How much is a brand fan worth? It’s a question some social media marketers have been asking for a while, but research suggests many are moving on from the search for a hard number.
According to a July 2010 survey of social media marketers by Millward Brown and Dynamic Logic, the most valuable aspects of social media brand fans go beyond anything with an immediate monetary value. Increased short-term and long-term spend on the brand were the bottom two results.
At the top of the list were the fan’s value as a source of insight and increased loyalty overall. Advocacy and engagement were also important to at least three-quarters of respondents.
This suggests that, despite the real need for return on social media marketing investments, marketers are largely not worrying about puting an exact dollar value on each Facebook fan or Twitter follower.
Less than a quarter thought ROI was good. Difficulties with these measures mean some marketers are still not trying to answer the question.
“The business question always comes up, but nobody can figure this out,” Maria Yap, director of product management at Abobe, told eMarketer about proving ROI for the company’s Facebook page. “For me, it’s about the value to the customer. I understand why companies want to focus on the business goals, but I put that aside. Let’s experiment. Let’s see what being here brings.”
Many social media marketers are eager to tie a hard number to the value of their efforts. Social media marketing firms Syncapse and Vitrue have attempted to analyze the worth of fans and followers on social networking sites like Facebook and here are their findings:
SYNCAPSE
Digital consulting firm Syncapse and research company Hotspex have come up with an empirical formula that puts an average value of $136.38 on the Facebook fans of the site’s 20 biggest corporate brands. Most of that value comes from how much the fans will spend on the brand’s products, with additional dollars coming from customer loyalty, recommendations and earned media.
The study found that people spent significantly more on products they were fans of, compared with consumers who were not fans. In the case of many of Facebook’s most popular food and beverage marketers, fan spending was more than double that of non-fans.
The pattern of increased fan spending held across all of the top 20 brands on Facebook, with differences ranging from 51% for Oreo fans to 168% for fans of Nokia.
Other studies have shown social followers are more likely to buy a brand’s products, but have focused on whether such consumers are brand-loyal rather than how much they actually spend.
VITRUE
According to a new study released by social media management company Vitrue, Facebook Fans are valued at $3.60 a piece in earned media for big brands. When scaled to Fan Pages with one million Fans, that equates to $3.6 million annually — and Vitrue says that this is just the tip of the iceberg.
As more brands and companies start to make real investments in social media, having a handle on what kind of value various platforms can offer becomes extremely important. After all, why invest in something if you aren’t going to get anything back?
Vitrue manages more than 45 million Fans for a variety of different companies, including entertainment, media, retail and restaurant companies. Its team sampled data from their clients’ Pages to come up with their valuation.
To start, Vitrue looked at its data to determine the wall post to Fan ratio, i.e. how many impressions a single wall post receives based on the number of Fans a Page has. The average ratio for Fans:wall posts was nearly 1:1. In other words, if a brand has one million Fans, it gets an average of one million impressions per wall post.
Factoring in a frequency of two wall posts a day (for ~60 million impressions a month), Vitrue then applied a $5 CPM against that data.
Here’s the math:
1M ipressions x 2 wall posts x 30 days = 60 million impressions a month
60 million impressions/1000 x $5.00 CPM = $300,000
$300,000 x 12 = $3.6 million
Still, these soft metrics can leave marketers unsure about their returns. Half of respondents to the Millward Brown/Dynamic Logic survey were uncertain about how much they were getting out of their investment in a social media fan base.
COMMENTARY: Does it really matter how you calculate the value of a Facebook or Twitter fan? Probably not, because value is very subjective. Social media marketer's all value things differently. It's like trying to place a value for a business with no revenues. Too much emphasis is placed on future potential.
I can even make a case that the value of a social network fan is worth less over time because the ad-supported revenue of social networks is flawed, requiring huge numbers in order to create increasing returns. The reason for this is because the number of social network users is a finite number. In the beginning the number of users for a social network is exponential, as the social network experiences rapid growth in users. Facebook and Twitter have both experienced this phenomena. However, there is a critical inflection point, when the growth in users begins to slow down, revenue growth then slows down, and eventually both the number of users and ad revenues peak. Past the inflection point, a social network will generate less ad revenues per user, a classic case of diminishing returns. I actually show this when I calculated Facebook's Inflection Point:
There is no doubt in my mind that the only way for social networks to extend the point in time when the critical inflection point occurs, is by adding new non-advertising revenue streams. Facebook is now in the process of doing this. Facebook's real-time geotargeting ads could be a way to increase adverage revenue per unique visitor, but over time Facebook will still reach the critical inflection point.
Weaknesses in the ad-supported revenue model of social networks is best illustrated by comparing the average revenue per unique visitor for social networks against other online sites. Silican Alley Insider did just that in the following chart:
Courtesy of an article dated April 5, 2011 appearing in eMarketer and an article dated June 21, 2010 appearing in eMarketer and an article dated April 14, 2010 appearing in Mashable
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