What Is The Value Of A Facebook Fan? Zero!

It is a question I hear several times a week:  What is the value of a Facebook Fan?  I’ve seen answers ranging from $136.38 to $3.60.  I can’t blame vendors, agencies and consultants for trying to answer the question -- the hunger from clients is so great that anyone promising a simple answer is likely to get attention.  The problem is that there is no simple answer to such a complex question. In fact, it may be best if marketers approached this question as if the answer is zero -- unless and until the brand does something to create value with Facebook Fans. 

There are numerous reasons the question of Facebook fan valuation is problematic: 

  • Assumptions:  The methodologies for estimating the value of a Facebook fan rely on a host of assumptions, but every audience, brand and program is unique. For example, the value of a fan for big-ticket items cannot be the same as a fan for lower-consideration items. 
     
  • All fans are not equal:  Every individual has a unique social graph and a unique voice.  I might be considered influential on topics of social media and marketing, but my opinion on floor mops might hold little influence within my set of friends and followers. One’s value as an influencer varies from category to category. 
     
  • Acquisition matters:  How a fan is acquired makes a difference.  A fan that organically “likes” a brand has more potential value than one that is encouraged to click the “like” button in exchange for a coupon or some Farmville bucks.
     
  • Cause and effect:  Which came first, the chicken or the egg?   Do Facebook fans spend more, or do people who spend more become fans?  If the former, then Facebook fans are generating new value, but if the latter is true then Facebook fandom merely reflects existing value rather than creating new value for brands.
     

The smart marketer will approach the question of value as if the answer is zero -- there is no intrinsic value to a Facebook fan.  This might sound sacrilegious to social media marketers, but think of it this way:  What’s the value of an email subscriber if the company never uses the database for anything?  And what’s the value of the same email subscriber if the company has a smart, user-focused strategy for email?  It is what companies do with fans that creates value, not merely that a brand has fans. 

If you find it concerning to think of Facebook fans as valueless, perhaps you might consider the difference between potential value and realized value.  There is an appropriate and interesting corollary in the world of high school physics:  If you lift a ball off the ground and hold it stationary, it has no kinetic energy but it does have potential energy; drop the ball, and the potential energy becomes kinetic energy.  Facebook fans are like that -- all potential energy until you introduce something that creates kinetic energy.  As such, the operative question isn’t, “What is the value of a Facebook Fan?”  but “How do I make my Facebook fans valuable?” 

A Facebook fan has one primary value in the absence of activation by brands, and that is for risk mitigation, but even that value is made greater when brands foster stronger relationships with engaged fans.  (Self-promotion alert:  Watch for my new Forrester report on the ROI of social media marketing, due out within weeks.  Risk mitigation is one perspective discussed and, when combined with other measurement approaches conveyed in the report, should assist marketers to assess the value they create with their social media efforts on Facebook and in other social venues.)

What do you think?  Have you found easy ways to value your fans on Facebook?  Or is real value only created when you unleash the potential value of fans via programs, interaction, information and other sorts of engagement?

Comments

Finally, someone who will

Finally, someone who will admit that we don't know.
Isn't that the real answer?
There is no absolute way to quantify the value of fans.
Similar to the way it has always been with marketing in general.
We can look at before and after, and say "I made X before and now with marketing spend I make 2X therefore..." But so many factors come into the equation (morale, luck, markets, greater effort etc...) that isolating a single factor is very difficult. The goal should be to evaluate from a qualitative perspective, do you feel good about it? Informally are people talking about it? Do you think you are getting WOM? You can test it with coupons/specials, but at the end of the day, putting a dollar amount on a fan is a marketer's effort to sell to clients.

Thanks Joey

I know it would make it very easy for marketers if we could say that a Facebook fan is worth something. That way a marketer could say, "We invested $Y and returned $X" merely my multiplying the number of fans times some value. But you and I are in agreement, the value of fans is assessed based on what you do with them. Thanks for the comment!

