Interesting post on Social Media ROI over at Mashable by Brian Solis, principal at new media agency FutureWorks, and author of the upcoming book, Engage.

Brian takes agencies and brands to task for offering social media as a cure-all Dr Pangloss solution, sometimes without a clear focus on the specific problem (objective) that the social media investment is supposed to solve.  Everyone wants ROI (return on investment) on social media, but return on which investment? Marketing investment, HR investment, market research investment?

Brian concludes “Defining the “R” in ROI is where we need to focus, as it relates to our business goals and performance indicators specifically”.

Agreed. But remember that the key point here is that whosever “R” we are talking about in ROI, that R is a financial R – always measured in $ value.  ROI is an established financial measure, a ratio comparing apples to apples ($ gain / $ investment) (which is why the terms Return on Engagement / Participation / Involvement / Attention / Trust – are nonsense; they do not measure return, they measure – if anything – cost of achieving engagement etc).

The challenging issue with social media ROI is that it necessarily means attributing financial value to outcomes of social media investment (otherwise it is not ROI). This can be easier said than done , especially outside marketing (e.g. using social media in human resources, internal communication and market research) – which is why some argue that ROI is not a good social media metric – it’s easier to stick with media metrics (exposure levels, influence on perceptions).

Brian’s broader point is that we need to understand and articulate the business question to which social media investment is supposed to be the answer, before committing funds.  What exactly are we trying to achieve from a business perspective – improving ROI on marketing, HR, research – or some other business objective?

To this end, we find it useful to use the classic SMART framework – the objective of a social media investment should be Specific, Measurable, Achievable, Relevant and Timely. Is your social media investment SMART?