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What Is the Value of a Facebook Fan? by ClearSaleing
Posted January 16th, 2009 under All Blogs, Attribution Management, News, Optimization, Uncategorized, What's New? with 11 Comments
By Adam Goldberg
If the amount of Facebook fans a company had were an indication of the number of sales for their product(s), we would generally assume that more fans equals more sales. But several factors contribute to the popularity of a Facebook fan base, which can make it difficult to define the value of a fan.
Take a simple comparison between brands in the auto industry. Lamborghini has over 447,000 fans on Facebook compared to just over 11,000 fans for Toyota. Keeping the logic that more fans would equal more sales, we would assume Lamborghini would sell 40 times the number of cars than Toyota.
However, Toyota sold 9.2 million cars in 2007 (’08 numbers not yet available) and Lamborghini sold 2,406 cars in ’07, or 2,823 times the number of cars sold by Lamborghini. So, if the number of fans one has is not a straight-line correlation to the number of sales a company will do, then what is the value of having fans? In order to understand the value of fans, we need to understand why people become a fan in the first place.
One of the reasons is that it shows their personality to their network, just like adding music, TV shows, or quotes. A second reason one might become a fan is to let other people know about a product or company they’ve had a positive experience with. Now, within that category, there are companies that people become fans of like Lamborghini, where most all of their fans will never buy a Lamborghini because they could never afford it. Then, there are other companies that people become fans of like Apple Inc., where the vast majority of fans can, or one day will, be able to afford one of their products. It is the group of fans that have not bought yet, and have the ability to buy, where you have the best opportunity to get value, i.e. profit.
So, when someone becomes a fan, it gets broadcast out to that person’s entire network in their news feed. See below:
The average person’s newsfeed reaches 164 friends on Facebook (see here), so each time a Facebook user becomes a Fan, 164 people have the opportunity to also become a fan and learn more about that company.
One way to establish a value for fans is to look at it in terms of what it would cost to buy 164 impressions. If we assume a $5 CPM (cost per 1,000 impressions) for 164 impressions, that would cost you roughly $.82 each time someone becomes a fan and has that displayed on their news feed. In the Lamborghini example, they received over 73,300,000 impressions from their 447,000+ fans, which equates to $366,540 worth of free advertising.
Ultimately, if you could conclude that as a result of someone becoming a fan, they influenced another person in their network to make a purchase from you, then that is when fans become profitable. The value is equal to the amount of profit you earn from that customer’s initial order and perhaps all of their future orders. Unfortunately, it is not possible to track to this magnitude today.
There are a few types of tracking available today that can give more insight into the value of fans. The first is to put special offers on your fan pages. If someone reacts to a special offer that is promoted on your fan page and is only accessible to fans, you could tell the number of sales you received from that specific promotion and, therefore, assign a value to your fans. A second method is more rudimentary. When one becomes a fan of yours, you know only a few things about them: First name, last name, date they became a fan. You could put this information in a database and cross-reference that with the name of the customers you receive each week. Anytime you find a match, you can infer that you received that sale, in part, because they are a fan. Obviously, there could be many other reasons why they bought from you, and you may have some difficulty matching just names in an accurate manner.
I’m interested to hear more thoughts and ideas of how others in the online marketing world value Facebook fans.