Drop 'm! ;-)

I knew Facebook fans' value would be revealed by dropping them ;-)

Great post Augie, amidst the hype and nonsense and wild suggestimations
You're very right of course, there are no Facebook fans - the only thing that unites those is Facebook itself. Compare it with baseball or soccer: they don't exist unless it's about baseball versus soccer. If it's about baseball, it's about Red Sox, Mets, Yankees

Faceboos fans are just people. The real value is in the persons that can successfully engage with them and make money out of that. And all they have to do to show that, is prove it. How can the same person be worth $5 on Facebook and $1 or $10 on Twitter, and $Whatever IRL? Ridiculous

Variable value

Your point about someone being worth different dollar amounts on Facebook versus Twitter is interesting. For me, the idea that a person has a value applicable in every situation for every brand just seems patently ridiculous.

With tongue firmly implanted in cheek, I agree with your suggestion--one way to know the value of fans is to drop them all. That way you can tell what value you've lost!

Well done on the analogy

Well done on the analogy about Facebook fans being potential energy until a clever introduction makes them kinetic energy.

I agree that it is nearly impossible to peg an exact value on a FB fan. I think that in time, when more patterns emerge and advanced metrics help track and aggregate clickstreams (I.e., did they Like the link for Farmville bucks or because they really like it) then we will be closer to valuing the average fan. Although to run a true test, we would need a vacuum.

Thanks for the post!
@emilybinder

Real versus potential value

Thanks Emily. I wonder if the concept of real versus potential value deserves more attention. We have this nasty habit in business of thinking something only has value if an immediate dollar sign is attached to it, but potential value is very real (just like potential energy is in physics.) If I buy a fire extinguisher, it probably has no value to me until my kitchen in ablaze; then the $100 investment becomes worth tens of thousands of dollars!

Less Risk, Greater Value

As a contrarian, I believe it is possible to have a generic approach to calculate the value of a group of Facebook fans. It depends on the organization's ability to generated recurring, predictable value either in the form of increased spend or decreased operating costs by shifting touches in more expensive channels to less expensive avenues. The better-defined the value calculation, the more predictable the revenue effect, the less reliant on hocus-pocus or a few highly-skilled experts, the greater the overall engagement relative to competitive brands, the higher the value of the fan. If you don't understand how your brand interacts with consumers at key occasions, you're more likely to think of social media as some elaborate scam that will always defy measurement.

In theory I agree...

Brian, in theory I agree with you, but the idea of generating "recurring, predictable value" is simply impossible, in my opinion. Brands change, programs and promotions change, perception change and people change. In the end, brands can find ways to say "last quarter we derived this much value from our Facebook fans", but can they repeat that value each and every quarter? It reminds me of the legal wording in financial prospectuses: "past performance is not indicative of future results."

ISO "recurring, predictable value"

This cuts to the heart of the scalability issues that companies face with social media: can they scale?

Cable television subscriber value, once thought unknowable because of the variance in subscription fees, number of channels per local headend, different regions, uneven adoption of PPV, etc., went from being abstract to $2,000/subscriber once there was the political will to demonstrate what *was* recurring and predictable.

Scott Monty of Ford was able to "prove" valuation internally based on the percentage of contacts that shifted away from more expensive call centers towards Twitter. I suspect Barry Judge and Tracy Benson of Best Buy were able to demonstrate the value of Twelpforce because of improved conversion rates. In both cases the organizations had already embraced data, and the ability to compare YoY results, among other metrics, enabled them to recognize that there was some kind of lift from social media.

To my way of thinking, social media is an extension of Six Sigma: every day is another chance to get things right. "Recurring and predictable" is what separates a four sigma from a six sigma.

Great points

Great points, Brian, and in the end I suspect we are closer in thought than we are apart. The things you discuss--what Ford did with call center savings or how Best Buy impacted conversion--are direct and measurable outcomes of the investments Ford and Best Buy made in social media. I'd still suggest that it isn't the fans that have value however--it is what organizations do with their fans that creates measurable value.

