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More on Proofs, ROI, and Web 2.0

March 25, 2008

Ben Martin at Agent Genius(an excellent site that I have now added to my RSS reader) has posted a trenchant response to my earlier post on proof in Web 2.0 type of activities.

He takes issue, it seems, with a few things, confessing himself further and further befuddled by the dialogue.

First, measuring ROI from blogging or social networking activities — Ben seems to believe — is inherently bunk:

How do measure “investment” in social media? A, or ActiveRain blog costs exactly $0. Let’s say you get one deal per year by blogging. A facebook profile costs you exactly $0. Let’s say you convert one lead from your facebook network into a deal per year. Let’s see, anything divided by zero is… Infinity, I guess. That’s one hell of an ROI!

He then claims that time really isn’t a factor when it comes to blogging:

Okay, so there’s the time factor. Sure it takes time to write a blog or do the social networking thing. You can do this during unproductive times of the day. Nobody at the open house? Type. Waiting for a client to show up for a meeting. Type. Kids gone to bed and the spousal unit is watching a boring TV show? Type.

He then concludes that there is no cost to blogging:

Now, consider the opportunity costs of not sharing your expertise. If you don’t write about what you know, the only people who benefit from your knowledge are you and your current clients. Knowledge is a Realtor’s greatest asset and to not share it is to squander it. Basically, to not share your expertise widely is like holding your expertise in inventory, and everyone knows that holding inventory costs money.

I’m going to go out on a limb and say that the net cost of blogging is effectively zero dollars. Some will quibble with this, but remember to consider the opportunity costs of holding your knowledge closely.

There’s a lot of confusion here. Ben seems like a very smart guy, and very observant, but in this particular instance, I’m afraid he’s out of his depth — just as, I suspect, I would be if I started talking about how best to show a house.

First of all, measuring ROI in marketing is not a difficult concept. You measure “lift over control”. If you have a baseline established already, then measuring lift isn’t particularly difficult. For example, if my website gets an average of 300 visits a day, then I add a blog and see 3,000 visits a day, that’s a pretty clear lift over control (historical data).

If you have no historical data, then you try to find someone who is doing the exact same thing you are, then do your activity, and measure lift. So find an agent, or a brokerage, who is doing exactly the same things you are, except for blogging, and compare your two businesses. If you’re getting 20% more transaction sides, or your transactions are worth 15% more than his, then that’s pretty solid lift over control.

Yes, it gets tricky when you’ve got two heterogeneous companies, and the control group is hard to establish, and you have to start assigning weighted averages and such, but that’s the principle.

The “This cost $XX, and I made $YY from it, so ROI is $YY/$XX” is far too simplistic and often misleading — as is the case here. That a blog costs nothing, therefore getting one sale would make the ROI infinite is a ridiculous result. I suspect that Ben knows that, and was merely using it as a rhetorical device. No, the real question is, would you have gotten $YY without that zero-cost WordPress blog?

To further confuse the issue, Ben believes that the cost of operating a blog is the time it takes to type up some words. You can do this, as he puts it, during your unproductive dead time.

This is confusion because it implies that were you not blogging, you’d be sitting around twiddling your thumbs. That isn’t the case. Time spent notblogging could be spent doing more of the same old activities — writing Thank You cards to clients, or making a phone call, or reading up on the latest market studies. There are a nearly infinite number of things one can do during dead time that isn’t blogging or social networking.

How do we know that those activities are in fact not more valuablein terms of growing your business than typing, typing away on a blog?

The logic behind his claim that there is no cost to blogging is… well, bizarre.

First, it assumes that Knowledge is a Realtor’s greatest asset, not his personality, Rolodex, experience, attitude, or physical beauty. That may or may not be true. But even if it were true, the claim that not sharing that Knowledge is squandering it, because “holding inventory costs money” simply makes no sense.

Holding inventory costs money because storage costs money. This is a purely physical concept, based on the physical space that inventory takes up in physical space that you as a company must lease or own in order to store those items. In fact, for most e-commerce operations, “inventory cost” asymptotically approaches zero — particularly if they sell digital goods such as music or photos. That insight, after all, is the whole premise behind Long Tail. How much does it cost to store knowledge in your brain? If it isn’t zero, you need to contact your lawyer and sue yourself.

Further, Knowledge is not subject to spoilage. Knowledge isn’t fish that has to get sold within a couple of days, or it goes bad. You do not automatically forget things you didn’t blog about, or share with the widest possible public audience. Sure, it could get outdated as new facts emerge, as new knowledge is gained — but in that event, even the shared Knowledge gets outdated and “goes bad”.

So contrary to Ben’s thoughts, actually, there is zero cost to not sharing Knowledge, no inventory cost, and not sharing does not mean you squander it.

There is a significant cost to sharing such knowledge. I’m incurring that cost right now, by typing out this blogpost. I don’t see it as a cost, because I happen to enjoy blogging; this is partially entertainment expense for me, if you will. But that isn’t the case for an agent trying to drive more business via blogging or social networking. That is a real cost. And as such, it requires some proof of a return on that cost.

