In his recent book, “What Sticks”, Rex Briggs estimated that over one-third of the $300 billion dollars in annual advertising spend in 2006 was wasted. Of this amount, approximately $23 billion dollars was wasted simply because the allocation of media spend across channels was not optimal. Put another way, re-allocating media dollars to channels that work harder for your brand or products can optimize your marketing spend to the tune of billions of dollars.

Last week, I was honored to be one of the panelists associated with a very interesting measurement discussion. The purpose of this panel was to explore how industry is progressing in developing digital marketing metrics to drive more consistent and higher ROI through less advertising spend waste- with better optimization of media mix, combined with a data-driven digital marketing approach. This session was part of a “digital immersion day”, hosted by McCann Worldwide in San Francisco for one of their clients. I was joined on the panel by Dan Neely of Networked Insights, Konrad Feldman from quantcast, and Will Hodgman from Comscore (M: Metrics), so a wide range of measurement angles was represented.

Anna Banks with McCann expertly moderated a vibrant discussion by posing challenging measurement questions, including examples such as:

. Can digital and social media metrics be used as leading indicators of business? Which ones?

. How can companies quantitatively understand the lift that active participation in social networks can give to their lead generation efforts? What about PR? What about aircover advertising?

. What’s the potential of Atlas’ engagement mapping, or other similar mechanisms to track the impact of a series marketing tactics (or user actions) beyond the last action?

All panelists provided well-thought answers that predictably highlighted their company’s ability to help drive towards a better estimation of marketing ROI. As a Collective Intellect employee who fulfills the twin roles of client services and social media analytics, here are some general impressions on measurement in a social media world, which were also discussed to some degree last week:

It ain’t easy (to estimate ROI)

Measuring ROI within the social media channel is not a white-jacketed, scientific affair (yet). And while I do believe it’s possible to move beyond the fuzzy warmth of the adage that “social media is more about the ‘I’ in Return on Investment”, measuring channel-specific impact of social or digital media marketing endeavors is not for the faint of heart. However, it can be done and there are digital research firms such as Insight Express or Marketing Evolution addressing this very issue. For example, Insight Express is charged with quantifying ROI across channels as part of BzzAgent’s recent challenge to competing agencies, the “WOM Guarantee Program”.

Doing it right may not be the best approach

Although it sounds counter-intuitive, digital and social media marketers need to make decisions quickly about what is working and what is not. Asking them to provide the inputs needed to build a complex, black-box, neural net or marketing-mix model- that may be statistically rigorous but mildly obsolete by the time it is complete- doesn’t help with the daily challenges of managing your campaigns. A “good enough” approach may work for many marketers. Begin with key social media performance indicators which, in turn, can be correlated with success metrics to gauge impact on revenue, customer satisfaction, or brand awareness.

Liberty! Give me the data

Database marketers and business intelligence experts are quite comfortable in terms of mining their own data for information. Can social media information become part of this world? The answer is a qualified “Yes!” However, there are fundamental challenges incorporating social media data feeds into database and reporting systems. Enabling savvier clients to make their own channel-specific ROI estimates (at whatever level of effort they choose) is an attractive option. Social media data can be integrated with alternative marketing data to help understand more fully the relationship between marketing action and downstream success metrics.

Conclusion

One of my favorite words is “nascent” and, to me, it describes the current state of social media analytics. There is no solid, industry-wide, currently accepted approach to measuring ROI for this channel. A wise person once said that it is not the destination but the journey that matters – as in traditional media, social media measurement approaches will become formalized over time and that journey will be fun.