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The Dirty Little Secret about Social Media Return on Investment

show-me-the-money

What’s the social media return on investment?

Ask that question to your favorite social media guru and watch them choke like Tony Romo at the sight of an Eagle. Then watch them redefine the meaning of the word “is”, rearrange the variables in the age old cash-on-cash formula and come up with a calculation that would confuse Einstein himself. You see, they have to do that because the numbers stink. If you were to put one method against the other, dollar earned for dollar earned, you’d have a higher ROI if you sat at Starbucks asking every patron if they wanted to buy or sell. Don’t get this twisted now – I’m not saying no one has ever gotten a client out of social media.  As a matter of fact I know the exact opposite to be true from personal experience. But in the current state, if your primary marketing strategy for your real estate business was to pour all your marketing energy into social media, the dollars you’d get back from your efforts would make you take a serious look at Burger King employment opportunities.

The Dirty Little Secret About Social Media ROI

Dismissing social media as a fad is simply foolish and I’m not attempting to do nothing of the kind. But there’s an 800 pound gorrilla in the twitterstream that no one will talk about. So I will:

Strictly from an ROI perspective, in its current state and reach social media can produce great returns on money and time invested, if the business is marketing to other businesses. The opposite tends to be true for businesses marketing to consumers

Let’s give some examples. If you are a graphic or web designer trying to find clients, Twitter is your absolute best friend in the whole wide world. Nothing else you could be doing instead, will match its results. If you are a mortgage pro who’s looking to establish relationships (hence, referrals) from local Realtor, engaging them on Twitter, friending them on Facebook will be a profitable venture if you play your cards right. Same goes for insurance agents, home warranty reps etc etc. But if you are a Realtor scouring Twitter for consumers that are just waiting there patiently for a nice agent to DM them so they could sell their home … (do I really need to finish?) There are some rare exceptions – i.e. restaurants, coffee shops can do great things in building loyal customers through social media.

Don’t forget the intangibles

Before those of you that completely misunderstood my paragraph above chew my head off, I want to point out the intangibles of social media that though might not be measured in banknotes, are priceless nevertheless.

  1. Brain Trust – The brilliant people that I’ve met on Twitter and the ability to pick their brain about issues, is a paradigm shift, in my opinion. Because of their advice and experience, I can make decisions that will allow me to make more money (or avoid losing)
  2. Top of Mind Awareness – Facebook may not help me in locating new clients, but it sure helps in creating more clients out of the people I already know. Through this amazing tool, I can stay in touch, demonstrate my expertise and ensure that when that time comes, mine will be the number they dial.
  3. Dollars are not the only benchmark – Businesses are brilliantly using social media for other purposes that don’t involve business generation. Providing customer service and building brand equity are two of the many functions social media facilitates and elevates to higher levels.

It’s just the beginning

Finally, remember that we are in the early stages of the game. As the reach of social media grows and becomes even more mainstream the results will come. So there is something to be said about positioning yourself now and grabbing that first mover advantage.

(There. I feel so much better… )

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Written By

Houston Real Estate Rainmaker and Uberproud Father/Husband (not necessarily in that order). When I'm not skinning cats or changing diapers you can find me on Twitter or Facebook. I blog about marketing, social media and real estate. I might not always be in agreement, but you can rest assured I'll be honest. Oh, and I can cook a mean breakfast...

37 Comments

37 Comments

  1. Atlanta Real Estate

    September 11, 2009 at 9:29 pm

    Erion:

    Nice post!

    I’m not bold enough to hate on social media on a forum like this, but my actions speak louder than my words:

    I don’t tweet, I’ve got no Facebook, no Flikkr, I have never delicioushed, stumbled or Digg’d ANYthing, EVER.

    Weird, because I’m right in the sweetspot (I think) at 40, I love the net, am surrounded by computers, develop web sites, study and practice SEO until way too late every evening, and I’m a self described expert at AdWords.

    But, I never have (never will?) done any of that social networking “stuff.”

    I do blog, and this is to learn things, and this works! I literally learn something every single day from blogging, it’s awesome.

    Instead, all my efforts go into generating real leads on my web site, which provides a HUGE ROI! Over 100x, dollar for dollar last year.

    You know, that’s just how I roll,

    RM

  2. Erion Shehaj

    September 11, 2009 at 9:56 pm

    One note of caution A.R.E,

    Before Google and Adwords, there were self described classified ad experts and books on how to write the perfect three liner in the daily fishwrap. Don’t hear about them much now, do you?