Applying the above, we can ask some questions about Ben’s personal experience:

Based on my personal experience, I’m also fond of saying that I can’t draw a straight line between my blogging efforts and any success I’ve had in business. But I can draw a squiggly line. 2007 was the most remarkable year of my career, and I attribute it in large part to social media. Did I get a new job just by blogging? Nope! I networked in real life. Did I get the freelancing and public speaking gigs just by blogging? Nope! I got papers published and spoke for free. Did I just blog my way into a photo shoot and get my picture taken for the cover of my professional society’s national magazine? Nope! I volunteered for committees, showed up for events, and followed through on commitments.

Could I have done all of the above without blogging? Maybe one, but definitely not all three.

Could someone else who isn’t Ben, who also networked in real life, also got papers published and spoke for free, also volunteered for committees, also showed up for events, and followed through on commitments but did not blog have gotten a new job, gotten freelancing and public speaking gigs, and gotten his picture taken for the cover of the national magazine?

If the answer is Yes, then I can go out on a limb and say that all of Ben’s blogging activities were worth precisely zip. He might have done better by spending a lot more time on the golf course.

What’s funny to me is that Ben and I are kindred spirits in terms of what we want to see out of real estate, and out of the agent population:

So I offer a different equation: Return on Engagement. Instead of thinking about return on investment, consider how you can engage your social media farm. The extent to which they’re engaged with you is the extent to which they’re likely to think of you when they need to move. And because referrals will come when there’s trust and engagement, even though you may NEVER convert someone in your social media farm into a client, they will be more likely to think of you to the extent you’ve engaged them through social media.

This concept won’t resonate with everyone, but I know many genius agents understand this intuitively.

Ever since I started this blog, I’ve been talking about the need for agents to become more professional, more honest, more authentic, more engaging, more human, more Cluetrained. So I’m 100% on board with what Ben is advocating here. And I’m glad to hear that many genius agents understand this intuitively. So do I. I’m really glad that there are agents trying the new methodology, even in the absence of objective metrics, based on what seems to work for them. God Bless ’em.

But as a marketer, I want data and backup and proof. I’m not asking for scientifically valid proof here. I just want to see enough evidence, enough data, enough proof for a reasonable person to conclude that yeah, in fact there does appear to be a causal relationship between blogging and increased sales. Or increased productivity. Or something. I want to see lift over control.

Because without that data, we’re not engaging in marketing, but in hype. We’re not thinking about Web 2.0, but fantasizing about Dreamland 1.0, fueled by so much over-the-top rhetoric: OMGASM! DA BLOGS RULE!!!

Furthermore, may I point out that even Ben’s new, less objective metric, can and should be measured? It’s easy to do. I hope some marketing firm or ActiveRain or whoever does it soon.

It’s a classic brand recall study.

Get one group of 15 consumers who have used an agent for their last home purchase. Ask them who they would use for their next home purchase when they need to move. See if they recall the name of the agent they used.

Get another group of 15 consumers who used an agent who blogs and social networks for their last home purchase. Ask them the same question. See if they recall the name of the agent they used.

Get a group of 15 consumers who read real estate blogs. Ask them the same question. See if they name the agent blogger.

Measure the difference in the response. Voila! Return on Engagement metrics.

And may I say once again, if there is absolutely NO statistically significant difference between the three groups… then I will go out on a limb and say, blogging is absolutely worthless as a Return on Engagement tool.


9 Comments leave one →
  1. March 25, 2008 8:30 pm

    Rob — great idea on measurement of Web 2.0 effectiveness via a brand recall study. Hopefully all of the conversations about this on various blogs this week — which may or may not be a waste of time 🙂 — will cause someone to put the study together.

    While I still haven’t seen a definitive financial return from having started blogging five months ago, this morning I wrote a post outlining some very well defined lift over control results for web traffic.

  2. March 25, 2008 9:47 pm

    Rob, I’m not sure what you’re asking can even be measured. Further more, I’m not even sure if it’s all that important to do so. Like any other personal marketing, that platform is not as important as the speaker.

    I’ve found that what works for one guy is worthless to another. someone who excels in social media might be to shy to cold call, or simply bad at golf. There is no “Someone like Ben”. every person is a little different.

    If social media is working for Ben, it’s working for Ben. If it doesn’t, it doesn’t.

  3. March 26, 2008 9:05 am

    Todd –

    I think what you mention is the temptation for us all. It’s so easy to say, Different Strokes for Different Folks! and be done with the hard questions.

    But I guess my point is that if “it” works for Ben and only Ben, at some point, there has to be some evidence showing that “it” is working only-for-Ben. Yes, every person is a little different, but techniques either work or they don’t for that particular person.

    If blogging/social networking does indeed work (however we define that word), then the person using it should be able to show some proof, some lift over control, if only to convince himself that what he’s doing is valuable.

    For example, what Scott Rogers at VARbuzz wrote (see comment #1) is at least some evidence of something going on. 🙂 Now if we could only relate web traffic –> conversion –> leads –> transactions… then we could actually quantify ROI…



  4. March 26, 2008 3:29 pm

    Let’s start here: Anyone who claims to have social media measurement figured out is only fooling one person.

