First the easiest way to answer this question; How effective is Social Media? is to demonstrate it:

Go to Google and type in: How effective is social media?

Google doing what it does best comes back with a nice varied selection of articles. From the good side to the bad side and the ugly of course.

On the good side you have

Jeremiah Owyang of Forrester Research recently met experts in the field to discuss how effective social media is in a recession

Article here:

On the bad Side:

Social media “struggling for effective metrics” Just what is success and how do you measure it click here for the article

And the ugly:

Leon Apel makes a case that all the time and effort may not be worth it:

Article here:

There are many other results on the page that are worth looking at, this is just my selection.

I posted the same question in this forum: http://workconnexions.com/node/35#comment-153