Why It's So Hard to Justify the Cost of a Social Network (Part 1)

In a previous post about Social network ROI and the value of a relationship, I opened up about some frustrations I had this year getting a social network development project off the ground. The gist is to convert our company's tired old subscription-based education/information portal to a platform that is much more interactive and responsive to customers.

Despite it being a small company (where conventional wisdom says decisions have an opportunity to be made relatively fast compared to, say, a Fortune 500 counterpart), it still took a portion of last Spring, an entire Summer, Fall and the tendrils of the upcoming Winter to get it funded. In fact, at several points the project appeared to have dang near died on the vine.

Making the Case for Change

I knew it was going to be like that so to mitigate the sticking points, I planned for all of the following right from the get-go:

built the "burning platform" for change;
gained executive buy-in for the need to change;
brought on board key influencers from the rank-and-file;
mitigated executive resistance to cost by considering offshore service providers. (In fact, we ultimately secured a solution price that was 85% less than initial expectations);
developed a comprehensive RFP to help define project objectives and requirements;
facilitated a vendor selection process to mitigate concerns about the risk of "untested vendors";
interviewed clients of short-listed vendors to mitigate concerns of quality control.

That's a short list. But despite all those things, it still took three-quarters of a year to get over the approval hump. For a small company of about 10 people, that's a long time. But you tell me. Is it in the ball park for project launch decisions?

One of the reasons I'm convinced it took so long to move forward with the project is that despite having performed a lot of the "change management" pre-work above, the guys with purse string authority fell into analysis paralysis around social network ROI, cost recoupment and payback periods.

I'm tellin' ya, that ROI-thing is a tough nut to crack. It's tough to quantify, let alone forecast, the economic returns of what is essentially the value of a relationship.

I mean, sure, we can measure, track and manage metrics like: subscribers, page views, unique visitors, content popularity, comments, length and depth of visit, and so on. But what the purse string managers were holding out for is what's the formula, the equation, or whatever it is that translates those things into $$$?

And equally frustrating for me was one particular--yet unarticulated--metric that decision makers were seemingly holding out for. That is, the implied: "Mel, what's the probability of success at an 80% confidence interval?"

Help me out here. Where the hell is that type of forecasting model? How have you managed those kinds of expectations?

But Can We Blame Them?

On the one hand, I couldn't really blame them. Shelling out the dough, even at 15% of original pricing expectations, is a scary thing for a small company in today's economy. Especially one that caters to customers in the real estate industry. (Now you see the magnitude of my challenge?) Still it didn't alleviate my frustrations.

I was frustrated because I felt I addressed everything that was addressable. Short of producing a prototype and a pilot program, I needed to find another way to get them to see the vision I was seeing beyond the economics. (Don't think I didn't consider a prototype. Ultimately that was out of the question because it, too, would've cost something to produce and therefore questioned for its economic value.)

I stewed and griped privately of the need for "managerial cojones" and (privately) derided managerial hand-wringing about all that was wrong with the current system. It was ironic. After all, they understood the need for change. Yet, despite having narrowed the field to a single service provider and despite managerial awareness about how the current platform was death-spiraling our business, there was continued waffling at the decision point.

How Different Are These Objections, Really?

But here's the deal. Is that really so different from other projects? I mean, that's been the million-dollar question all along hasn't it? Even before social media and social networks were in vogue, the training industry, for example, has long grappled with exactly those kinds of questions for years... decades. Pick up any T&D Magazine or scan any ASTD forum and you'll see articles and on-going discussions about the hows and whys of ROI justification in training development projects.

In Part 2 of this series (to be published tomorrow), I'll list my thoughts about how a four-level evaluation model, long held as a workhorse in the training industry, might map to metrics traditionally used to quantify performance in social media.

And if I can correctly articulate the tendrils that are currently wrapped around my brain, I'll also try to layout my perspective about why folks like you and I sometimes have a hard time making a quantitative case to shell-out for a company-hosted social network.

In the meantime, I wasn't just being rhetorical when I asked some of the questions above. I really do want to know how you've handled similar objections to those I described. Feel free to comment.

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