    I will restate my assertion by echoing what Todd says: What you’re asking to measure cannot be measured, at least for now.

    As with many debates, we are actually debating the underlying beliefs and assumptions that we make. In my view, this one comes down to work/personality styles and the extent to which a person is comfortable with uncertainty and ambiguity.

    As I see it, there are too many variables at play in the business world to attempt to isolate one of them and say that it (and it alone) caused the lift. Even in your web analogy, where the site goes from 300 to 3000 daily visits after adding a blog, there are many other factors that could affect this. The “control” is far too uncontrollable.

    I believe the world is chaotic. See, I want proof just as much as the next guy, but in the absence of proof, I will go with what seems to be working. Some might call that superstition. I call it pragmatism. That’s my personality type: I’m comfortable with ambiguity, uncertainty and creation by iteration. Others aren’t, and there’s nothing wrong with that. In fact, I’m glad I have the analytical fact-finders on my team.

    I will debate the knowledge as inventory metaphor. It is admittedly a loose metaphor. I will argue one point: It is true that knowledge expires. In the accounting profession, it has been noted that the body of knowledge completely turns over every six years, and that the rate of change is increasing. Real estate has just as many rules and regs, so it’s essential that agents share their knowledge “while it’s hot” and continually refresh their inventory.

  5. March 26, 2008 3:59 pm

    Ben –

    I agree that we may be debating underlying beliefs and assumptions. And I further agree that the “level of proof” needed is dependent on the person and the need.

    Because you’re 100% right to the extent that almost every marketing ROI study or lift-over-control report I’ve seen or worked with would not pass muster with scientific inquiry. All of them have gaping holes and major assumptions — the better studies at least state those assumptions.

    The point, I suppose, is that to some extent, “proof is in the eye of the beholder”. You — comfortable with chaos and ambiguity — may consider it enough that good things happened after you started blogging. Others — who need a bit more support for decisionmaking — may want to see some data.

    Nonetheless, that does not, IMHO, remove the need for data and proof. I dispute that effect of marketing, of social networking activities, cannot be measured at all. I can accept that they can’t be measured with scientific precision, since that standard is unattainable by anything that involves human beings (see, e.g., economics statistics). But they can be measured, and should be measured as best as possible.

    On Knowledge expiring… oh, I totally agree. And our goals, I think, are identical: we want to encourage agents to share as much of their knowledge as possible. I was merely pointing out that when knowledge turns over, it turns over whether shared or not. But as you mention, it was an inexact analogy. 🙂

    Thanks for your response; love the discussion.


  6. March 27, 2008 1:11 pm

    What the heck are you guys talking about?

    One either derives income from blogging/social networking or they do not.

    If you work 80 hours weekly doing nothing but those two activities and earn six figures, what’s your return? How many angels can dance on the head of a pin? 🙂

    Only if you can make more doing something else do the 80 hours come into question — which is of course an opportunity cost problem. Of course, even that equation might be worthless to a particular real estate agent who’d rather make less money going 2.0 than knocking doors or whatever.

    This reminds me of the whole SEO #$%^storm caused by a BHB post I wrote several months ago.

    The bottom line there is the same as it is here — either you’re making money doing it or you’re not. Bragging about all the contacts you’ve made might increase your daily dose of endorphins, but not much else. Last time I checked, my banker was still not allowing me to ‘deposit’ all those good contacts in my account. 🙂

    The rest, it seems to me, is a whole lot of esoteric albeit elegant rhetoric about not much.

    Rob — I’m feeling your take on this, I think. It appears to me you’re pretty much looking for quantifiable results and a whole lot less mind bending explanations about how one deal makes someone’s life different. 🙂

    Am I close?

    Good stuff.

  7. March 28, 2008 9:46 am

    Hey BawldGuy –

    Love your take. 🙂

    FYI, if you make $100K a year doing nothing but blogging for 80 hours a week, assuming 2 week vacation, you’re making $25/hour. Heh.

    Yeah, you’re close — what I’m looking for is data. Even presonal, one-off data. But ideally, I guess I’m trying to provoke the 1000Watts and Swanepoels of the world to undertake a study of Web 2.0 techniques.

    And i think maybe I’m giving the impression that Web 2.0 stuff isn’t worth doing; that is the farthest thing from my intent. I think they’re worth doing — I just want to capture and quantify that as much as possible. 🙂


  8. March 28, 2008 3:50 pm

    Rob — I think the problem you find is those not making money giving you all sorts of slight of hand gibberish, resulting in more confusion.

    On the other hand you’ll not get much from those closing dozens of transactions as a result of their 2.0 efforts. They often don’t wish to share. Wearing their shoes, why should they give others the key to the vault?

    It works — the problem is, as you’ve said, getting reliable data on which to make equally reliable conclusions.

    Not an easy task — some might say virtually impossible.


  1. Show Me the ROI: Is Web 2.0 a Load of Hooey or Who’s Making Hay

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