Framed another way: The fact someone "liked" Ford didn't diminish call volume. Ford only got value because they were present, had staff listening, invested in tools so consumers could engage with each other, etc. I'm certainly not arguing against social media providing demonstrable value; I just think efforts to place a dollar value on Facebook Fans are more an interesting discussion topic than they are useful marketing ROI tool.

Ridiculous. If a prospect is

Ridiculous. If a prospect is worth zero, a qualified "liking" prospect cannot also be worth zero. I see your point, but I think this is one of those headlines that steps over the bounds of accuracy to get more attention. I've done it myself, as a blogger ;-)

You can say it's zero. But you don't know. And the value of the average fan is based on what the average company does with them, not the company that does nothing. And even companies doing this well know that the analytics are limited by the cookie and length of sales cycle.

The other problem with this approach is that it make keep people from building their fan base because they don't have a sales/monetization/upsell strategy yet. That kind of hesitation has already put a number of companies behind the curve. I'm seeing Facebook momentum in some industries that has effectively put laggards out of the game. And the monetization models are working and companies with big FB pages are making good money. All the stories about what's really working have not been covered or blogged about yet.

Fans are worth something more than zero

Okay, we can agree a fan is an asset. But the exercise of valuing that asset is what strikes me as ridiculous. If a brand does nothing with their fans, it's possible the value might be negative and not zero--it leaves fans wondering if the brand cares. But if a brand does smart things with their fans, there can be tremendous value.

I suspect we agree with this, but the point I was trying to make (despite the sensational headline) was that value is created by what we do with fans and not merely that we have fans.

$0 vs. $240M?

Great insight Augie. We don't hear enough sound marketing logic being applied to this crazy new world of ours. I had a similar thought in reading the recent analysis of RIMs FB fans ($240M).
So much of a proper valuation depends on an accurate projection of the future:
- How much is the lifetime value of this customer
- How will their relationship with me change as a result of this facebook engagement
- ...and adding more complexity, how will the facebook platform change in the coming years that will allow me to make this engagement easier, harder, or impossible?

Coming up with these assumptions will continue to be a unique challenge for every brand. Starting from zero, and finding value that can be projected with confident assumptions makes sense.

LTV of a fan?

One of the concerns I have about Lifetime Value calculations of Facebook fans is the cause and effect question. A customer has lifetime value, but is that value increased when they become a fan? Or should their entire LTV be attributed to the Facebook group?

In the end, I think the best way to assess your social media investments isn't to worry about their value as an asset but instead what value is produced from that asset. Using a lot of assumptions, we may come up with an asset value, but if we don't produce and measure results, that valuation doesn't do us much good. (What good is a $1M plot of land if we let it go fallow and don't use it in any way?)

Eh, Zero?

Great post! In full agreement that a standard monetary value is problematic and the reasons you list are spot on.

But I'm not totally sure I agree that a Facebook fan = zero. A fan is a consumer who has indicated they 'Like' your brand and are open to receiving your messaging. There's value to that access. There are businesses built on selling access to potential value.

How much would you pay to reach an opt-in potential or existing customer with your message? I think media value is where the $3.60 came from, and it's for sure a rudimentary methodology and it's not THE value, but it is a simple way to discover SOME value and that's an ok place to start in my opinion.

I'm not saying it's smart to equate social media with traditional media over the long run, it's certainly not, but if you're a marketer trying to sell your social media strategy up the ladder, and media value is the shortcut way to put things in perspective, speaking in those terms might be your best bet to get things rolling.

I agree to a point

I think there's a difference between potential value and realized value.

"A fan is a consumer who has indicated they 'Like' your brand and are open to receiving your messaging." Agreed--but sending that message has a cost and creates a return. If the brand fails to send messages or engage with their fan in any way, then the fan doesn't really have value, does it?

Little to no real value is created by a fan "liking" a brand; but potential value is certainly created. Whether or not a brand realizes any value requires them to take action, engage, create content, share offers, etc.

