Value per Facebook Fan: A Smart Metric?

I came across this interesting article on Mashable, on the Cost per Like (or Fan) on Facebook and how to valuate it. It’s interesting because nobody has a real answer yet, so discovering what might add insight is intriguing. Read further for my comments on the article and contents.

Lauren Indvik wrote the article “Cost Per Like: A Subjective Valuation of Your Facebook Fans” on Mashable. First of all she begins with explaining the definition of Cost per Like:

“Cost per Like refers to the cost of acquiring a new fan for a Facebook page, either through paid advertisements or, less directly, through earned media efforts.”

Next she describes the three way to “buy” Likes:

  • Through “cost per thousand impressions” (CPM). Advertisers bid to target a group of desired users, and pay every time their ad is seen by a thousand of those users.
  • Second option is “cost per click” (CPC) campaigns, wherein advertisers pay every time their ad for their Facebook Page is clicked on.
  • Third option is the lately unveiled new metric: Cost per Action.

What intrigues me the most in this article is the question Indvik asks, namely, it’s probably nice to have lots of fans, but how much are they really worth?

According to “social media marketing agency Syncapse and research firm Hotspex conducted a study that attempted to assess the average value of a fan based on collective product spending, brand loyalty, propensity to recommend, media value, cost of acquisition and brand affinity. According to their calculations, a fan is worth an average of $174 to a company. But as the chart below shows, the value of a fan can differ widely across companies:”

Focus on fans or engagement?

What I question is the following remark by Marc Grabowski, COO of Facebook ad-buying firm Nanigans in the article, saying that “Facebook fans are valuable: by becoming fans, consumers are saying that they want to know more about your brand, and are giving you permission to communicate with them, so long as that communication continues to interest them.”

This kind of opt-in is great but to be honest, if I would compare it with email marketing for instance, a nopt-in doesn’t say much. Becoming a fan is a one-off action, I am also fan of a couple of Facebook pages of brands, but do I really give their communication attention to all their engagement? It’s like with opting-in for newsletters, I do for many sites, but do I read all the newsletters? NO.

The value per Fan is therefore not a metric I would choose for, eventhough I think it’s good to compare fans versus non-fans behavior.

Indeed, depending on your business objectives, determine if Facebook is the right way to achieve this in a cost-effective way.

What would I measure?

I would look at the percentage of the fans that is actively talking about the brand. Next to this perhaps indeed, to try and be able to create this monetary equation, look at the cost per action of engagements.

Facebook (fans) is a channel, trying to ROI a channel is like trying to ROI a telephone line, it doesn’t tell you much about what types of communication, content, engagement is driving the results that you seek.

There are so many “become a Fan and win an iPad” type of contests, that really, the amount of Fans and calculating the value per Fan is a distracting excersition.

Choose your metrics wisely, because “Organizations become their metrics,” as mentioned by HBR.