How much does this brand impression “YouTube” mean to Google?

What is the value of this impression?

One type of question I hear a lot is something like “What is YouTube worth to Google?”

Since I’m in a line of work where valuing products and technologies is important, I think about this kind of thing a lot. Most of the time, this is not from an M&A perspective (“what is the value of that revenue stream + goodwill + synergies?”), rather a lot of the valuation I care about in this Web 2.0 world is from a couple of other perspectives.

One:  How does a product or feature or promotion create value for a business where the revenue stream is more ‘indirect’ (i.e. ad-supported businesses) – what does that feature or promotion do to get more users to the site or increase their value to advertisers OR to attract more advertisers to the site and increase their value to the site? Even in the YouTube question above, this is an interesting question – a fairly literal question of how YouTube brings users and advertisers together. I’ll save that analysis for another day.

Perhaps more interesting is the second type of value analysis I spend a good amount of mindshare on – understanding the true business value of different forms of marketing. A related wrinkle on this subject (again, for another day) is the area of marketing attribution – divvying up business benefit (profit) across multiple marketing touch points in proportion to each marketing tactic’s contribution to the benefit (i.e. sale). However, we need to start with the basics first.

To me, most companies still have a problem with the very first step. “What is a Brand impression (i.e. banner ad) worth to my business?” Or, similarly, with viral marketing, “What is a PR impression worth to my business?”

I’d like to say we’ve come a long way in understanding the value of a brand impression, but aside from the most sophisticated marketing companies with the most sophisticated marketing intelligence tools and people, the true value of a brand impression is unknown to most brand managers and marketers. They simply know they need to do it, and gauge the size and importance of this campaign to that campaign, and base their budget and media plan on that historic benchmark. This is obviously a poor habit – budgets should be based on the benefit you expect to receive (unfortunately many businesses in the brave new world of Web 2.o can’t even get this benefit piece quantified, so the idea of prioritizing and budgeting in line with benefit is a lost cause). IMHO, this is lazy – some form of  revenue modeling must be done by anybody setting product and marketing strategy. But I digress. 🙂

One of the ways you might gauge the value of brand impressions is to try to isolate a campaign (geographically or among a segment or bucket of users) and measure sales before and after the campaign. Another way is to research things like brand awareness, brand favorability and likeliness to buy before and after a similarly isolated campaign.

I haven’t seen it used anywhere, but I believe a similar proxy could very well be used to evaluate the value of PR and perhaps even social marketing. The PR industry is even farther behind than brand marketers in the desire to quantify performance. That’s probably because PR budgets are not performance-based and so there is no incentive to change a perfectly good business model where PR performance is based on # of placements, and social marketing is judged by # of downloads, followers, and comments, rather than the actual observed impact on sales).

Not to confuse “business value” with “cost”, but it might at least help to know the market value of a half- or full-page editorial article in a publication or website, compared to the market price of a similar sized advertisement in the same publication, and eventually work towards a ballpark proxy of what a single reference is worth from a trusted writer vs. an anonymous contributor vs. a known product user vs. an anonymous product user.

Without knowing this information, no marketing director or brand manager can know the true business value of garnering positive reviews, and thus there is no quantifiable way to ensure that product development and marketing plans are correctly prioritized, and that these crucial and scarce resources are maximized!

If asked to proxy PR value, I’d probably multiply the market value of a similarly placed ad by some set of factors:

• On a scale of 1-5 is the article definitely positive, generally positive, neutral, slightly negative or very negative? You might even bucket test with a panel or survey the real results on actual purchasing or brand affinity after presenting unknowing users with similar types of articles.
• What is the click-through-rate (CTR) and conversion rate (CR) of leads from different publications, editors, and types of brand references? Which perform best and worst and by what margin?
• What is the CTR and CR if I put links to the product in question (or FAQ page) right inside the user reviews?

These are just some of the ways that marketers should begin understanding what PR and personal references mean to the business, relative to traditional marketing (where the voice is a corporate voice). With at least acceptable proxies, product designers and marketers can apply data to make business decisions, and then track their own performance – or learn where implementation has faltered – by these key performance indicators. What would you rather tout to shareholders: an increase in revenue or an increase in positive brand references, twitter followers and facebook fans?

Next, I will take a stab at how I might evaluate YouTube’s value to Google, by looking at value drivers that are perhaps different than you might expect.