and they spend it. Brands also have Social Capital, sometimes they increase it, sometimes they decrease it. And sometimes both people and brands go into the red (the irritating over-tweeter you just unfriended, the Toyota product recalls you heard about). It’s worth noting that Social Capital is not driven solely by what people or brands do in social spaces. Your Social Capital with friends is much increased by you having dinner and drinks with them in the real world. And so it goes for brands, real world performance, products and even advertising can build or diminish their stock of Social Capital.
This isn’t a completely new idea; there appears to be a Sociological view of Social Capital and others have written about it here. But we believe its something worthy of a deeper look and more practical application in a commercial context.
What is Social Capital made of?
Social Capital doesn’t directly equate with money, though I believe it will become more clearly monetised in future. For now, I’d argue Social Capital is made up of a combination of:
(1) People’s time/attention and interactions. I have a limited amount of disposable time, I’ll spend it on things that interest or entertain me. As the Attention Economy concept showed, this has a commercial value. Time and attention are tied implicitly to currency, or newsworthiness. For example, lots of time and attention (and green profile pics) were devoted to the Iranian election protests on Twitter back in 2009. Whereas now hardly anyone tweets about it, so currency is a big driver of time and attention.
People will also trade time/attention for excitement, interest, relevancy, entertainment and so on. Things that really engage people get them interacting. From the humble click-through to making films and building apps, people’s time and attention is a function of their engagement. As with friendships, if they aren’t spending time interacting with you, you’re probably not very engaging.
(2) People’s influence, their goodwill and their collaboration. In social networks, people can also trade their influence and goodwill with brands. There are only so many brands people have a strong opinion on, so goodwill is a limited resource. The more of it the brand has, the better it will perform.
The NPS crowd are big on this and have demonstrated that a positive disposition towards someone or something is predictive of revenue growth. This is critical, since you want time, attention, interactions and influence to be positively, rather than negatively, viewed.
But its not just about goodwill, influence is an important contributor to Social Capital. If people are prepared to use their influence on behalf of your brand, then that influence has a value. You’d prefer them to be using their influence for you rather than the competition. We would definitely value influence more than sheer numbers of connections. Influence would include people being prepared to retweet your message, become your fan on Facebook and sharing a link to your content.
Finally, people collaborating with a brand to create content or just something useful is worth including. Social gatherings and conversations tend to coalesce around Social Objects (the things people talk about, use and share in social spaces), so if people are prepared to create things with you, that has a value.
So What?
Assessing someone’s Social Capital is one way to estimate their value in the social web. Twittratr and Twinfluence are good examples of tools designed to allow people to do just this, albeit in a limited way.
Social Capital might also be a good way for brands to work out just how much sway they hold on the social web. It would provide a benchmark for their performance over time and a way to compare themselves to competitors. I’m not advocating anything so simplistic as a single metric (we’re not trying to recreate Millward Brown’s much derided AI score here). Its more useful to understand a brand performance along the different dimensions of Social Capital.
But I would like to work out a correlation between Social Capital and revenue growth, I bet you’d find a strongly predictive link. We’re working on this right now.
But is isn’t just about measurement…
Businesses are already earning and spending Social Capital. When Apple releases a new product, they immediately increase their stock of Social Capital as people devote time, attention, their opinions and their influence to it. When Habitat began spamming Iranian election Hashtags on Twitter, they reduced their Social Capital as the Twitterati began to criticise them.
But it goes further than that, if businesses can understand just how they can help people build their Social Capital, I think they’ll end-up building Social Capital of their own. When OfficeMax created Elf Yourself, an amusing and viral personalised animation, they generated enormous Social Capital for themselves because they helped others be funny, amusing, smart and earn Social Capital from their own social networks.
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