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Should You Really Ignore Facebook? Here’s How Much Fans Are Worth!

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Brian Cantor
Brian Cantor
11/28/2011

Multiple reports have emerged this fall undermining the role social media plays in meaningful customer engagement, if not actual revenue. For B2B organizations, social media has been deemed an unsatisfactory lead generation tool. For B2C organizations, social media has been ripped for building superficial customer relationships, predicated more on discounts and promotions than true support for the brand.

And let’s face it. Even the staunchest of social media advocates have to admit there is some merit to the idea that networks like Facebook and Twitter have not yet become easy pathways to infinite ROI. No matter the industry, there exist examples of organizations that have not been able to parlay massive social support into significant revenue and CRM improvements.

But your organization might not yet want to dismiss social strategy as a hobby or side project. According to a new study by Social Code,cultivating a vast network of Facebook fans can indeed yield significant business benefits. Well, sort of.

The study, which reports on months’ worth of Facebook ad data from over 50 cross-vertical clients, shows that calls to action universally resonate better with Facebook fans than non-fans. No matter what type of behavior the company wants to spur, its Facebook fans are more likely to engage.

Some action calls, such as contest submissions and voting (fans are 546% more likely to engage) and app installations (fans are 239% more likely to engage), are significantly more productive when directed to social network followers. Though the difference is not quite so significant for actions like fan acquisition (52%) and program sign-up (84%), there is still a clear conversion advantage when marketing to Facebook fans.

What about purchasing, which is the most valuable form of conversion for many social investments? The differential is a staggering 195%--only 2% of non-fans were driven to purchase, as compared with 7% of Facebook fans. From a CPA standpoint, the difference was $43.86 for a non-fan versus $14.88 for a fan.

For all types of conversions, the study, which assumes a $1/CPC, found a CPA rate of $5.37 for fans versus $14.93 for non-fans. Based on that, Social Code quantifies the value of a Facebook fan at $10. When specifically concerned with purchasing, this methodology would actually yield a value of nearly $30 per fan.

While a value of $10/fan sounds great on paper and is consistent with some other research on social media valuation, the potential design flaws and oversimplifications do raise some questions about the data’s significance.

Obviously, the fact that the study was limited to the performance of action campaigns on Facebook could serve to both restrict the findings (there is no guarantee the findings hold true for other forms of marketing) and amplify the disparity in performance (insofar as the groups are classified as fans or non-fans, there could be a noteworthy bias either for or against engaging and purchasing with the brand on Facebook that might not be symmetrical to the pool’s overall opinion of the brand and its products). The fact that there does not appear to have been a control for how the fans were acquired (or what type of marketing a non-fan rejected when choosing not to Like the brand) means that we lose serious context about the nature of the fans and non-fans being analyzed.

Most notable, however, is the fact that there does not appear to be any consideration for the actual buying habits of those analyzed. At the end of the day, all this study is really concluding is that a brand’s Facebook fans are significantly more prone to Facebook-based-calls-to-action than non-fans (hardly a surprise). It does not necessarily comment on the value of a Facebook strategy, and it does not necessarily reveal the appropriate price point or best practices for acquiring fans within whatever social media strategy does exist.

While social media is praised with bringing a multi-faceted stream of benefits to the corporate sphere, an important part of its value proposition is the idea that it will directly create business. Those who are acquired as fans, social media advocates argue, will either become first-time or more regular purchasers of the product and serve as loyal customer advocates in the meantime. Indeed, when companies devote dollars upon dollars and hours upon hours to acquiring Facebook fans, they are not simply looking at getting a "like" from their existing, regular customers—they are looking to establish a relationship with those who are not buying (or not buying regularly) and drive their active spending.

Even forgetting about the all-important advocacy component (this study does not really measure that), we do not really even know how Facebook fandom influenced the buying habits of those in the Social Code study:

  • Were the customers who decided to Like the brand new customers or existing customers?
  • What percentage of the new customers have been translated into buyers, and how does that success rate differ from other marketing campaigns to new buyers?
  • What were the buying habits of the existing customers who became Facebook fans? If the Facebook campaigns did not exist, would they still have responded to marketing (and purchased) via another channel (or just purchased without provocation), or did Facebook actually drive additional spending?
  • What about the non-fans? Are they non-fans because they are brand enemies or simply because they don’t see value in liking the brand on Facebook? And, what was their spending level and response to non-Facebook marketing? If a chunk of the non-fans actually love the company but prefer to do their shopping offline, does it really matter that they were not converted into fans?

None of this indicates Facebook is worthless as a forum for B2C and B2B engagement. Based on the Social Code data, there does appear to be a clear advantage in engagement with Facebook Fans, and that could certainly help get the message out.

But in assigning a value of $10/fan, the conclusion of the study gives the misleading perception that each fan acquired will bring $10 worth of new revenue to the business. That is simply not the case; it is far from a fact that a company can spend $9.99 on acquiring each of its Facebook fans and still draw a profit.

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