knowlege base

Knowledge Base

Opinion

Return on Investment for Online Communities

Jim wrote: Does anyone have any hard data on ROI for online community-building?

Jim,

I suspect that the answer to this question underpins the dilemma faced by the entire global digital economy, much of which has been funded by, hope, greed, deception, misrepresentation, misunderstanding, hype, and yet, much good intention.

The problem is, as I see it, the inability of economists and accountants to value intangibles, knowledge, network, and I.P. And the reason, as I see it, that causes this, is the desire to equate and value the digital environment as if it were asset-based and tangible. The core elements of the asset-based environment are:

  • transferability of title to asset
  • conventional, easy to understand and straight-forward cost of replacement in terms of labour, material and other inputs
  • ability to establish reasonable comparisons of value based on availability of similar/same offerings
  • relative stability (less depreciation) of the asset

In the digital economy, these factors, as means to establish "value", are effectively useless. I have found the core (value related) characteristics of the digital (on-line?) economy/offerings to include:

  • Speed of dissemination
  • Cost - high one-off establishment cost, with effectively zero marginal cost
  • Potential for exceptional leverage into target market/audience
  • Character of subscriber base and its magnetism to product/service providers (as an advertising medium)
  • Quality of content
  • Authority of content and degree of "third party" validation/support
  • Perishability of content
  • Degree of hyperlink ability
  • Global reach
  • Degree of global appeal

These factors are different for each digital offering and therefore their value differs. The degree that an on-line community (or anyone else for that matter) can optimise each of these factors, then the higher the ROI from a conventional accounting, economic viewpoint. However, such a calculation assumes direct and measurable benefit and ignores the intangibles that are associated with the digital technology - many of which are as much about sociological, psychological and cultural outcomes as they are about dollar outcomes. Some of these "almost impossible to quantify" benefits and outcomes may include such elements as:

  • the benefit of accessing people/information previously inaccessible
  • the sense of comfort and security of people previously at the "margins" of community (geographic and social);
  • the value of enhancement of knowledge and skills generated in the virtual community;
  • the value of improved communication between people
  • the value of establishing global relationships that enhance understanding between cultures and its contribution to world peace;
  • the value of lifting the "cost-of-conflict" hurdle to commence war because of its effects on established relationships;
  • the additional "risk" prepared to be adopted by people to "venture into new areas" as a result of the added security from access to virtual help sources;
  • the value of being able to voice/canvass views;
  • the value of enhancing the democratic process;

The list is endless, and must be considered in any assessment of value of the digital environment. As long as the digital environment is measured by non-digital criteria, then enormous peaks and troughs will continue to plague participants in the digital process. The challenge for the early 21st Century, as I see it, is for social and economic thinkers to formulate a set of "algorithms" that help determine value of digital elements in a consistent and predictable manner.

< back

| top |