Those in the marketing and agency world are privy to the buzzwords “paid,” “earned” and owned.” Traditionally, they stand for the different types of media and can be easily broken down like this:

• Paid: Buying a 30-second Super Bowl spot
• Earned: Coverage on Mashable
• Owned: Your company’s website

But social media has brought about a change. It not only affected how agencies themselves function on a day-to-day basis, but it also altered the definitions of paid, earned and owned media and blurred the lines between them. Now, the challenge that agencies face is figuring out how to integrate all three forms of media for maximum effect. What follows is a breakdown of what the terms mean, how different agencies interpret them, who is responsible for synthesizing the three channels and how the agencies measure success.

The Social Challenge

The conversations on Twitter and Facebook never stop — it’s 24/7/365. A brand can’t buy an ad and then call it quits — it has to continue the conversation, engage consumers and really earn that earned media.

“Why would a TV spot end and there be no URL or Facebook Page?” asks Curtis Hougland, founder and CEO of Attention. “We don’t want any ‘dead ends’ — the conversation should be ongoing and cross-platform.” Indeed, blasting consumers with banner ads and product placement isn’t enough. With social media, marketing has become more of a pull medium than a push — the audience is active and engaged, transforming marketing into a two-way street. It’s been a curveball for the industry, and agencies have had to restructure and rethink their approach to media to account for the impact of social media.

Paid, earned and owned — as terms — don’t mean as much. Grant Owens, an account planning VP atRazorfish, often finds himself “frustrated by the rigidity of the buckets.” To explain why, he looks at a brandedYouTube channel and explains why it could be classified as any of the three buckets:

• Paid. It can cost ~$100,000 a year to manage.
• Owned. It’s an exclusively owned URL (much like a website) and the brand has complete control of what is posted.
• Earned. It’s “squarely social.” A YouTube channel will succeed only if consumers watch and share the videos they see. A brand needs to earn those eyeballs with creative execution of content.

And even a Facebook Page, which is free and “owned,” costs a pretty penny when you consider the fees of hiring an agency and social media specialist to manage the Page and produce content.

“To some extent, everything that’s done by a media agency is paid media,” says Andrea Wolinetz, director of social media at PHD. “Whether it’s managing a Facebook Page or blogger outreach, people get paid for that work, so it always starts from a place of paid media.”

And at the end of the day, do consumers care about these buckets? Do they see the paid, earned and owned lines drawn when they’re watching a commercial or tweeting about their favorite brand? No.

“Consumers don’t draw those lines, we do,” says Owens.

The Increasing Importance of Earned Media

So, the goal of the modern agency is to connect the dots and integrate all media for maximum results. Of the three buckets, the holy grail is earned media. Earned media can be most easily described as the result of paid and media — you buy a Super Bowl ad (paid) or you run a promotion on your brand’s Facebook Page (owned), and then and then people in the media talk about it (earned) and the Twitterverse erupts into conversation about that topic. You may shell out big bucks to flash an ad before a consumer, but you can’t force them to buy anything or tweet about it — you have to earn that consumer’s dollars and tweets, you have to engage and empower him to become your evangelist, says Sean Corcoran, an analyst at Forrester.

“Earned often requires a paid spark,” says Owens. “We have empirical evidence that a kick-start from paid media is often the difference between a cultural juggernaut and complete silence.”

Wolinetz agrees, saying that earned media is the buzz, and it’s more of an effect than a cause. “It’s what becomes of any fire that we start in a space,” whether it’s from paid media or not. Earned media is what you get when you foster such a connection with someone that he’s impelled to write a Yelp review, a blog post, a comment or a tweet, sharing their thoughts on your brand with their social network. The nice thing about earned media, too, is that it provides more insights and is much more measurable than it was before social media went mainstream.

But, “regardless of what type of media it is, you still need to conceive of its potential as earned media,” says Hougland. “You need to conceive of the distribution of the content at its conception and then filter everythingthrough its earned potential.” This is especially important, he says, when you consider that all content — whether it’s text, a video or a microsite — will be “reduced to a link” for social spheres. There were 500 billion word-of-mouth impressions made by Americans online in 2009, according to Forrester. Such volumes of word-of-mouth marketing can spread awareness of a product incredibly quickly, and it’s why earned media has become so important to a marketing campaign.

How Paid, Earned and Owned Play Together

So, is any form of media more valuable than the others? While we’ve already discussed that earned media is becoming ever more crucial — you want people to become evangelists and talk about your products of their own volition. Then again, it’s hard to get those eyeballs without making a big impression for which you have to pay big bucks. Wolinetz says that whether one is more important than the others comes down to what you’re trying to accomplish.

“We want to understand how these three media work together for a goal, whether that’s an action, or a purchase or more conversation,” she says.

In addition to the big three, the planners at Horizon Media also take into consideration social insights (also called ‘social intelligence’). Taylor Valentine, Horizon’s VP of social media and relationship marketing, says “You don’t really begin to understand the impact that [paid, earned and owned] are having on each other” unless you look at the numbers and analyze the data to see where traffic is coming from and what is spurring engagement. The raw numbers — say, 746 “likes” and 593 comments in a week on a Facebook Page — don’t provide much insight, but digging into the numbers and figuring out what people responded to will help a brand optimize all forms of media, thereby enabling the brand to create the deepest and most meaningful relationships with consumers.

The important thing to remember is that social media is not a vertical, like advertising or PR — “It’s a horizontal layer that wants to touch every part of your business, from customer service to customer acquisition to customer retention,” says Hougland. He and Owens agree that there can’t be silos anymore — the teams at the agency must play well together to come up with an idea that can dip into all forms of media. Attention’sBarbie and Ken campaign is a great example of an integrated approach. It started with a simple idea: How can Barbie and Ken get back together? And it worked very well across all forms of media and even dipped into “shared media” with the Match.com video, since both Mattel and Match benefited from the earned media generated by the clip.

Measuring the Value of Media

A media agency is driven by an objective — it needs to compel consumers to do something, whether it’s paying attention to a new product, buying something or going to a store. Just because the medium is Twitter instead of TV doesn’t mean much — media is media. What’s become most important to the agency is how successful the campaign was at accomplishing the goals.

“At this point in social media, we pretty much have metrics along the entire purchase pathway,” Wolinetz says. “We know the amount of eyeballs that something hits and how far it spreads.”

Whether it’s better to get X million hits on one post of earned media on Perez Hilton or the same number of impressions spread over 25 different sites comes down to the campaign. “Depending on your objective, one would be more important than the other,” says Wolenitz.

Hougland adds that we’re getting to the point where there are different performance metrics for each point along the marketing funnel. You can determine your effectiveness at achieving a goal, whether it’s brand health, brand awareness, brand preference or intent to buy, says Valentine. Owens puts it bluntly: Did we drive more leads and sell more cars? Did more people book hotel rooms? Do people have a better perception of the brand?

As more consumers get on board with social media, generating earned media through social shares will become an even higher priority. And that means paid and owned media — and the teams that manage each — will need to work together even more seamlessly. The barriers of the silos are broken, and they’re only going to crumble more.