Social Referral Traffic - What to measure? Whom to target? What are the qualitative aspects?

The pieces of big puzzle of profitability of any consumer internet company have always been

1. Traffic Generation
2. Conversion
3. Monetization. (in some cases, 2&3 are same)
4. Retention.

But with the advent of social media, social networks, and social sharing tools, a whole new piece of puzzle is emerging : 5. Social Referral.


I had earlier written a post about the benefits of social media optimization here. Your customers and visitors share information about your products and services using the social sharing tools in your website. The ever expanding social networks such as Facebook and Twitter are fundamentally changing the way people discover information. Except for a brief period of last about 30-40 years, people, for times immemorial, were discovering information through word of mouth, and through the trusted sources in their offline social networks. Today, social media sharing is enabling people to hear what their trusted sources from across the world say about the news, products, and services people care about, before making their decisions. Simply put, social networks are slowly restoring the primacy of information discovery through word of mouth (mouse).


A simple diagram below depicts the big picture of traffic generation, referral, retention, and monetization.

Social Referral Traffic.
When your visitor or customer shares information about your website, products or services to his social networks, and generates traffic through such referral links, the traffic is called social referral traffic.


What to measure?

1. How many times information from your site has been shared.
2. Who is sharing the information?
3. Who is generating new social referral traffic?
4. No. of new visitors referred per social sharing link.
5. No. of conversions per No. of new visitors referred through a social sharing link.
6. Retention rate per unit number of converted referral traffic customers per social sharing link.

(there are certainly more parameters to measure than these six)

Whom to target? 
From the above analysis, it would be possible to identify the group of users generating the most valuable social referral traffic to your website. It will be useful to understand what percentage of your visitors are generating what percentage of your referral traffic from their social networks. Often, less than 3% of your visitors/customers would generate more than 50% of your referral traffic, and even a less percentage would generate new customers.  Most likely, these 3% visitors/customers are social media influencers of some significance, among their networks. Simply put, their followers trust their referrals, and that is why their followers follow their referrals to your website.

Redefine your Net Life Time Value parameters. It is very important to  identify who these top 3% customers are, and how valuable is their referral traffic. Assuming that all your current customers have same/similar Average Revenue per User (ARPU), these top 3% customers unquestionably have a higher net life time value than other 97% percent of your customers because they generate referral traffic, who then generate further profit. Therefore, it is important to identify this top 3%, proactively woo them with offers, and promotions to retain them, and give them incentives to share information more often to their social networks.

Qualitative Aspects of Social Referrals.
Web analytics is quantitative and often does not identify the qualitative aspects completely. For example, let us assume that two of your referring customers A and B, generate same amount of referral traffic AX and BY, and both AX and BY same amount of revenues and net profits. Your web analytics results would treat A and B as equally valuable referring customers, and your marketing department might approach both A and B with equal promotion offers. However, AX, the referral customers generated by A, is qualitatively poor: AX consume your customer care services much more than BY, the referral  customers generated by B, or may be, AX has  signification number of returns and repurchases than BY. In that case, you might want to think about which referring customer to keep, and which one to stop targeting. In the long run, quality of customers referred matter beyond profit numbers.

Today, as social networks expand exponentially, and as we rapidly perfect the social media monitoring tools, measuring, and understanding social referral traffic, and targeting social media influencers will be key to running a successful consumer internet business. 

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