Two Social-Media Tech Companies Set Out to Answer It With Differing Formulas True to form, many of the technologies showcased during New York's annual Internet Week wowed, but what really generated attention were efforts to answer the $64,000 question: How do we measure the value of a Facebook fan, especially since Facebook is a dominant part of a marketer's toolkit?
Two clever social-media technology companies, Syncapse and Vitrue, took a crack at answering this seemingly simple question. I say seemingly simple because, in reality, the "value" of a fan can mean lots of things such as actual sales value or value as evangelists or value as a research resource in a crowdsourcing campaign.
And given the ad hoc nature of measurement today, it's no surprise, therefore, that we see wildly divergent answers from these two companies. Syncapse, for instance, assigns the average value of a fan at $136.38, and Vitrue pegs the value of a Facebook fan at $3.60. The wild differences, of course, lies in what you are measuring. Let's take a closer look.
The Syncapse approach
I got to hear Syncapse CEO Michael Scissons present the findings from a joint, proprietary research study his company did with Hotspex. It was designed to calculate the value of a fan based on a set of attributes as described by Synapse in the study:
- Product spending -- Facebook fans spend, on average, $71.84 more than non-fans over a two-year period.
- Loyalty (meaning ability to influence and promote brand loyalty within a target audience) -- Facebook fans are 28% more likely to continue using a brand than consumers who are not fans on Facebook.
- Propensity to recommend -- 68% of fans are "very likely" to recommend a product to family and friends (as opposed to 28% of non-fans).
- Brand affinity -- 81% of fans feel a connection to the brand (versus only 39% of non-fans).
Together these attributes (and a few others) roll into a sophisticated formula which yields an average value of $136 per fan. Now, I love the idea of these metrics. I love the scope that these attributes reach for. I appreciate how cleverly they assigned a dollar value to intangible attributes such as brand affinity. And rightly, the study spends a fair amount of time acknowledging that the value is highly dependent on lots of variables.
Yet, the study requires us to take some pretty big leaps of faith since the data is self-reported -- not behaviorally tracked. This somewhat stacks the data deck – after all a fan means they are already favorably predisposed.
But even if one is willing to take these leaps of faith, what are the practical applications of this information? Does a marketer then use this measure to justify shifting dollars from one media into Facebook? Is it a "dollar for dollar" shift? Or is this information best used as a theoretical baseline for some objective measure of progress? While I like this approach because it is innovative and ambitious, its practical application remains to be seen.
The Vitrue approach
Vitrue's approach to the question, "What's the value of a Facebook community?," is to associate fan value to the value of impressions generated in the Facebook news feed. It then applies display banner advertising pricing to the number of Facebook fans (at $5 per CPM) for a value metric. The results of the study are based on Vitrue's own client data that had a combined 41 million fans. With this approach, one can theoretically increase monthly media impressions significantly so that, for instance, a marketer with a large Facebook fan base that posts twice a day can deliver 60 million more impressions/ month. Here is a recap (and many thanks to Webtechuniverse's blog post) of the formula: 1M impressions x 2 posts x 30 days = 60M impressions 60M impressions / 1000 x $5 CPM = $300,000 $300,000 x 12 months = $3.6M $3.6M / 1M fans = $3.60
This approach is valid and similar to the methodology used to assign media value to publicity received in the news. "It's important to understand that once you build that fan base, you want to make sure you're leveraging it," said Michael Strutton, chief product officer at Vitrue, and they provide a nifty tool to help you measure your value Facebook fan page.
While this approach is more focused than the Syncapse approach (though less strategic), even within the more limited scope, here too we must be willing to take a leap of faith, which is that all impressions perform equally irrespective of environment within which those impressions are delivered. And then the inevitable "Now what?" problem also raises its head because we are not clear on how to apply this learning in the real world. Does this suggest that a wholesale dollar shift will deliver comparable results? (I'd love to hear from the Vitrue folks on this point.)
Conclusion
I fully appreciate the need to put an ROI face to the question (pun intended), and I much applaud the efforts by these companies to give guidance. But it seems fair to step back for a moment and ask ourselves a bigger question: "What is our Facebook marketing investment worth?" The way to answer that bigger question might be, in fact, to reframe it within the context of specific marketing campaigns like direct marketing rather than looking at this problem in a "monolithic" sense. As David Armano, senior VP, Edelman Digital, observed in a session on Facebook; we would do well to think of Facebook as part of a larger marketing "ecosystem" where there are practical and actionable set of measures like customer lifetime value, acquisition costs and sales.
The way forward
There is a rising chorus of voices demanding a coordinated industry approach to metrics and methodology used in the measurement of social media that integrates the disparate trade organizations' efforts while introducing the best thinking from innovative companies like Syncapse and Vitrue. This will allow the industry to come up with an accepted standard set of metrics that provide true actionability. It's time we roll this initiative out in earnest -- so if you have a voice or want to help, feel free to e-mail me.e-mail me
So what did I learn about the value of a Facebook fan in the last week? At least I learned enough to say, "It all depends..."
| ABOUT THE AUTHOR | |
| Judy Shapiro is chief brand strategist at CloudLinux and has held senior marketing positions at Paltalk, Comodo, Computer Associates, Lucent Technologies, AT&T and Bell Labs. Her blog, Trench Wars, provides insights on how to create business value on the internet. | |
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