Was at the Web 2.0 Strategies forum today and took part in a social software ROI discussion. The discussion wandered quite easily onto the ROI of blogging or the ROI of wikis, and the features and functions of the tools. This has never really helped develop the ROI case for Web 2.0 or Enterprise 2.0 and didn’t in this case. It got more interesting when we turned our attention to a problem that Web 2.0 could solve (maybe using blogs or wikis).

For example, if a software company has a problem where support calls cost too much, a wiki may be a good tool to lower the cost of fielding support calls. Jive Software recently quoted an organisation where phone support cost the organisation $12 per incident, whereas wiki support cost $0.25. A wiki therefore supports the ROI case for the reducing the cost of providing support – there’s no ROI for the wiki in it’s own right. It’s just that organisations that adopt Enterprise 2.0 can improve the ROI’s on many different projects.

The conclusion I took away was that ROI only makes sense when applied to a specific business problem – then you piggy-back on the ROI of that business problem, rather than trying to make a generic ROI case for widespread wiki, blog, or social software adoption.

Was fortunate enough to have a brief email conversation with Ed Brill the other day. For those of you who don’t know, Ed is the worldwide Notes/Domino sales leader for IBM. He’s also on of, if not their most prolific blogger, and is well known in the IBM world for a) being passionate about his product and supporting his product on-line and b) writing his honest opinions on-line and not being any sort of mouthpiece for IBM marketing.

I was asking Ed about whether it was possible to quantify the value of his blog to IBM. The only number he could really put his finger on was that since he started blogging four years ago his business’s revenue has increased by 40%! However, this clearly is not the only factor, (not only are other Lotus executives blogging, but the product has undergone significant enhancements in that time period) it certainly corrolates.

Blogging obviously hasn’t hurt the Notes/Domino line, and the anecdotal evidence is that the Lotus community certainly appreciate Ed’s blog (go and look at the comments for proof).

Whether it is a cause or not, if it has corollated with a 40% revenue increase over four years – why wouldn’t you blog?

Continuing on a theme of ROI for various Web 2.0 tools, I started thinking about the ROI of blogging.

Part of the problem is that blogs, being tools, can be applied to multiple problems. So the ROI of ‘blogs’ is somewhat misleading. In the same way that wiki ROI studies get confused when they try to address the tool itself, they should instead address the problem the tool is trying to solve, and then do an ROI study on that problem. For example, a blog could:

• Show a different side to an organisation, or reinforce a current perception/image (eg Microsoft’s Channel 9 or GM’s Fastlane)
• Showcase expertise around an industry or subject matter (eg the English Cut)
• Generate an honest dialoge with customers (eg Ed Brill of IBM)
• Perform market research (Dell’s IdeaStorm)

So, when organisations come to address the ROI of a blog they should look at its purpose, and use their traditional methods. For example, if GM is trying to change its public image using a blog, the same ROI methods should be applied as if they were engaging a consultancy on a re-branding or re-launch exercise. If market research is key, then the ROI follows the same pattern of how we measure the ROI of focus groups today. I worked with one customer who wanted to use their corporate blog to increase their brand awareness. So their measure of success was to sample brand awareness using phone polling before and then a few months after launching their blog. The ROI calculation was done on their traditional brand managment ROI metrics (so it could be compared with previous exercises). The fact that we are using an IT tool to get to the same end result shouldn’t change how we measure ROI, it should (hopefully) help us end up with a better ROI result!

However, measuring return is not the only tricky part of measuring the ROI of a blog. The costs are pretty low in turns of financials, but the real cost is time. How many hours per week are you going to budget for blogging and how does this impact your ROI? It’s even more difficult as it is not a one-off cost, as would an IT project to automate business processes where you pay a lump some for software, hardware and services and watch the returns come in. Blogging requires a certain time commitment every week, or sometimes every day. You need to work out the opportunity cost of your bloggers spending time blogging (or, more accurately, spending time performing market research, talking to customers or showcasing their expertise) into your calculations.

Of course, all the above only address external blogs. What about organisations which provide employees with blogs within the firewall? Again, go back to the problem that blogs are trying to solve.

If your internal blogging platform is meant to be a searchable knowledge repository, how have you previously measured the value of employees having speedy access to information?
If it is for employee feedback, what was the ROI of previous feedback schemes? One that I think will become increasingly important is retention. How much does it cost it replace an employee and how much will lack of blogging facilities be a reason for leaving as a new generation with new expectations comes into the workforce?

Let’s try and put some numbers around this. Say we have a £20m turnover company with 100 employees. Let’s say they have an industry speicalist, their super-star consultant who is usually chargeable but equally is expected to help close deals, which I hope is a fairly typical scenario. Let’s say that he ‘gets’ blogging, is really keen, and spends four hours a week blogging. Assuming he charges at £150/hour that’s £600/week = ~£30k per year lost revenue (0.15% of turnover). So his blog, showcasing his expertise and therefore giving his organisation authority, has to pull in probably between 1-2 clients per year to break even. How do you measure this? Quite simply the same way as you measure any marketing tool, you ask your customers whether it had an impact on their decision!

However, there’s another way of looking at it. Blogging champions are funny people, the chances are that the consultant would blog out of hours, because they are so enthusiastic about what they do. Even if it is done during time which would be otherwise chargeable, the consultant would be expected to attened sales meetings to convince the client of the organisation’s delivery capability anyway. By blogging, he or she is doing this for an unlimited audience, as opposed to the two or three people they might meet during a sales presentation. Because of the blog, it may not be necessary for the consultant to attend so many of these meetings. So the actual cost would be much lower than £30k per year, and it is still opportunity cost, not real cash going out the door. Anyway, all if this is measurable – hours spent on chargeable time, hours spent on sales presentations and hours spent blogging and number of new customers who recognised the blog as a factor in their decision (and number of customers who found the blog a value added service which they recognised, and decreased the likelihood of going elsewhere – this is a question that should be asked too). The key however, is not to look at the ROI of the blog, but the ROI of the business problem the blog is addressing (in this case increased sales) and treat the blog as an input into that ROI.

Finally, I noticed two great statements whilst looking at this, one from SearchCIO which suggested that the potential business upside of blogging was so great that we should expect to see a lot more attempt by analysts and MBA-types to formally calculate the ROI. My favourite though was from Jeremiah Owyang who is someone who sees the ROI as so obvious that there is little value in calculating it. This is an interesting observation when replayed at corporate level. If you see day to day the anecdotal and intangiable benefits of blogging (or any other Web 2.0 tool, wikis, instant messaging etc.) then why spell out the ROI for your competition? If they want to spend the next five years thinking about it while you get on with it and enjoy the benefits that is a distinct competitive advantage!