    Google annihilated the newspapers because it fundamentally changed how people got their info. Although we’re in the early stages, my money is on social media repeating that shift. And when it does, if SEO doesn’t become obsolete, it will be significantly less effective.

  3. Atlanta Real Estate

    September 11, 2009 at 10:39 pm

    Erion:

    Don’t see it that way.

    Google didn’t kill the newspapers, newspaper web sites did. Every major newspaper in the country has an web site edition. They killed their print business themselves.

    Google didn’t do it. If consumers needed to search Google for every news story, the printed papers would still be fine. You have to know what to search for first.

    Twitter, Facebook and whatever else is not going to replace searching for something on the internet.

    Let’s say I need a PDF manual for a old widget. Am I supposed to tweet for it, or search facebook sites for it? Naaa.

    Also, I think you have this nonsense:

    https://www.youtube.com/watch?v=mubCkCAEiDQ

    Confused with anything relevant.

    🙂

    Enjoy!

    Rob

    • Erion Shehaj

      September 12, 2009 at 1:35 pm

      If newspaper websites killed their own print business, who killed the newspaper websites? 🙂 I mean they’re still up and everything, just not generating any substantial revenue relative to the costs of generating the content.

      Any business built on advertising (and Search is built on advertising) is built on the ability to attract the majority of the buying eyeballs. Remember what was the main spot to look up things for sale pre Google? The Classified sections of your local paper. That’s where you went if you were looking for a house, a car, a dog or a mate 😉 Once those eyeballs left for the Google provided ease, the game was over.

      Thanks for that video, by the way. Absolutely hilarious!

  4. Tom Lyons

    September 11, 2009 at 10:43 pm

    I have to agree ROI is not the best right now, but the same was true for the internet, and I think we expect the wrong thing from Social Media.

    Internet is now the third highest lead generator for Realtors, right behind Friends and Referrals!

    Now let me point something out. The first two largest lead generators are? Friends(Social) and Referrals(Social), third place Internet(Media). HMMM, Social Social Media

    Let me ask a question out there, when you attend a local social event, dinner party, networking event, do you measure your ROI? Is your goal when you go to a dinner party, to solicit business? However, would you say that business gets done because of the friendship and contacts you make at those events? Sure it does!

    You need to take your online social activities and turn them into offline relationships as well. Through a customer appreciate event, use social media to get the word out, tell people to tell their friends over Facebook and bring them!

    Engagement is the goal, and that’s where ROI exist.

    When you get a lead from your website, I bet your first goal is personal contact on the phone or in person. That should be your goal with your online community as well. Get to meet them virtually then in real world.

    Just my two cents!

    • Erion Shehaj

      September 12, 2009 at 1:43 pm

      @ Tom Lyons

      Let me ask a question out there, when you attend a local social event, dinner party, networking event, do you measure your ROI? Is your goal when you go to a dinner party, to solicit business? However, would you say that business gets done because of the friendship and contacts you make at those events? Sure it does!

      You better! Let me oversimplify this for clarity a little: If all you did to generate business was attending social events, dinner parties or networking events (in some markets that’s all that works) at the end of the month/quarter/year you would need to look at the dollars produced by your efforts, directly or indirectly. Now compare that with sending postcards to your farm area for a month/quarter/year and the results that yields. I’m with you that networking is not a sales call, so measuring the return is a bit peculiar. But measure it you must, because for every marketing decision you make, there’s an opportunity cost of doing something that might be more efficient per ounce of effort expended.

      Makes sense?

  5. Barry Cunningham

    September 12, 2009 at 1:22 am

    Funny thing ..I just commented on Bloodhound Blog about this same very issue.

    Bottom line to me is there a defined ROI? It also depends what you are looking for in such ROI? Is it to build a good list, is it to get the word out about business…or is it to chat with friends and associates.

    I think that really determines if SMM is worth it or not.

    Long since trying to bring the horse to water. If they don’t get it…they don’t get it…why discuss or have an issue with what the competition doesn’t understand?

  6. Ken Brand

    September 12, 2009 at 9:35 am

    Thoughtful stuff. Bottom line, for me, as you pointed out, “intangibles and it’s just the begging” sums it up.

