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My answer: WHY are you doing them in the first place? If you can't answer that, you're wasting your time and the company's money.
Sounds simple I know, but I'm stunned at how unclear many marketers are about their intentions/expectations/hypotheses for how social media initiatives might actually help their business. In short, if you can't describe in two sentences or less (no semi-colons) WHAT you hope to gain through use of social media, then WHY are you doing it? Measurement isn't the problem. If you don't know where you're going, any measurement approach will work.
Here's a framework for thinking about social measurement:
1. Fill in the blanks: "Adding or swapping-in social media initiatives will impact ____________ by __________ extent over _____________ timeframe. And when that happens, the added value for the business will be $_____________, which will give me an ROI of ______________. " This forms your hypotheses about what you might achieve, and why the rest of the business should care.
2. Identify all the assumptions implicit in your hypotheses and "flex" each assumption up/down by 50% to 100% to see under which circumstances your assumptions become unprofitable.
3. Identify the most sensitive assumption variables -- those that tend to dramatically change the hypothesized payback by the greatest degree based on small changes in the assumption. These are your key uncertainties.
4. Enhance your understanding of the sensitive assumptions through small-scale experiments constructed across broad ranges of the sensitive variables. Plan your experiments in ways you can safely FAIL, but mostly in ways to help you understand clearly what it would take to SUCCEED -- even if that turns out to be unprofitable upon further analysis. That way, you will at least know what won't work, and change your hypotheses in #1 above accordingly.
5. Repeat steps 1 thru 4 until you have a model that seems to work.
6. In the process, the drivers of program success will become very obvious. Those become your key metrics to monitor.
In short, measuring the payback on social media requires a sound initial business case that lays out all the assumptions and uncertainties, then methodically iterates through tests to find the model(s) that work best. Plan to fail in small scale, but most important, plan to LEARN quickly.
Measure social media as you should any other marketing investment: How did it perform versus your expectations of how it should have? If those expectations are rooted in principles of profit-generation, your measurement will be relevant and insightful.
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This is creating anxiety in all but the most cutting-edge, nubile marketers: No one wants to be sitting on the sidelines if SM is that lean-times silver bullet. It probably isn’t, but for motivation, Jared’s “train has left the station” point is good to keep in mind.
The rules and ROI for SM are clearly different. So to master it, I think we’ll need the patience many of us don't have, and the discipline that is such a luxury these days. That's why I also love #4 above: Take the risk, but dabble, measure, then dabble and measure again – it’s OK to fail. Eventually you will find the right use of SM for your business.
Secondly social conversations are happening already, ignoring them does not make them go away. Using social media to communicate directly with customers is an insanely cost effective way to directly influence how a company is perceived.
How exactly to measure them? Technology and statistics,
Although the effects are indirect, I suggest you can measure ROI by the number of RTs that your company makes about others.
Twitter is "Pay it Forward" writ large.
Note an RT is the opposite of a pitch or DM which might be considered spam.
Twitter spammers almost never take the time to "selflessly" look at what others are writing and RT. If they did, they would be less of what I would call a spammer.
Nothing gets someone attention better than when someone retweets (repeats) what they wrote. It is human nature to be highly flattered when this happens. Of course, don't ever RT a comment from someone that isn't really worthy of being retweeted. You don't want to appear insincere. But your would-be prospects are likely to be highly intelligent people who often post profound or relevant things anyway.
Your interests will obviously lie in the same area - by definition.
So IMHO Twitter is about indirect relationship building and you can do this on a large scale with dozens if not hundreds of prospects.
Now that wasn't two sentences and I could go on.
By reading the Tweets of those in your industry, you really get to know how they think which would help you deal with them even if you never Rt'd them or messaged them on Twitter or Facebook itself.
Following someone is like condoned spying.
Twitter is like one big trade show that one has to be at.
Social media is a bit different than, say, direct mail. There's a much better chance you'll create negative word-of-mouth and then compound it.
I absolutely agree with #4. This is the philosopher's stone of social media. Small, well-communicated, open-channel failures that define success.
Ultimately I can't help but laugh a little at people who want to measure the hell out of social marketing. The outlay is insignificant compared to the return, and really, what you're asking is 'how do I justify the cost of channels that let my customers tell me what they think or converse on a regular basis'.
When you boil it down 'social media initiatives' are just another way to stick people in a room and let them talk while you mostly listen. If you can't justify that in your budget....