This is a guest post by Mikko Kotila – CEO of StatsIt, a pioneer in New Kind of Research in APAC.  The post first appeared on Mikko’s blog

The Seven Dumbest Sins of Social Media is a confusing, misleading and somewhat sad article about snake-oil and guruism. It is a great example of the wide spread ignorance of the knowledge era. But not in the way the writer of the article intends it to be.

Ranting and slander has long been used as a coping mechanism to deal with things that you don’t “get”.  I’ve seen a lot of assaults on the social media, but rarely by someone with the portrayed authority of Mark Ritson.

Social Media is Just a Fancy Name for the Internet

We’re now in the transitory period of “everyone look, it’s the social media”, but that wont last. It’s not the first naming attempt for a more human version of the Internet (semantic web, web 2.0). At the end of the day, we will call it the Internet again and then one day we will stop talking about it all together. And no, the Internet doesn’t have an ROI anymore than electricity does. It’s an enabler for other things, things that are measurable and have a potential to generate an ROI.

“would you trust a research method that excludes 90% of the population” -Mark Ritson

Almost everyone with some commercial significance is already online. In many cases conventional research methodologies tend to exclude people, often those who have something real to say. They’re already too busy saying it online. The Internet is a window to people’s lives, and often reveals hints and truths about their real behavior. It’s all already there, nobody has to be interviewed or observed.

“Focusing on what customers do, not what they say they will do, is key to building effective strategies”

Social media can be used as a powerful platform for insights work. It’s not about communities, online panels or engaging, but about listening and utilizing the naturally occurring online conversations as a sample for research projects. Cleaned, structured, anonymized and randomized it becomes a treasure trove of insights work.

I can have a N=10,000 sample on ice-cream consumption up and running tomorrow with an actual cost of below US$1,000. Using that sample I can do quantitative analyses to answer questions like “during what time of the day, and during which TV shows are people likely to crave ice-cream?” or “why are popsicles consumed for a very different purpose in China than other ice-cream types?”. With a team of one, I can turn that project around from brief to report in couple of days if needed.

According to industry estimates, there are somewhere around 2 billion conversation instances online every day. A single digit percentile of that is directly about brands, and another single digit share about commercial categories without a mention of brand. That’s 100,000,000 commercially themed conversation instances online every single day. We can do a lot more than usage & attitude study on ice-cream with just a fraction of that.

I can’t see how “it’s totally unreliable data”. How is it more unreliable than prompted, controlled, directed or observed data? If the argument is representation, then what is representative? How many % of the population are willing to participate in a focus group or respond to a survey? How well does that segment of the population represent the total population? I’m aware of the fact that some of the online conversations are marketing comm and not consumer’s voice,  but strategies exist in order to deal with that.

You Can’t Lead by Following

Mark’s article is the best evidence of what an amazing opportunity this is for brands. Those “in the know” have a chance of gaining real competitive advantage over those who are still stuck in the ivory towers. The biggest clients seem to think so as well. If you want different results, you have to do different things. A focus group is not that “different” anymore.

I’ve been to 60 countries while spending time with thousands of people and I have never heard someone share a story about participating in research as a consumer. I know some people do it, otherwise it wouldn’t be a US$30 billion dollar industry.

Maybe it’s the fact that I mostly mix with people between 20 to 50, male or female, different ethnicities, varying income and education levels. It might be that they just never ever talk about it. But they do talk about skiing, knitting, spiritual experiences, business, exotic travel, their jobs and even about Twitter. And it’s not a surprise, in Malaysia for example, over 30% of the online youth are on Twitter. In Japan Twitter reaches over 20 million people.

“maybe you can use half-decent qualitative insights into a small minority of the market” – Mark Ritson

Let’s Talk about ROI

While at Statsit we’ve done hundreds of qualitative research projects using naturally occurring online conversations as a sample, on the quant side things get really sexy. My personal favorite is how Twitter conversations are used for predicting the stock market. Close second is the UK based hedge fund that more than double over-performs average funds by Derwent Capital, calling itself “Europe’s first social-media based hedge fund”. I also like how Organic uses Twitter & Facebook conversations to predict commercial traction across different categories. Similar models exist for predicting everything from box-office revenues to book sales.

Just like with electricity, the ROI is not in the grid, and not even on the devices you plug in. It’s in what you do with the electricity powered devices. If I were to serve you a cup of tea, I wouldn’t make a big deal out of how I’m going to use the electric grid to power the water boiler. I’d explain to you the background and common uses of my Pu-erh tea that comes from an ancient tree somewhere in Yunnan province. I might also make a point out of my Japanese volcanic clay teapot, prepared according to long traditions by a 7th generation master. The internet is an enabler, just like electricity is. It doesn’t or shouldn’t have an ROI.

In reference to soft-drinks and communities, a great example is Coke’s 10 million strong online community in Japan. When Ebata-san, Coke’s VP for i-Marketing in Japan last year shared with me the amazing I LOHAS water bottle story, he mentioned how the online community helped Coke to conduct research related to the innovation and across their other product categories. I LOHAS was the market leader in bottled water one week after its launch and still is today. And yes, that’s water in a bottle. By the way, good luck finding a can of Pepsi in a Japanese super-market or vending machine.

“The future of market research is increasingly about listening to what consumers are already saying.” – Stan Stanunathan, VP Strategy & Global Insights for Coca-Cola Company

I totally agree with the fact that you can’t show an ROI on social media, just like you can’t show an ROI on electricity. But it’s also hard to measure ROI on social media campaigns. Mark got that bit right. Same goes for search and online display. Maybe marketers should stay away from those as well, after all one doesn’t want to make themselves “incompetent at best and potentially liable to accusations of malpractice at worst” as Mark provocatively puts it in his article.

The research interns I sometimes interview, will be eager to point out how click-to-conversion reports fail to give a complete picture when you’re marketing a product for which total marketing spend’s attribution towards sales is 5%. Measuring ROI is very hard for online activities, but it’s pretty much as hard for everything else. You have to have a sales attribution and marketing-mix model even to get seriously started.

Absolute and Total Non-Sense

There is something special about the Internet (yes, the social media). You get called for bs. Both brands and people. In the past a school-yard bully would get his way, and your lunch money. But not in the wonderful world of “social media”. There is a hint of democracy in the Internet and usually the voice of reason will eventually emerge.

I dropped out of school to start one of the first digital agencies in Europe. In -96 we dealt with obstacles likes “why should I have a website, I don’t even use email”. Our first project was a 4,000 product eCommerce solution, first such business application in Finland. Which at the time was one of the world’s leading information societies. I didn’t even know what ROI meant. 12 months in to the project, the client stopped printing and sending 240,000 50-page full-color mailing order catalogues per year.

Now 15 years later, the research industry is facing these same questions. When cold calling and 10 person focus groups aren’t paying off, when more and more people each day are becoming connected and the Internet is becoming an integral part of their lives, why ignore this opportunity? We bribe people to be in our studies, we hope they won’t be fatigued by millions of questions, or worry about the interviewer, or forget why they think they bought that appliance 3 months ago. Now people are throwing their responses at us – and it’s predicting real trends – is that bollocks too?