I don't mean to be splitting hairs, but there's a serious message here for marketers. The goal cannot be merely to acquire the largest Facebook fan group. That, in and of itself, provides no measurable REAL value (although it may represent substantial POTENTIAL value). To demonstrate value, you can't assign a dollar amount to each fan but instead need to execute plans and programs that create measurable value within your fan base.

Does that make sense? Or do you feel the difference between real and potential values are insignificant?

Thanks for the dialog!

Finkle is Einhorn

Hi Augie thanks for responding!

Agree completely and have learned a lot from your post and the resulting dialogue. Potential and realized value are two different things, but I think the lines are crossed. To the point made earlier by @briancarter "the value of the average fan is based on what the average company does with them, not the company that does nothing." So we're speaking the same language, just differing on the technicality. I'm in agreement with brian that the potential value doesn't really apply because any company investing in the effort will almost certainly realize its potential value.

Nice post

I have had a couple of discussions around this topic, and agree with most of what you say. I do think that you can not say that you approach it as zero though, as others have pointed out, they do have value, you just don't know what it is and there is no formula to figure out. Not to mention that the formula would vary depending on your business and your goals.

But as with everything, marketers and other departments are looking for hard #'s to validate any initiatives. I understand what they are trying to do, but at the same time frown when such initiatives are put on hold because there are no true definitions and because numbers such as the ones that you have posted vary so much. It will be interesting to see how much further these discussions happen though.

Mike

Thanks, Mike

I appreciate the input!

Love the "potential energy" analogy

This post has raised a point that many social media marketers ignore. Clients want to get more fans, more followers - go from 100 to 1000 they say: but they don't know why. Your analogy will be a great way to explain that it is better to have 20 fans that are actively engaged in the brand than 2000 that are passive and just 'there'.

Now I'd love to see a post on different ways to convert from potential energy to actualized 'kinetic' (in this metaphor) energy.

Potential Energy

In business we have the tendency only to see value when a dollar sign is attached to it, but potential value is a very real thing. Growing a Facebook fan page from 100 to 1000 fans is a good thing, but you can't put it on a balance sheet nor does it deliver revenue! The only time those extra 900 fans will drive demonstrable business value is when the company does something with those fans and converts their affinity into action.

Glad you enjoyed the blog post.

Good perspective

Augie - thanks for telling it straight. I lost my cherub-like demeanor on this topic twice, http://bit.ly/9NHqWP and http://bit.ly/bL4b4i. The situation becomes even more confused when we talk about reputation impact instead of marketing (which may have a more direct causal link, esp in a direct sales strategy).

@Shonali Burke just wrote on this, citing you for inspiration -- my comment there touches on the harm these BS calculations do to the concept of measurement. Many people believe you can't measure the impact of any type of communication outside of direct sales support, and poorly thought-out, assumption-laden tomfoolery doesn't help our cause.

What if the only value Facebook fandom has is on perception of value? Fan activity may suggest a sense of value or being valued that improves reputation... Fans grown organically get some sense of well-being from identifying publicly with a brand, and the cost of generating that identification on FB is likely lower than through other means...

This topic requires serious, unbiased research, and how.

Cheers -
Sean
@commammo

Bad metrics are worse than no metrics

On the one hand, I think the efforts to value Facebook fans are good because they strike up dialog (such as this one.) On the other hand, I also agree with you that they hurt the cause of true measurement.

Let's say a company chose to act on the knowledge that someone says a fan is worth $3.60. That would mean that they can invest in acquiring fans at $3.50 apiece. If said company invests $3.5M to acquire 1M fans, will the CEO and CFO be content with the marketing department saying, "each fan is worth $3.60 so we delivered 3% ROI"? Or will they expect true business value to be proven?

So, I'm with you--let's focus on measuring what we DO with our fans. That is the value our C Suite and shareholders expect!

Thanks Augie

You've nailed my thinking here. The FB fan value debate cheapens our work -- even if, as Paul Broft says in the comments, the specific numbers matter less than the variables. You know that businesses will do exactly as you write here!