    If I had an identical real estate twin bro and to generate and attract business, we both did everything exactly the same, except, I embraced and employed Social Media and my twin didn’t, I know that I would attract and uncover more listing and selling opportunities, my relationships with my on-line friends would be deeper and more meaningful, my Top Of Mind Awareness would be brighter and I’d receive more referral-recommendations. (But I can’t prove it)

    Lastly, “eureka”, your statement, “if your primary marketing strategy for your real estate business was to pour all your marketing energy into social media, the dollars you’d get back from your efforts would make you take a serious look at Burger King employment opportunities” should be etched in stone, maybe it should be the 11th commandment. Social Media is a tool and a strategy not Salvation.

    Thanks, Cheers.

  7. Atlanta Real Estate

    September 12, 2009 at 11:09 am

    Don’t get me wrong, I’m not “against” social media. I’m just not currently for it. Further, I reserve the right to change my mind.

    It’s just not an avenue I choose to generate business from. And I disagree that it’s somehow going to replace search in the future, or even diminish it in any way.

    To me, search is a fundamental, and due to the nature of the web, spread all over the place, search will always be a core functionality.

    Lastly, I look at my real estate business as strictly a business. This comes from my background selling B2B for 14 years.

    I literally do not want a single client from my social network, circle of influence, friends, neighbors, parents on the baseball team, none of it. I do however, normally become friends with my clients, and this is fine with me. Sometimes these clients will spawn off other clients, and that’s ok too.

    Recently, my neighbor two houses over came to me asking for a CMA and wanting me to list their home. I happily produced the CMA for her, but respectfully declined to take her listing.

    I’m not mixing business and friendship.

    Again, as in all posts, this is just me.

    Rob in Atlanta

  8. Elad Kehat

    September 12, 2009 at 11:55 am

    Erion, I wish that you would have backed up your claims with numbers. Because my own numbers say that you’re PLAIN WRONG.

    “But if you are a Realtor scouring Twitter for consumers that are just waiting
    there patiently for a nice agent to DM them …”
    While they’re not waiting there patiently for agents to DM them, most are positively surprised and happy to get a relevant tweet from an agent. The key is *relevant*.

    Here are some numbers for you:
    In demandspot.com (disclosure: I’m the site’s founder) we’re seeing a 30% !!! click-through-rate on tweeted links and 15% reply rate to tweeted offers for help. That’s between 10 and 100 times the rates you can expect using SEM (some tips here: https://wp.me/pCPZo-h).
    Social media already does offer an amazing ROI – to those who figure out how to use it right. Because SMM is relatively new, knowledge of best practices is not yet as widespread as in other forms of online marketing. Give it some time and you’ll see those social media gurus provide some great ROI numbers – or just figure out how to use it effectively before everybody else does.

    • Erion Shehaj

      September 12, 2009 at 1:26 pm

      @Ehad

      Quite frankly, Sir – I don’t give a damn about clickthroughs and reply rates. I can put a link on Digg or StumbleUpon and get tons of worthless traffic. Talk to me about conversion rates and adding dollars to the bottom line. Then let’s put those numbers up against… anything else you can do to generate business and you will see they won’t even come close to matching up — at the current state of social media.

      Nice try, though 🙂

  9. Tom lyons

    September 12, 2009 at 3:24 pm

    I agree you need to understand where all your business comes from. But to me it’s a matter of intent. You can track deals but not cost from a dinner party. The bottle of wine you brought as a gift was not REALLY a business expense it was a gift for a good friend.

    Now a charity Is the same in my eyes, we attend to give back to support. It’s genuine personality that leads to the referred deals. The same applies to social media.

  10. Atlanta Real Estate

    September 12, 2009 at 3:26 pm

    Erion:

    I like the response.

    Some day I’ll ask my brother exactly how the newspaper industry came to be where it is today. He has spent his entire career in the Newspaper Industry and is now the Managing Editor (The Boss) of the Charlottesville Times in VA.

    BTW, I keep asking him for a link from their front page to my site, but he just keeps calling me an idiot. LOL!

    Anyway, I think the newspaper web sites are doing fine, it’s the issue of trying to simultaneously manage the print side of their business, which is going the way of the dinosaur. My brother told me at one time that their web site kicks butt and makes all sorts of money but the subscriber side (print) is a cash vacuum.

    As for google, ALL advertising did not, has not and will not go to Google. The revenue for all these ads that run on AG doesn’t go to Google. Google is great, and massive, but they are a search engine who makes a ton in cash from AdWords. (not to mention all their other stuff)(just to keep this simple). Don’t give the entire internet to Google. They are not responsible or every change on the internet and what’s happened to brick n mortars that are now obsolete due to the net.

    Good conversations though. What we gain from it, who knows. 🙂

    Now go place tiny classified ads in thousands of newspapers and GET RICH baby!!

