Social media firms such as Syncapse, Vitru and now Fanscape have come up with formulas to capture the dollar value of a fan or follower's worth. Most companies, though, don't use such complex formulas. Instead, they have been proceeding on blind faith that a social media presence will pay off on the bottom line. While they are not inclined to want a specific number, some sort of valuation path would be welcome.

In part one, MarketingVox spoke with a few social media experts to find out what are the best ways to fill the gap between the complicated formulas of Syncapse et al and the fuzzy math used by the masses. In part two, we look at some of the mistakes they make with these methods.

Missing the Point

For starters , says Jonathan Kopp, partner & global director at Ketchum Digital, trying to assign a specific worth to each fan, friend or follower misses the point. "It is beyond dispute that organizations can derive great value, including ROI, from social media engagement - starting with listening to your audiences, then moving on to provide information and content that's constructive, useful and valuable to them. But value must be determined based on the organization's business and communications objectives and a clear benchmark from which to measure success."

The Problems with Quantity

But let's assume companies want to try - a la Syncapse or Vitru or Fanscape. The metric that Sherrie Madia, author The Social Media Survival Guide, sees companies using the most to track social media have to do with quantity (e.g., how many followers, fans, etc.). They tend to set large, arbitrary numbers as goals, she says, tracking "buzz" - the conversation or commentary that is generated as a result of a company’s social media efforts.

"And of course, they are tracking visitors to sites as a means of gauging a return." The problem is social media is never about quantity alone. "If a company has 400,000 followers, but sees no increase in sales, does this necessarily count as "success?"

More to the point, Madia says, social media enables companies to track a host of other metrics, which, depending on a company's objective, can provide far more value than, for example, 1 million fans, she says. Thus, she says, key metrics to examine include such variables as:

• length of engagement (how long users spend on your Facebook fan page)

• loyalty (Is your target audience engaging more than once? Are they retweeting your content, sharing or commenting?)

• bounce rate (while companies may see an encouraging click-through rate from an email to a community site, if the bounce rate once they arrive is low, then you may need to rethink your content/offer/engagement strategy on the landing page.

• And of course, conversion is vital "because at the end of the day, companies are trying to turn social media into sales."