Take care,
sean

Augie - As Sean mentioned,

Augie -

As Sean mentioned, your post was so thought-provoking that I did write a follow-up post on "value" as "WIIFM." The only reason I didn't comment here prior was that I didn't see the value (sic) to you or me in doing a "hell yea!" comment without anything else to add... and as I thought more about it, it seemed to need a whole post of its own - so that's what happened.

What is most frightening to me - and I don't use that word lightly - is that these calculators, valuations, etc., will be jumped upon by those looking for a quick fix and who either don't have the time to do their research into what constitutes good measurement, or are so swayed by social media "gurus" that they take their word as gospel truth, and perpetuate the myth.

I recently read Dave Cullen's excellent "Columbine." It's a riveting retelling of the horror of that massacre, and one of the threads in the book is of how one of the girls murdered was (wrongly) portrayed as dying for her beliefs. No matter who tried to correct this impression, however gingerly, they couldn't do it - because the myth had taken hold.

That's what I don't want to see happen with social media measurement or, for that matter, any form of PR/communication measurement.

Thank you again for an extremely timely and thought-provoking post.

Fan Valuation

Worrying/obsessing over the exact suggested numbers in the calculation is missing the point. The point of such a fan valuation methodology is to surface the relevant variables to then have your own unique discussions to assess your own company's specific Facebook strategy and related media and technology budget.

Missing the point?

Paul -- when the numbers are made up of whole cloth (see Vitrue's $10), how can there be any utility to the method? You don't need a dollar fan value to have a conversation about the strategy you're using. Have the discussion and dispense with the artificial, nonsensical, BS calculations. We don't even know if the variables are relevant, correct or useful.

Procter & Gamble has redirected a ton of money away from advertising to social media . You can bet they've quantified the value expectations, and they may even have a calculator to help them strategize -- you can bet that none of those variables are pulled out of thin air.

Augie, First YAY! to not

Augie, First YAY! to not requiring an account to login for commenting. Second, like the straight talk even with the "attention grabbing headline." It's a commonly used story about what's more important: 200 rabid, diehard loyalists or 2K faux fans just lurking, never engaging or sharing? Most would take the 200.

The contrarians make good points, that the value of the asset isn't Zero; that it will very per organization, asset, fan, campaign, weather patterns and possibly Lady Gaga's next ensemble. ;-) People like Sean are right that serious, unbiased research is needed to really answer this question.

For companies considering asking "what's a lead, a fan really worth?" perhaps the first thing to look at is what else they're doing vis a vis being where there customers are. Are the buyers even on FB? How much time and energy and resources are spent on old ways vs. new ways? Is it worth it to be ahead of the curve vs. the competition? Again with the variables and no "one size fits all" magic formula. I'll be watching out for one, when you find it. FWIW.

Lady Gaga

You've given me my next report topic: "Lady Gaga: How she improves your marketing ROI." :)

Nice One

Augie,

I loved this post. As a Social Media marketer, I actually have your back on this one. I think there are a lot of people out there who are counting fans, followers and friends as if they are money in the bank. That's not how social media works. Those "numbers" are really people, and the value lies in the potential to build positive, lasting relationships that will build customer loyalty.

A Social Media presence does not give you direct access to your friends' bank accounts.

Thanks Nate

Appreciate the input. If retweets, followers and comments were money in the bank, I think I'd be a rich man after this blog post! :)