    RM

  11. Brian Brady

    September 12, 2009 at 3:42 pm

    Thank goodness that there is another person with the courage to question the efficacy of social media. Greg Swann and I hosted a session yesterday, asking this very question. Many big producers asked the very question you pose here, Erion.

    Social media prospecting is a much better application for solopreneurs than social media marketing but alas, it would require work, measured by results.

    Kudos for a well thought out article

  12. Chris Lengquist

    September 12, 2009 at 5:11 pm

    I have found my little niche blog to be very profitable and almost flying in the face of your argument. However, when I’ve tried to get the same results from other enterprises (such as “regular” real estate) I get very little actual results. So proceed with caution. Though I still love it and still do it.

    And to hammer your point home…there is a pretty well known blogger that makes crapola in Gross Commission Sales dollars and yet everybody reveres this person and this person speaks to groups all the time and it drives me crazy! because this person doesn’t actually make enough money to have any business teaching on this! 🙂

    I’m done ranting now.

  13. Dan Connolly

    September 12, 2009 at 8:27 pm

    Okay Chris,
    Who are you talking about? Inquiring minds want to know. Initials will suffice. }:->

  14. Brian Brady

    September 13, 2009 at 12:31 am

    “Okay Chris, Who are you talking about? ”

    Please do identify this charlatan so we might avoid him/her!

  15. Erion Shehaj

    September 13, 2009 at 1:11 am

    I don’t think personal attacks are called for in this discussion. Everyone is surely entitled to their personal opinion but it should remain such, IMO.

  16. Elad Kehat

    September 13, 2009 at 6:51 am

    @Erion

    You are right to not give a damn about clickthroughs and reply rates in general. It was my mistake that I didn’t clarify what’s being clicked and replied to. So here:
    When someone in your are tweets that they’re house hunting, you tweet back “I can help, how many bedrooms?” and they reply “3, and our price limit is $200K”, that’s a prospect right there. If you tweet them with a link to your listings and they click through then again, that’s a prospect for you.
    This has nothing to do with digg or stumbleupon and worthless traffic. It’s about being relevant and targeted and connecting with people who are in the market right now for what you have to offer.
    “Conversion rates and adding dollars to the bottom line” may vary – according to what you do with the prospect at that point – how good you are at what you do. But you can’t seriously be saying that prospecting is meaningless for your bottom line…

  17. Brian Brady

    September 13, 2009 at 3:33 pm

    “If you tweet them with a link to your listings and they click through then again, that’s a prospect for you.”

    Elad, I would agree with you that that practice is sound but I think you are confusing prospects with suspects. What Erion did a great job illustrating here is that conversion from suspect to prospect is the ultimate goal; that’s difficult to do via Twitter.

    I submit that social media are a great place to find suspects but that you must get them on the phone or in front of you to convert them to prospects.

    Erion, I had a comment that was lost earlier (most likely user error) that applauded you for this article. This is one of the more honest approaches to the pros and cons of SMM. This message is sorely needed from those of us whom have had those successes and failures.

  18. Jim Gatos

    September 13, 2009 at 9:46 pm

    This issue’s been discussed here before. Social Media – Blogging’s NOT a Predictable form of prospecting and as far as I can see and I think I speak for a lot of us, NO ONE has ever gotten rich from real estate blogging and social media except maybe the speakers who go around the country telling us HOW to do it..LOL..

  19. Matthew Rathbun

    September 14, 2009 at 12:09 am

    What does have good ROI? According the the latest Profile of Buyers and Sellers, Sellers found the home they bought online 38% of the time, thru a Realtor 33% of the time, the sign 14% etc… Print media resulted in less than 1% of homesales.

    Open Houses result in a client relationship less than 3% of the time…

    My point is that agents need to be ubiquitous. They need to engage people thru many different venues. A great deal of my production was based on online marketing, mainly because that’s what I enjoyed. However, I also used the tried and true marketing techniques that have survived the test of time. Social Media is just one more way to ENGAGE people. It’s clear on most any survey that consumers use the first agent that they have a substantial conversation with.

    And yes… I did get a client while getting coffee at a Borders’ Book store. He was a new investor and I was able to serve him as a consumer with many, many transactions. SocMed is far from the end all be all, but the demographics and math work very well for my area. Engaging consumers online is the best and most worthwhile marketing that we can do.

  20. Tom Lyons

    September 14, 2009 at 2:20 am

    Exactly Matthew, no one is implying that social media is the only method of marketing, anymore than your website is or Geo farming.

