Show me Numbers

When considering making a purchase as a business there are arguably three forms of justification – need, fear or value. By need I mean an absolute requirement for something i.e. you cannot operate without it. By nature these aren’t the decisions that you spend very long thinking about. The other two are where the majority of consideration comes in.

Fear – To a certain extent this is the more irrational of the two. What if I don’t do this? What won’t I know? What will people think? What if my competitors do or perhaps they already are?

Value – This is the more rational. If I do this I will derive this much benefit.

In the recent Econsultancy Social Media and Online PR Report (well worth reading) amongst many interesting statistics a few that jumped out at me were in connection with organisations’ (Figure 17) and Agencies’ (Figure 19) views of the potential value of social media.

Two points jump out at me from these stats. Firstly that Agencies think organisations are more sceptical about value than Organisations apparently do themselves. Perhaps this is due to lack of follow through on spending decisions?

Secondly that in both cases these figures imply that value is seen as a much bigger challenge to the argument for engaging in social media activities than the challenges and risks.

This is borne about by the findings of Figures 48 and 50 where from both Agency and Organisation perspectives 60% of respondents considered they had achieved some benefit from their social media activities but nothing concrete.

So with the vast majority of respondents seeing no concrete value in what they are doing does this suggest that fear – fear of what is being said about you, fear of missing an opportunity – is playing more of a role in justifying investment in social media than value?

Oh and the picture is from the 1970s TV version of Salems Lot and this scene was quite simply the most scary experience of my life at the time and I have never forgotten it!

I was involved in an Econsultancy Round Table session recently and amongst many very interesting topics discussed was (of course) the perennial conundrum of PR measurement. During the discussion a number of people commented on how they no longer placed any reliance on, or used, Technorati since it had changed how blog authority and rank were calculated.  So I thought I would see if I could get to grips with it.

In the past, Technorati’s authority score for a blog represented a count of the number of different sites that had linked to a particular blog in the preceding six months. Until the summer of 2008 this count included links where blogs appeared in blogrolls. These were removed from the calculations at that time, as they were identified as being too slow to change. Basically people’s housekeeping in connection with blogrolls was identified as being less than real time – to say the least I suspect!

The rank of a blog then represented how many blogs had a greater authority score i.e. more different inbound links than the selected blog.

The new measurements from October 2009 are less transparent but arguably more valid and useful. According to Technorati, authority is now based on “a site’s linking behavior, categorization and other associated data over a short, finite period of time”. This results in a score out of 1,000, with a higher score indicating greater authority. The advantages of this approach are that it is less easy for people to manufacture authority by creating fake links, plus the ratings are more dynamic, reflecting the extent to which individual blogs are the source of conversation.

They have also introduced a second authority score when viewing blogs through the Blog Directory feature that relates to a blogs relative authority within the sector or sub sector that it is classified in. For example if you want to know the blogs with a small business focus that Technorati thinks have the most authority on the subject then you can see a list here. In this case the Online Marketing Blog is assessed at having quite a bit more authority (961) within the small business blogs than the second ranked blog is this sector, Social Media Today (871). This is despite their overall authority scores being 614 and 689 respectively. Indicating that though SMT has more authority generally, Online Marketing Blog is considered to be more influential within the small business sector.

This is an interesting, and I would suggest, very useful change as it is relative and relevant authority that matters when assessing the importance of different sites not an absolute measure. We take the same approach to ranking sites at RealWire when calculating our RealWire Influence Rating for coverage achieved. If you don’t take this relative/relevant approach then you will always end up saying that the most influential sites are ones in the biggest communities e.g. Tech, but that is obviously not appropriate if you were trying to assess which sites were influential to, say, the fashion sector.

You can also see those blogs that are rising and falling the most within that sub sector on the right hand side of the same page.

I reckon these changes mean that it is easier to find key blogs that are relevant to you and those that are becoming more and less influential over time. And no this isn’t just because my blog now appears in the top 20k! What do others think?

I hosted the Fresh Business Thinking HitMe Summit on Online Marketing on Tuesday this week. It was a jam packed day with some very interesting speakers. I rounded things off with a brief overview of the online pr world and the importance of relevance. For anyone who is interested here it is.

Protecting the real world from the ravages of pollution and preserving our natural resources was once considered the preserve of environmental activists. Not anymore. Recycling, energy conservation and reducing our carbon footprint are now mainstream activities.

