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In our course we already have discussed how social media brings about not so tangible benefits. While not all companies should jump in the bandwagon of social media activity, it is clearly seen in a positive light. Many companies may however be wary of joining in due to the uncertainty of investing in a social media strategy. How much to invest? How to implement the strategy? What more tangible benefits will it bring? How do I know if I am doing so successfully?

Already in our course literature, certain benefits have been quantified. In the study conducted by Luo, Zhang and Duan (2013), results of their research showed that social media metrics such as blog posts and consumer ratings were actually significant predictors of firm equity value. Furthermore, their results showed that social media metrics predicted firm value stronger and faster than more ‘conventional metrics’ such as google searches and web traffic. However, it does not indicate which strategy to select, how much to invest, or how to assess the success of the investment. As the authors state, many managers have jumped in the trend, without a proper strategy, and have therefore ended up with multiple unfinished solutions.

Well, an idea could be to use basic finance metrics. An industry practice to measure the potential worth of an investment is to look at its ROI.  Let’s look at the ROI equation:

ROI = (Return – Investment)/Investment

We can from here on define how this equation applies to an investment in social media. The first step is that a company needs to establish their goal for using the social media strategy, how to track it, and assign a monetary value to these specific goals (Lee, 2015). For example, let’s say a company is interested in increasing revenues. In this example their goal is increase online purchases, a way to track it could be through sales tracking with Google analytics, and a way to assign this a monetary value could be by measuring the average purchase sale magnitude in their website and comparing it to the cost of using non-digital marketing tactics.

Further ways in which you could consider ROI of social media investments in more detail could include to measure total benefits per channel, determine the total costs, and analyse how to further improve your ROI results (Patel, 2014).

While social media can bring very valuable benefits to companies, it is important managers carefully consider their investment, rather than jump in the trend. Further methods can be considered, but for a beginning start up, these can be sufficient.

References

Lee, K., 2015. How to Calculate Social Media ROI: A Delightfully Short Guide. [online] Buffer- Social. Available at: <https://blog.bufferapp.com/guide-calculate-social-media-roi> [Accessed 12 Oct. 2016].

Luo, X., Zhang, J. and Duan, W., 2013. Social Media and Firm Equity Value. Information Systems Research, 24(1), pp.146-163.

Patel, N., 2014. How to Calculate the ROI of Your Social Media Campaigns. [Blog] QuickSprout. Available at: <https://www.quicksprout.com/2014/06/27/how-to-calculate-the-roi-of-your-social-media-campaigns/> [Accessed 12 Oct. 2016].

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In the world, 2.5 billion people have no access to a credit score, bank accounts, or formal documentation. That is a third of the world’s population! If these people want to take a loan, their options are limited. They could take a micro loan (which usually only go up to $150), however the process can be very difficult as a group of people must vouch for you, and only business owners can get them (Hayes, 2015). If more money is needed, or if the loan is for a personal issue such as unexpected large medical bills, a loan shark is the only option left. This is not only illegal and dangerous, but also the interest rates usually go up to 300% (Siroya, 2016).

2.5 billion people have no access to a credit score, bank accounts or formal documentation

Varied companies and individuals have aimed to help such people access the investment they need. Examples include social crowdfunding platforms like Kickstarter, Indiegogo, and GoFundMe, and person-to-person loan arrangements sites like Kiva. However, many depend on the charity of those in better conditions, who choose who to support. For the individual or smaller business owners or people interested in personal loans these sites often do not provide the solution they need.

In through the door comes Tala. It is an application developed by InVenture which aims to redefine loan provision in the third world. How is it planning to do so? Tala users will answer a few questions in order to be analysed by their system and see if they are eligible. These answers, together with more than a thousand data points like the ones showed below, are used as predictors for their repayment rates.

Today, Tala has reached more than 200,000 loans in Kenya in the last year, and their repayment rates have risen above 90% (Siroya, 2016).

Additionally, users can build up their credit score  with Tala in order to apply for larger loans in commercial banks in the future, something that was not a possibility before. While for the moment Tala is only active in Kenya, it will hopefully redefine the credit industry in the third world.

 

 

References

Adam Hayes, C., 2015. What Is Microlending And How Does It Work?. [online] Investopedia. Available at: <http://www.investopedia.com/articles/personal-finance/040715/what-microlending-and-how-does-it-work.asp> [Accessed 14 Sep. 2016].

Anon, 2016. Tala – Instant credit for a modern world. [online] TALA. Available at: <http://tala.co/> [Accessed 14 Sep. 2016].

Falcon, A., 2016. 10 Crowdfunding Sites To Fuel Your Dream Project. [online] HKDC. Available at: <http://www.hongkiat.com/blog/crowdfunding-sites/> [Accessed 14 Sep. 2016].

Siroya, S., 2016. A smart loan for people with no credit history (yet). [online] Ted.com. Available at: <https://www.ted.com/talks/shivani_siroya_a_smart_loan_for_people_with_no_credit_history_yet/> [Accessed 14 Sep. 2016].