Perhaps I wasn't clear

Sean-

Exactly my point. P&G obviously used variables to figure out what was appropriate to spend on Facebook. Kudos to P&G. Definitely thought leaders. The great purpose of the Fan Valuation was less about creating an ABSOLUTE rule of thumb for the value of a Facebook fan for ALL brands, but more to surface the relevant variables and offer some reasoning for how to arrive at an educated estimate for such a value. I never suggested to "make up whole cloth" anything, nor did I suggest to "pull anything out of thin air"...actually just the opposite...I'm suggesting to worry less about an ABSOLUTE Fan Value for every company/industry/etc, but more to focus on the variables that are to be considered (as surfaced by the original Vitrue Fan Valuation) and determine what makes sense for your brand specifically, based on your brand's own unique relevant characteristics. Certainly one should be as precise as possible for your own specific variables and resulting fan value calculation, but just don't obsess over being so critical about a global rule of thumb fan value....that would be missing the point. Vitrue's point was less about saying that $3.60 was the absolute end all be all fan value, but more about putting a stake in the ground and setting the stage for individual brand marketers to toggle the variables for themselves to come up with their own unique spin.

Understand...

Hi Paul - We know how people read things like the Vitrue piece, or the Syncapse piece. They seize on a bite and chew on it -- subtlety isn't a long suite in social media. I've got no beef with anyone saying, "here are a series of important variables to consider when trying to figure out what to do with social media (or PR, or internal comms, or CSR). My criticism of Vitrue was that it relied so entirely on conjecture in its illustration -- which, by the way, got them a heck of a lot of coverage. I think that was their objective, get coverage to support their sales strategy. No problem, except that the science was not science. Hence, I'm not obsessing about the exact numbers, I'm objecting to the reliance on made-up stuff. A lot of people won't do anything but use $3.60 per fan, run the multiplication and send it to the C-Suite. It's every bit the folderol as ad value equivalency, only not as well thought out.

Best -- thanks for an interesting discussion.
Sean

Thank you for speaking the gospel

Not everyone wants to hear the truth, but you've nailed it on the head. The studies to date on the value of a fan are meaningless. I've wanted someone to write this post for months. What's the value of a click? Or an email address? or a mobile number? There is no inherent value, only potential value.

Brands who were in an arms race to build Facebook fans will eventually realize value in the following they've created, but that value will come through effective use of the channel they've established. This requires a coherent strategy, integrated tools, appropriate measurement, and regular optimization, just as it does for marketers who purchase ads on Google or send emails to subscribers.

Thank you Augie!

-Kevin Barenblat, Context Optional

value of FB fans

The answer in the case of Nestlé and certain other corporates may be a *negative* value, judging by a quick look at some of the comments in response to their latest "more good news from Nestlé" post ("Nestlé invests CHF 150 million in the Equatorial African Region"). And they have more than 107,000 fans. Or should that be "fans"?

A "Like" doesn't mean "I like," does it?

Kevin, you raise a great point--many people who click "Like" to become a fan are not really expressing that they really like the brand, are they?

That said, I think Nestle is demonstrating how brands need to work with consumers in the social media era. No big multi-national company is going to escape some level of criticism--as the protests at the G20 demonstrate, someone somewhere is going to be against something every big company does. And if you look at the comments being posted to the "Nestlé invests in Equatorial Africa" post, there are more folks thanking Nestle for their efforts than there are "F*** you, Nestle" posts.

In fact, the negative posters are encouraging people to respond in positive fashion. So, if you think about it, since those negative folks weren't going to purchase Nestle products anyway, their actions are simply causing those who have affinity for Nestle to speak up and act.

And in Nestle's case, what's the option? Deleting their Facebook account? Not engaging with consumers? As one marketing leader just told me yesterday, "Social Media is now just another cost of doing business." I don't really believe social media is a cost and not a benefit, but today what brand has the luxury of ignoring social media (except, perhaps, Apple).

But, your point is well taken--no one can simply put a dollar value on each follower. Each is too unique--different motivations, different relationships with the brand, different social graphs, different POVs. In the end, it is only the value that brands can derive from their fans that matter.

"It is what companies do with

"It is what companies do with fans that creates value, not merely that a brand has fans."

Well put.

What is the value of a Facebook Fan?

Excellent discussion here Augie. The value we put on our fans and "likers" on Facebook is around engagement and how they interact with our brand. For us, the purpose of the engagement is to be of service -- provide valuable information, help people get more out of Monster, even point them to specific opportunities. This notion of engagement as a service is important (plug: we’ll be blogging on this topic on our MonsterThinking Blog soon, stay tuned).

