Last night’s Twittering produced some interesting discussion about Social Media ROI. It started off when Liz Strauss tweeted a link to What Is The ROI for Social Media? In a humorous mood, I joked that we will now need Social Media NPV. Haven’t we had enough of all this blogospheric chatter on Social ROI? Now you want us to look at another accounting acronym? Yes. This isn’t a complete post; these are off-the-cuff thoughts, but perhaps a thought-experiment may help us understand how to more effectively address the needs of enterprises.
NPV (Net Present Value) traditionally represents the present value of the future value of a series of cash flows. In determining the course of investment action, knowing the present value between two options improves decision-making. The calculations can get complex, but the concept is simple.
Let me emphasize: I’m not proposing that enterprises actually pull out the spreadsheets and calculate Social Media NPV.
What I’m getting at is a principle of the Web: as our Web stretches and as Moore’s Law continues to creep out of microprocessors and into our daily lives, predicting the future is getting harder every day.
If you’re planning on investing in social media based on what’s happening now, there’s a chance that your investment could face reduced returns as the game changes. We are now moving toward a Cloudy future and we’re just trying to figure that out. Investing too heavily in current technologies without taking into account the future value of those technologies could weigh an organization down.
So when enterprises invest their efforts in social media strategies, they will not only have to look at current measures of ROI (however that’s defined), they will have to understand the present value of future opportunity costs. This is more a matter of mind than matter: conducting business in the 21st Century demands a cunning appreciation for the nonlinear course of technological advancement.
Social Media NPV is the investment cost required to get social media strategies right. Perhaps it’s an unstable and cloudy measure in an unstable and Cloudy future. But: knowing uncertainties helps us to account for them. If your enterprise is looking at Social Medial ROI without discounting the effect of future changes, then you risk falling behind. This is as much a problem of strategic quality as it is about successful quantity.
So, what do you think? Am I introducing another three letter word to busy discussion? Or is this a useful intuition pump?