    It’s the agents who use all methods that succeed. Tracking your ROI is what tells you where smart money is spent.

    Social media is hard to measure, the same way any other social engagement is. Do you measure it in time spent and attach a dollar value to your time($100/hr). Add up the time and compare it to deals?

    I don’t think so, no one would do that for a dinner party or a charity event. Both social networking venues. Could you imagine, I spent two hours over at Bill’s tonight, that’s $200 invested in our friendship, hmmm, no deals from Bill this year, clearly Bill is a poor return on investment?

    If however, you are spending ad dollars on social media, hiring an assistant to do your Twitter and Facebook updates. Then you need to measure the result, because your goal was not Social interaction, it was consumer engagement int he same manner a customer appreciation event would be run.

  21. Robert Worthington

    September 14, 2009 at 7:40 am

    Erion, you are spot on Sir. My best friend has closed four deals from facebook and spends an hour per day on facebook. His ROI seems really good at this point. My ROI on facebook has been zero. I do think that some Realtors forget the fact that we still need to phyicalll have our face in front of the customer; not behind a computer screen, after all, hiding behind a computer screen doesn’t list properties or draft offers to purchase out in the field.

  22. Atlanta Real Estate

    September 14, 2009 at 8:52 am

    Robert:

    Very true. The sooner as I can convert them off the internet to “in person” the better.

    In fact, I’m taking a stranger to lunch today that came in off my web site this past week.

    The net is a heck of a collector and screener though.

    RM

  23. Linsey Planeta

    September 14, 2009 at 9:26 pm

    I’m wary of some of the Social Media discussion that takes place. It is no panacea – although desperate agents would love to believe it is.

    I have found Facebook as a wonderful way to maintain connections with my existing sphere and both Twitter and Facebook have become ways to expand that sphere.

    What I HAVE noticed is the WAY that my sphere is contacting me. Interestingly enough, about 50% of the time real estate inquiries from sphere or past clients come to me via Facebook rather than email or phone. That’s enough to tell me that it’s a place I need to ‘show up’.

    • Erion Shehaj

      September 15, 2009 at 11:35 pm

      @ Brian Brady

      …conversion from suspect to prospect is the ultimate goal; that’s difficult to do via Twitter.I submit that social media are a great place to find suspects but that you must get them on the phone or in front of you to convert them to prospects.

      It is unfortunate that many folks in the lead generation business dump the entire responsibility for converting the customer onto the agent. Granted that a lot depends on follow up speed and quality but fundamentally, it depends on the quality of the lead first. I have a feeling that what was described as a “lead generation system” would have participating agents spinning their wheels without any actual results. Because they never had a chance to begin with.

      Thank you for commenting as well as the kind words – I am honored.

      @ Jim Gatos

      The efficiency of different media fluctuates depending on the tool. In my book, blogging has an established track record of producing high quality prospects for those that do it consistently and do it right. Whether or not you can generate sufficient prospects to feed your entire business, that’s up for debate. I have had reasonable success with Facebook in generating business from my existing group of friends as have many of my colleagues. I am very skeptical (to say the least) about the efficiency of Facebook in allowing us to connect with complete strangers and generate business from those connections. Twitter is great, but still an infant.

      @ Matthew, Tom and Linsey

      My point is that agents need to be ubiquitous. They need to engage people thru many different venues. A great deal of my production was based on online marketing, mainly because that’s what I enjoyed. However, I also used the tried and true marketing techniques that have survived the test of time. Social Media is just one more way to ENGAGE people.

      It’s the agents who use all methods that succeed. Tracking your ROI is what tells you where smart money is spent.
      Social media is hard to measure, the same way any other social engagement is.

      I have found Facebook as a wonderful way to maintain connections with my existing sphere and both Twitter and Facebook have become ways to expand that sphere.What I HAVE noticed is the WAY that my sphere is contacting me. Interestingly enough, about 50% of the time real estate inquiries from sphere or past clients come to me via Facebook rather than email or phone. That’s enough to tell me that it’s a place I need to ’show up’.

      The question is no longer whether or not agents should “show up” in social media. In my opinion that has been answered by a resounding “yes”. What I was getting at was the ratio of effort that agents should dedicate to new media. Because, let’s face it – When you hang out on Twitter, time flies because it is fun. Same with Facebook. My point was, at the current state of social media, it is an economical mistake to dedicate the bulk of your time to a medium that is responsible for a small fraction of your revenues.

      Great discussion!! Thanks for the thoughtful comments.

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