First of all, thank you for your attention.

Caveat: I am an SEO and relationship-builder, not a SMM.

Setting the Stage: What is ROI?

"Return on invested capital: (corporate finance) the amount, expressed as a percentage, that is earned on a company's total capital calculated by dividing the total capital into earnings before interest, taxes, or dividends are paid." [source]

Diatribe:

What is the ROI of a handshake? The ROI of meeting people at a social event?

The answer: it’s impossible, too imprecise, and almost irrelevant to know.

Well, partially. It is possible to measure and optimize the transactional values of social activity:

• That handshake cost me approximately $20 (time, travel, etc.) and didn’t earn me any money in the following 3 months, so ROI was 0% (($0-$20)/$20).
• Meeting those people at that social event cost me $10 and resulted in $40 of sales, so ROI there was 300% (($40-$10)/$10).

See where this is going? Calculating ROI for these social activities totally misses (if not devalues) the underlying systemic order of such social activity: human relationships.

What is the relationship value of such social activities?

• That handshake cost me no relationship value, and earned me tremendous relationship value. Now that person and I are close friends, and he recommends my services to all his colleagues.
• Meeting those people at that social event cost me nothing (save opportunity cost, perhaps). It earned me a lifelong trusted adviser role with two of the guests.

People — especially businesspeople who’ve studied finance — like nice objective values. It helps to compare things. And that’s important when comparing avenues of expenditure. But objective valuation is only part of an honest evaluation. The subjective matters as well — and a WHOLE LOT more with human beings who are proven to act irrationally based on subjective criteria (like assuming their personal recognition of your brand is a qualifier for your performance).

Social events often attract relationship marketers. Some are sleazy. They may try to sell you something right there at the party, before they even remember your name.

The most successful relationship marketers don't press for a sale too early in the buying process. The most successful relationship marketers build relationships. They nurture them. And they sell. They measure the transactional values of their participation in social activities as they steadily increase. But they don't avoid or abandon participation because the transactional ROI is unknown. They accept that there are many unknowns in this world, and that not everything can be quantified.

Successful activity on social media sites follows the same rules. Optimize relationship value. That’s where the most meaningful value of activity in social media exists. Transactional value of social media activity is just data that's useful for fine-tuning your activities as you progress.

Relevant links to meaningful content:

• http://www.socialmatica.com/influencer-marketing/heres-a-quick-way-to-evaluate-data/
• http://gigaom.com/collaboration/5-problems-with-measuring-social-marketing/
  
• http://communicationsunlimited.ca/blog/2010/01/20/social-media-finally-returns-value/
  
• http://blogs.imediaconnection.com/blog/2010/07/20/conversations-that-aren’t-about-mel-gibson-the-b2b-social-media-case-study-part-1/
  
• http://blogs.imediaconnection.com/blog/2010/07/28/ceos-love-pie-the-b2b-social-media-case-study-part-2/
  
• http://webbiquity.com/social-media-marketing/the-social-media-roi-debate/
  
• http://blogs.forbes.com/johndragoon/2010/11/11/the-roi-of-a-handshake/
  
• http://goldenmarketing.typepad.com/weblog/2010/02/whats-the-roi-of-social-media-is-the-wrong-question.html
  
• http://socialmediasonar.com/can-you-track-social-media-roi
  
• http://www.bivingsreport.com/2010/dc-week-social-media-roi-omg-wtf/
  

Final ¢: Start optimizing relationship value by doing something meaningful and/or useful for the people you've connected with. Don't focus on the transactional value of activites on social media. In fact, if you really care about metrics like ROI, I suggest you immediately turn your attention from SMM to SEM.

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Acknowledgment of a Biased Worldview: I'm a search engine marketer. In that capacity, I love objective data and perceive most social media sites as an influence on universal and personalized search results. I'm also a social media user and human being, and severely dislike most SMM's and their represented brands on those channels -- as I use social media to share photos with my family, meet new people with shared interests, or access vetted information curated by people I perceive as experts; not to hear recommendations from a paid voice about his or her client's product array or learn about your new tactics for personal branding.

Request to As-Yet-Unkown Audience: If you think the essence of my diatribe is misguided and the common transactional calculation of social media ROI is the smartest way to go, please correct me in the comments.