It's always been about the quality vs. quantity for us, and how folks respond to the content and the conversation we bring to them. It doesn't do us any good if we have one million fans or followers, and only a few hundred are interacting with us. Our metrics show us our Facebook engagement leads to traffic to our site and even more important to us, a way to build good will for our brand. Our Facebook community is very active but we work hard at building that community with a reason for them to be there. Without good content, there is no engagement. And without engagement, there is no social. But long before determining return on involvement (ROI), we had 3 things in place: a content strategy, a definition of what success meant to us, and the ability to accurately track and measure that success.

Thanks again for the interesting conversation. We look forward to reading your upcoming report on the ROI of social media marketing.

-- Kathy O'Reilly, Monster.com
@kathyoreilly @monsterww
www.facebook.com/monsterww

Very helpful!

Kathy,

Thanks for joining the conversation. I loved this part of your reply:

Without good content, there is no engagement. And without engagement, there is no social. But long before determining return on involvement (ROI), we had 3 things in place: a content strategy, a definition of what success meant to us, and the ability to accurately track and measure that success.

Always good to hear about brands doing it right!

I've also wondered those

I've also wondered those question too. I agree all fans are not equal. Quite often I am seeing engagement from the same fans. It's like the old saying, "if a tree falls in the forest and no one is around, does it make a sound?". Same with fans. If you have fan that is not engaged, do they have any value or are they even a fan?

facebook fans

The best I can tell having a facebook page and fans is pretty much a popularity contest. At last count I know over 50 people/businesses who've built fan pages on facebook, but haven't received any new business as a result. Although all their friends who love their work are constantly giving them on-line praise. I guess having fans isn't so bad after all.

No new business or simply can't connect the dots?

Eli,

There certainly are aspects of Facebook Fan pages that are popularity contests. At the same time, I know of plenty of brands that have generated value with their efforts on Facebook. The challenge for the folks you mentioned may be NOT that they got no new business but that connecting their Facebook efforts to actual sales is so difficult. That's why the Forrester report that will be published on 7/19 recommends a broad approach to measuring value in social media marketing.

Thanks for the input!

This is an interesting

This is an interesting perspective. While it's true marketers cannot put a dollar value on Facebook fans, I do not agree that their value is "zero." ROI is on the minds of many, and it is a concern for companies. However, I agree that Facebook Fans have "potential energy" - companies need to focus on how to turn that potential energy into kinetic energy and see fans as a building block to continued success. Like others have said, the number of fans one has is not indicative of much; it's how companies engage and build relationships that matters. It's good to have that mindset when engaging with others on Facebook, Twitter, or any other social media forum.

Facebook Fan Value

Excellent blog post! The same goes for twitter followers and Linkedin connections. You know there is a valuable relationship there when you have put in the effort and then ask for something/sell something and they buy.
cheers
Michael

I think I understand Physics now :)

"It is what companies do with fans that creates value, not merely that a brand has fans."

Agree 99%. The 1% I'd throw in is that if part of a company's biz goals are to build awareness, that should be factored into the value of a fan and increasing that fan number should be a metric that's tracked. Not the only metric, but a metric. A brand has to generate awareness first to move customers toward the outputs they are seeking -- sales, feedback, promotion, donation, etc.

I also think there is merit in your risk mitigation argument. I like to call it building goodwill. You have to have fans in order to build this goodwill, which could come in handy during a crisis and mitigate risk. But a brand could also completely ignore fans, as it could with e-mails, and then the number of fans, likes or whatever Facebook changes it to tomorrow means very little.

Thanks for making us think, Augie.

99% agree

Thanks Justin. I 99% agree with your 99% argument about building awareness. Thanks for joining the conversation.

The value of a fan

Hi Augie, agreed with your blog post. I'd like to add though this same concept can be applied to anything in business. What is the value of a brochure? Zero. What is the value of your telemarketers? Zero. What is the value of an event that a company puts on? Zero.