In the Online Media World I would suggest the equivalent to pollution is irrelevance, and the time, and money, that are wasted dealing with it (never mind the frustration caused). Unfortunately the PR industry is one of the culprits in producing this pollution; with the interesting stories it does create often getting lost in the millions of press releases produced each year, many of which are often sent to significant numbers of people for whom they are irrelevant. This means only a small proportion of these messages actually lead to someone talking about a story.

The positive response to our recent Online PR animation suggests that many (all?) people in the PR industry are aware of the importance of remembering that there are real people at the end of each of these messages. Given this, if irrelevance is polluting their environment shouldn’t we all be asking one simple question:

What have we done to improve our relevance today?

For us at RealWire this means making sure the existing things we do to improve our relevance are performed 100 per cent and looking for new ways to reduce our “irrelevance footprint” all the time. Many of these improvements and processes are based on feedback from the receivers of our news themselves. Some things are simple, the equivalent to turning the light off when you leave a room or not leaving your TV on standby, and others take more effort and investment on our part. They all have one end purpose though – to deliver greater relevance to all the receivers of our news and so reduce the amount of pollution we create. 

We realise we’re far from perfect, but then how many people recycle 100 per cent of their waste in the real world? Does that mean that we shouldn’t all try and recycle more just because perfection is probably unattainable? That’s why we are always looking to improve. After all it is only through delivering relevance that the PR industry can ever hope to release the influence it desires. 

I noticed today that PRNewswire have recently started to provide their content through sector specific Twitter feeds e.g. PRNTech, rather than all through one single feed. RealWire also did this a few months ago as we realised, as PRN would appear to, that people following news content would find this would significantly improve the relevance of the content to them. It’s not rocket science, nor is turning off your TV, and it won’t solve the problem of PR pollution by itself, but as with the environment a lot of small individual measures can make a big difference overall. 

So hats off to PRN for also taking this step and perhaps we could all ask ourselves what have we done today to improve the environment in the Online Media World we all inhabit?

Interbrand published their list of the top 100 global brands for 2009 last week, Coca Cola maintaining its position at the top for the ninth year in a row. I thought it would be interesting to compare the brand values calculated by Interbrand with the equity values of the companies concerned as it would indicate those companies with the most to lose (and gain) through their PR and reputation management.

The results for some companies are surprising including the banks, JP Morgan and HBSC, and in particular Apple, who it seems is not very reliant on its brand with only 9% of its company valuation represented by its brand value.

Interbrand’s  methodology effectively values the extent to which a brand is able to generate financial benefits due to the superior demand created through the strength of the brand itself and not the underlying assets, expertise etc of the company.

Comparing this brand value with the company’s stock market value effectively gives an assessment of the extent to which the brand itself is the driver of the company’s performance.

The table below shows the top 50 brands in the Interbrand list sorted in descending order by those whose brands represent the highest proportion of their company valuation. (The position figure is their position in the Interbrand list).

Top of this list is the French company PPR who own the Gucci Group and Puma amongst others. These two brands alone are valued by Interbrand at $11.4bn compared to a stock market value today for PPR of $16.1bn (€11bn) i.e. 71% of the company valuation is accounted for by the brand value of these two brands. Another luxury brand that appears high in the list, with 53% of its value accounted for by its two biggest brands, is Louis Vuitton Moet Hennessy.  This doesn’t seem surprising given the importance of brand in establishing luxury items’ worth.

Bottom of the list are the banks JP Morgan and HBSC. Only 5% of their company valuations is accounted for by their brand values. However this is not a credit crunch effect as this figure has not changed much over the last two years. This seems a little strange to me on the face of it as it implies that the banking sector is much more of a commodity market despite the importance of trust and confidence in this sector.

But more surprising still is Apple. According to Interbrand only 9% ($15.4bn) of the company’s value ($165.7bn) is accounted for by its brand. This compares to 25% for Microsoft and 42% for Sony. This implies that Apple’s brand is not considered an important driver of value in the company and yet I would suspect that most communications and marketing people would perceive that the opposite was the case.

I wonder if the majority of the reason why Apple is valued at 32 times its earnings (as of 21/9/09) driven by high expectations of its ability to innovate and design new products now and into the future and not the Apple brand itself?

Anyone else have any theories?

IKEA figures not calculated as privately owned so no stock market valuation available
Equity valuations were as of 21st September 2009
Tickers refer to New York Stock Exchange except where stated
Where currencies have been translated the following rates to $1 were used:

Euro = 0.682
Yen = 92
Korean Won = 1,204
Canadian $ = 1.077
Swiss Franc = 1.04