Marketing|Demand Creation Blog: Thoughts on strategy, lead optimization, social media and the digital space

Sunday, April 02, 2006

Measuring the ROI of Social Networking for Business

Social networking sites like Friendster and Yahoo 360 are all the rage, but is there a business application lurking in there? Well maybe not with these consumer services, but some like LinkedIn and Ryze have been built specifically to cater to the needs of business people to connect with colleagues, prospects and customers. With a network of 5 million subscribers (slated to reach to 8-10 million by the end of 2006) and subscription rates of $20 to $200/month for an account that allows introductions outside one’s network, LinkedIn seems to have the potential for a successful business model. As a user of LinkedIn who has tested the site for prospect and competitive research, I was curious about the ROI possibilities of integrating it into the marketing mix as another channel for sales lead generation.

Using the data from my own LinkedIn Network and some quick math I performed an informal experiment. LinkedIn’s basic Business subscription costs about $239.40 per year and allows 15 simultaneous introductions per month (180 per year). Based on this, if I wanted to get introduced to all 11,000 of my contacts two degrees away, it would take me 61 years to reach them all — and $14,603.40! Even on the most robust Pro plan that allows 480 concurrent introductions per year (about $2400), it would still take almost 23 years to get introduced to everyone. Clearly this is not the most efficient way to reach a broad-based audience (and no, I don’t seriously believe anyone would think it was).

But kidding aside, as a targeted channel, LinkedIn and other business social networks like it may ultimately have some of the best ROI around: one closed business-to-business deal is likely to bring in sales worth many times the $2400/year LinkedIn’s Pro plan costs. That potential alone is worth the effort and small investment to pilot a business social networking tool’s use as part of a company’s marketing plan. As always, such an experiment will be most effective working in concert with business development — and preferably with account executives who already use and understand how to make the most of the tools.

Claburn, Thomas. “Social Networks Go Pro.” Information Week. March 27, 2006. pg. 55

Joseph Mann Sunday, April 02, 2006


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