Firms quantify the bottom-line value of social media activity

Though corporations are beginning to track sales or page views tied to social media activity, PR agencies are still figuring out how much digital and social media work impacts their bottom lines.

In December, Dell announced it had earned $6.5 million in revenue worldwide due to its Twitter presence. Though corporations are beginning to track sales or page views tied to social media activity, PR agencies are still figuring out how much digital and social media work impacts their bottom lines.

Edelman has a separate digital discipline and expects $40 million in digital revenues for 2009, or approximately 9% of total revenues, explains Rick Murray, president of Edelman Digital. This is a jump from several years ago, when digital made up about 1% to 2% of revenues, he adds.

"That only factors in things that we assign specifically to Edelman Digital," explains Murray, "as opposed to the fees that the core PR teams might generate themselves by integrating digital into their day-to-day jobs."

MS&L also has a separate division, its Influencer Activism Marketing group, that "generated another 10% to 15% in new revenue," says Jim Tsokanos, the firm's North American president. "This is a jump of between 5% and 10% year over year."

However, as social media is more integrated into the agency's overall work, "digital probably makes up 25% of our revenue today," he adds.

Broader impact
Given that digital permeates throughout all PR work, agencies sometimes find it difficult to measure its financial impact.

"Obviously, it's a positive thing for the bottom line because digital has tremendously expanded the value that we are able to bring to our clients through new products, services, and strategies," says Erin Byrne, chief digital strategist for Burson-Marsteller. She adds that, where it is easily traceable, Burson reports that digital makes up 15% of revenues, and is growing.

Fred Cook, president and CEO of GolinHarris, explains his agency's digital impact similarly, as GolinHarris digital is integrated with the regular media practice, and it doesn't break it out as a separate budget-line item. In cases like this, the agency needs a different approach to measuring digital's impact.

Cook looks to "cases where you see budgets getting cut. The percentage, the proportional amount of a program that is digital is increasing, whereas the cuts would be more on the traditional side."

At DKC, digital makes up approximately 5% of revenues, says president Sean Cassidy, but "if we look at how much of our business is digital, we likely spend 50% to 60% of our time in the digital realm now. The definition of digital revenue is a little gray."

While Cassidy looks at time spent on digital, agencies can also monitor growth in digital by the size of the accounts and if there is organic growth in the digital realm.

"Not too long ago, as recently as a year or two ago, it used to be that a majority of income for digital was really housed in a handful of key anchor clients," explains Jonathan Kopp, global director of Ketchum Digital. "Today that has changed. Digital is spread across the agency and across regions."

Kopp declined to provide specific revenue numbers for the agency's digital practice.

Murray notes how clients are also willing to spend more money on digital work.

"We have gone from a business base that had, last year, two clients over $1 million in annual fees, and this year, we're at 13," he reports.

More growth expected
And the growth is only going to continue, with more developments in mobile and measurement coming in the future.

"Measurement's incredibly important," says Murray. "I think you'll see everybody spend significantly more time focused on it going forward because clients are demanding some proof that what we're doing is having a measurable impact on income."

Investments in Digital Staff: Cohn & Wolfe
Tapped Chad Latz, previously SVP at Ketchum, as president of its global digital practice, starting in January Edelman Digital
Hired David Armano as SVP in December, shortly after bringing on Bruce Eric Anderson, senior communications manager at Dell, and Michael Brito, a social media strategist at Intel, as VPs Ketchum
In November, the firm hired Tim Weinheimer, former VP and MD at Brunner Digital, as VP and digital strategist, working closely with Jonathan Kopp

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