(This is an excerpt from Todd Denis’ detailed post about Facebook fan value on Augmo.)
What should you pay for a Facebook fan heading into 2015? Common sense and the average marketing budget says it’s about $1 per fan – but the potential value of that fan to your brand is likely much higher.
This in-depth article addresses the pros and the cons of widely known Fan Acquisition Costs (FAC), focused heavily around Facebook. It also provides three models for calculating your brand fans’ potential value (aside from costs): Halo Value, Leads Value and Revenue Value. Under these three models, I’ve calculated some unscientific but (hopefully) entertaining Facebook brand fan value examples:
- Oreo’s Facebook fan = $5.90
- Hubspot’s Facebook fan = $3.71
- Audible’s Facebook fan = $10.04
In my travels, where channel growth has been a strategic target, and without much deeper math required, I have always used the following trigger points:
- $1 for ‘lite’ social acquisition (Facebook fans, Twitter followers, and so on)
- $3 for ‘heavy’ fan acquisition (email lists, site registration, opt-ins)
Assuming you can agree on conventionally acceptable costs at $1-3 bucks, what are Facebook fans actually ‘worth’, and how is it calculated?
If someone told you that a Facebook fan was worth, oh I don’t know, let’s say $174, and you whole-heartedly believed it, then you would be happy to pay just about anything under $174 per fan acquisition (less costs, assuming they are not built into the $174), right?
Forget buck-a-fan. Hell, you’d pay $100. All day, every day, for as many fans as you could get. You’d be $74 in the gravy on every fan. Costs in, those are juicy margins, provided you can bank on the value actually being $174.
With this kind of sound reasoning, they’d make you CEO.
Except they wouldn’t.
They’d fire you for being a simpleton who paid $174 for a Facebook fan.
And they’d be right to do so.
In their study, Syncapse “compared Facebook fans and non-fans based on their corresponding product spending, brand loyalty, propensity to recommend, media value, cost of acquisition and brand affinity,” to arrive at $174 as the average value of a fan across the large global brands in the survey. It identified that Coke fans are worth about $70 bucks, Disney $132, Victoria’s Secret close to $300, and BMW $1,600. You get the idea. (Syncapse summary here. Full study here.)
Most stunning though is Augie Ray (formerly from Forrester), who floated the notion that a fan is “actually worth zero.” Zero? Yikes. Ray explains, “If you find it concerning to think of Facebook fans as valueless, perhaps you might consider the difference between potential value and realized value.”
‘Potential’ value vs ‘Realized’ value? Now we’re getting somewhere.
Vanity growth (the ‘mine is bigger than yours’ fan acquisition race that dominated 2008-2012, with brands outspending to out-grow each other) is an absolute case for zero realized value. Companies poured billions of dollars into the pursuit, with little thought for return on investment. Buckets of potential with tiny cups of results. Like the dot-com rush, brands simply did not want to miss out on the yet-to-be defined Facebook opportunity. To be clear, Facebook did nothing to deter this.
But with a billion+ people now comfortably inside their system, Facebook seems to have wisely shifted their focus to engagement. And this shift appears to be not just Facebook as a whole, but to the per brand strategy as well. They want your brand to grow, of course, but the math favours the brands that can engage.
Don’t get caught up in the semantics of defining engagement on Facebook, as it is a never-ending puzzle. Just understand that engagement is the difference between a passive audience and one that takes some form of action based on your brand not sucking. It’s what sets brands apart on Facebook, other social platforms, and pretty much any modern touch-point. Fail to engage, and fan value plummets everywhere. Build a pattern of authentic consumer engagement, and fan value is almost infinite – especially on Facebook.
Rest assured that the often misused, mislabeled, misunderstood premise of a one-size-fits-all model to social fan value stops here. Pay $1 (if you buy my upfront advice on used car costing) but have a full understanding of just how good a deal you are getting, or not getting, by applying your own unique math to your own unique brand needs.
The full post, with deeper examples and more analysis, is available by clicking here.
Top image courtesy of Shutterstock.