Tuesday, November 22, 2011

What is a Facebook Fan Worth?

The old quip about advertising spend--namely that half is wasted, but nobody can tell you which half--remains true, it seems.

According to social media agency SocialCode, a Facebook fan is worth about $10. Looking at more than five million Facebook ads placed by over 50 clients (spanning verticals, but mostly in consumer packaged goods, auto and finance) from between May 2011 and September 2011, the study looked at the cost of acquiring new fans, and what it took to get them to perform a desired action. Value of a "fan"

The study  found that fans perform desirable actions such as installing an app, voting in a contest and making a purchase at a much higher rate, and it's significantly cheaper to prompt them to do so, using advertising, than it is to prompt non-fans.

Facebook fans also are more likely to engage in actions that suggest more involvement. .

The study looked at seven actions a user might perform on a Facebook fan page: app install, contest submission, contest voting, fan acquisition (which encompasses "liking" a sub-brand for existing fans), program sign-up, purchase and sweepstakes.

The cost per acquisition, calculated by dividing the total cost of clicks by the total number of actions, for fans and non-fans is $9.56.

The total conversion rate for fans, obtained by dividing the total users who performed an action by the total who clicked on an ad, is 19 percent, compared to seven percent  for non-fans.

But other studies come up with different figures. Values range from two cents to $136, depending on how one wishes to tally the presumptive value. It all hinges on the assumptions.
  • 2 cents: (offer for 500 new fans for $10.51; eBay).
  • 57 cents: (offer for 1000 new fans for $57 by this fan-creating agency).
  • $1.07: (the cost of advertising on Facebook that encourages a user to become a “fan”; Webtrends).
  • $3.60: (as a media buy to reach 1 million fans; Vitrue).
  • $9.56: (extra cost per acquisition for "conversion" of fan/non-fan into a purchase or other action; calculated by SocialCode).
  • $71.84: (extra amount fans spend vs. non-fans; Syncapse)
  • $136.38: (average annualized value of total fan purchases; Syncapse).
  • 20 extra visits to your web site: (vs. one visit from a non-fan; Hitwise).

None of the studies address the obvious fact that a person willing to become a Facebook fan of an advertiser is probably already buying that company's brand. In other words, the extra value Facebook fandom adds for advertisers is $0 if the fan was already locked in. Value of a fan varies

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