I find more and more people just simply don't care, and also with the challenges in the economy don't have the resources to experiment. In a given day, we spend far too much time on a computer trying to process things that are of zero value, then we do sitting with a person in front of them creating value.

People want to do business with their friends, with experts and people that care about their business. Get off the computer and get in front of people and make a real difference. Listen on social media and take action for real results. For example, if you were listening to one of your customers, and you were so engaged with your client that you even listened to the receptionist. Maybe one day she was having a bad day, and you sent her some flowers with a note to cheer up, and that she does a great job.

It is meaningful, doesn't cost anything really and you made a difference. The fact that people don't see the value in doing something easy, sincere, and personal blows me away on a daily basis.

Think about the people in large companies who have lunch in the lunch room and never talk with their peers and simply go back to work. So crazy, this era of our economy there is such tremendous waste of human capital. It was not just a recession in financial terms, it is one of massive losses of human capital and potential that are being wasted.

Let's do better!

Real versus Social worlds

Thanks James.

If I understand the point you're making, I'm not sure I agree. I don't see the issue as being one of real world versus social media world (although I wholeheartedly agree that physical real-world contact can't be replaced!) Instead, I think the issue is how we can bring more of that authentic, human contact into social media where brands can touch so many folks in the medium of their preference.

To put it another way, no one asks the ROI of having lunch with a peer--they recognize the value (personal and business) of building that relationship. Business must concentrate on delivering value in social media, so I'm not suggesting we turn a blind eye to costs, risks and return in social media marketing, but I do believe that just like dedicating time to lunching with someone, the true benefits realized in social media can only be measured broadly--short- and long-term, financial and not, quantitative and qualitative.

Commnet: Re:Real versus Social worlds

We are on the same page. But I'd like to counter though..."Business must concentrate on delivering value in social media"...I believe that in business your value is reflected through social media since most actions on social media are an after an experience has happened with a brand. Some are not though, but the majority of interactions on social media happen after some sort of experience.

Did you have a great experience with that restaurant? If you did, then you might be more apt to follow their feeds and experiences. And as the restaurant if you are on your game you are going to follow and engage your regulars through that medium.

My friend Shane Gibson who co-wrote a book called Sociable said it best.."You must be where your customer are.." he goes on to talk about strategic engagement and exactly the stuff we are talking about value here. Since if your customers are on twitter or Facebook then your business should be there delivering value.

And that discussion we had earlier about well...what is value? You talked about a Facebook fan's value being zero, and that is usually the result of not having created a relationship through that medium.

If you created a relationship through that medium, and you connected with that person and deliver value then perhaps it should equate the same value however you decide your customer transacts with you.

But I really worry about the day that social media is connected to a CRM. CRM is useless for most companies, and if not done right will tremendously impact the experience and opportunity that social media channels can bring.

Risks on both sides of the valuation coin

I think the gist here -- that there's no specific, generalizable Fan Value Multiplier that can be applied across industries and across companies -- is pretty much spot on.

What's the Value of a Facebook fan? What's the value of a customer? There's no generalized answer to either question, but we intuitively know the value of a customer is >$0. Eventually we'll also intuitively know that the value of a Facebook fan is > $0.

But I think there are risks on both sides of the "a Facebook fan is worth $0 / a Facebook fan is worth $136.38" generalization game.

There's a risk on the $0 side that people who aren't really paying attention will take away the message that "there is NO value at all in a Facebook fan" or will take away the message that "there is no way at all to determine the value of a Facebook follower to my brand".

Both messages are wrong.

The value of the $136.38 side is not that it sets an absolute value on a fan, but that it helps to establish a methodology for establishing the value of a fan to MY brand and that it starts to establish some benchmarks. If I'm Burger King and I know from the published research that McDonalds is getting $136.38 of value from each fan and I'm only getting $26.99 (using the same valuation methodology), then I know I'm doing something wrong.