Calculating the Value of a Facebook Fan
I’ve been heads down with the team for awhile pounding out a study examining the value of a Facebook Fan.
I have hopes.
I hope it throws some wind into the sails of people who are doing good social media marketing strategy. Absolution is frequently sought in simple numbers. The importance of activation strategy should be very clear in the charts and text of the paper.
The second is for the lack of misquotes. It would be really nice if it wasn’t misquoted.
The third is that I hope you’ll find it useful.
In sum, take a look, and feed on back.
4 thoughts on “Calculating the Value of a Facebook Fan”
Looks like a good start! A fantastic next step would be to get any evidence, even if anecdotal, that people did what they said they would do over time – e.g. did they actually purchase as they projected?
“Facebook fans were more loyal to the fanned brand than consumers who were not fans” is the nub of the issue when looking for incrementality here – of course they are more loyal, that’s why they “fanned” in the first place. So how did they get “loyal”? They were loyal first, then fanned. So in many cases, Facebook doesn’t create loyalty, it simply allows for the expression of it.
Which brings us to “Fanning has a demonstrable impact on others”, which seems to me, where you start generating incremental benefits. The question here is, does “would likely become a fan of a brand” generate actual sales? We know loyals outspend non-fans, that’s logical and mostly pre-determined by other marketing efforts.
But what is the spend like when a non-fan becomes a fan through family or friend interactions? I didn’t see that number anywhere, but that’s the one that would convince me to invest in Facebook – that these incremental contacts / fannings generate incremental Sales. If they don’t, then dollar for dollar, I would just buy media, where I can measure the incremental sales generated.
I understand imputing McDonald’s Facebook Fan value to be $580,003,461. The real question is, how much of that value would have occurred anyway without Facebook, and how much is *because* of Facebook? It’s one thing to say “Fans spent X”, quite another to say they spent *because* they were fans. We know the most loyal customers are the most likely to buy already, right?
I’m sure you’re working on that, Christopher…
Would also love to see anything on “de-fanning” or “re-fanning” as predictive of purchase behavior. I have seen this anecdotally and might be where the real power lies in social media – not as a media substitute, but for the saving or re-capture of sales, where the incrementality would be crystal clear, and data is typically quite scarce for the Brand folks. End user merchants can measure customer defection quite easily, Brand folks are just getting their first data points through social.
What if there is a correlation between de-fanning or non-activity as a fan and reduction in likelihood to purchase? THAT would be something every Brand would need on their dashboard – could be used to study changes in formulation, packaging, pricing, all of it.
Jim! Thank you for the questions –
Indeed, this paper was a snapshot in time – it doesn’t answer the question ‘what is the incremental effect of Facebook on a user’ outright. The answer to that question would have a lot to do with the impact of the strategy upon that base.
Such an analysis, on the incremental value of fan-dom, is the next logical step. It would require a very different instrument.
I’m pulling out the key questions you’ve posed below because they’re very salient.
I have hypotheses on these. It’s going to be fascinating to do the incremental study and use it to really inform/drive strategy.
Thanks for recognizing this as the first step. I hope (a fourth hope) that now we have a baseline, we can start talking delta.
Key questions:
1. “What is the spend like when a non-fan becomes a fan through family or friend interactions?”
2. “How much of that value would have occurred anyway without Facebook, and how much is *because* of Facebook? It’s one thing to say “Fans spent X”, quite another to say they spent *because* they were fans.”
3. “Is “de-fanning” or “re-fanning” predictive of purchase behavior?”
4. “What if there is a correlation between de-fanning or non-activity as a fan and reduction in likelihood to purchase?”
When I saw the “becomes a fan through family or friend interactions” I was reminded of the review I did of the Social Media field study for the WAA Research Group. In that study, Fans don’t generate incremental behavior because all their friends are already aware, but incremental awareness of often created among acquaintances (weak ties / strong ties). This might be the mechanism for social to really be like media.
Guess it depends if you consider family to be friends…:0
Therein lies one of the more interesting aspects of social – Godes and Mayzlin and the weakness of strong ties.
You have fewer close family and friends (strong ties) than you have friends/acquaintances and cohorts (weak ties).
If you make a recommendation and it goes onto your wall – the number of weak ties that see the message will be greater than the number of strong ties. If you have 100 Facebook Friends, power law that out along weak tie and strong tie. There are far more weak ties.
However, what we do not know (yet) is if (or how much) the attention paid to such statements by weak ties is inversely less. The degree of attention fragmentation on wall posts is something only Facebook would really be able to answer.
In the meantime then, for the foreseeable future, strategic analysts will have to go back to Grannovetter and Godes/Mayzlin.
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