Vitrue, a social media marketing firm founded in 2006, snagged an AdWeek article this week when it announced that it had caculated the value of Facebook fans. It’s $3.60 per fan. What’s behind the valuation? A rash of assumptions, according to a piece on the company’s Web site.
Why do I think this is wrong? Let me count the ways:
- Their data is proprietary. The company says it manages 45 million fans and drew the data from a sampling across industries, but they don’t specify the amount of the sample, the specific firms involved or any other information that might provide clarity as to the methodology. No one can cross-check the data.
- They make several assumptions: They say they looked at the ratio between wall posts and number of fans — asking how many fans have the potential to see a post. This is similar to using circulation in a print pub. Fine. But unlike circulation (audited) or even Nielsen Ratings, we’re assuming that all fans have an equal opportunity to see, and we’re assuming that a wall post is equivalent to an ad. Then, they say that multiple posts have equivalent impressions — two per day totals 60 million impressions on a one million fan page.
- They then say that these impressions are free, “similar to earned media.” But we know earned media is not free — someone had to do some work to make it happen. This is one of the insidious problems with ad value equivalency — there certainly are costs associated with generating earned media, and they must be accounted for.
- Next assumption, cost per thousand impressions. They settle on $5 CPM, based on nothing — wouldn’t this number depend on the specific outlet? How about some science instead of conjecture? Multiply it out using their figures and it totals $300,000 in monthly value for the two post-a-day million fan page. They show it like this:
1M impressions x 2 posts x 30 days = 60M impressions >>> 60M impressions / 1000 x $5 CPM = $300,000
But what I believe is most egregious is the idea that engagement on Facebook is really just a game of increasing advertising impressions. This is totally contrary to how social media is designed to work. It’s push-focused instead of relationship-focused. It’s shouting from the rooftops instead of talking to your neighbors.
Look, everyone has to make a living — advertisers are pretty comfortable in their “metrics every marketer is familiar with,” as Vitrue’s article says. But marketers need to wake up — measure something meaningful! I don’t know, but perhaps the fans are actually doing something that increases their intent to purchase? That improves their understanding of the product? That makes them have a more favorable attitude toward the company? That they bought something?
Surely any of those is a better metric than one based on made-up numbers, bad methodology, weak assumptions and false equivalencies.
Harrumph.
Tags: communication methods, communication vehicles, effective communication, Facebook, measurement, PR measurement, reputation management, Research, Social Media
Sean -
YES! Outcomes outcomes outcomes!
Sean,
I spotted the same article but I stopped at the “wonder and dismiss stage” rather than probing further. The day may come when Facebook will be monetized but since there is no commonly accepted currency, there can be no CPM or ad value (and that’s assuming that ad value is a proper measure to begin with).
Thanks for diving deeper and calling our attention to an important issue.
Shonali and Mark – thanks for stopping by.
This all drives me nuts – as much as I want there to be a dollar figure for all this social media stuff, unless it’s direct sales, there isn’t one yet. That should be OK, because it’s new! But, there is SO much bad science and self-interested research, it’s just junk. Crap!
Sean, I think you hit the nail on the head when you say “It’s push-focused instead of relationship-focused. It’s shouting from the rooftops instead of talking to your neighbors.” To this end I agree wholeheartedly with Mark that at the moment there is no CPM or ad value.
Craig, thanks for the comment, and the RT! This is a subject that needs more due diligence!
Cheers for now.
So what is the answer? I agree with both sides, what would a fair CPM be for FB? There is value in fans. If we delete the fans that ignore after a while, then the ones that don’t pay attention what are we left with?
A retailer like Starbucks will no doubt have a much lower CPM and added value than say our company Sleepy’s. Coffee is purchased every day but a mattress is every 7-10 years. It does make sense that the more fans you have the more added value impressions you get.
Greg
Hi Greg – thanks for the question. That’s THE question!
We believe there is value in fans – and for certain types of companies, we could determine revenue per fan (we’d need a direct sales situation). We know that consistent communications with prospects tends to lead to conversion, but we don’t yet know whether Facebook fans equate to actual prospects. Not too much unbiased research is out there. We need to know the impact of fandom on awareness (we can guess it improves it), disposition (we assume people won’t become fans of brands they don’t like), intent to purchase (not just an assumption, but some type of repeatable formula to determine how many active fans translate into how much improvement in intent to purchase), and finally, actual sales. Then we need to pull out other influences to that purchase decision, net out the cost of doing all of that, and we’ll finally know what the ROI is on Facebook fans.
We also need to keep in mind the various biases that can influence research respondents — this is not an easy thing.
My beef is the casual way that Vitrue assumes their way to a value calculation.
To answer another of your questions more directly, I believe that arriving at a “fair CPM” depends on too many factors that vary with subject company and target audience. It’s not going to be that easy, doggone it!
Lastly — we also could debate, as @KDPaine has many times, that CPM and awareness numbers are the totally wrong answer in social media. Even measuring the extent of involvement or activity is fraught, because we don’t make it all the way down to outcomes. Advertising lives on potential — and we need to ask the questions about whether it is the end-all and be-all of marketing.
Thanks again for your comments.
Thanks for the response, It really is a three card Monte. I have a feeling that by the time we DO figure this all out? The next best thing will be banging on the web door and all of us will be asking, how do we measure this thing? LOL.
Greg.
Greg Longmuir
Director, Sales and Online Marketing
Sleepy’s the Mattress Professionals.
LOL indeed, Greg! Persevere…
Cheers for now.
Hey Sean, I agree with the critics argument that you can’t measure the worth of a fan on “impression” (Since everyone can hide a certain feed). For me as publisher every fan definitely has its worth. I calculated the CTR of every “Fan” and summed up for how many AdImpressions the Fans coming from Facebook account for. For my website every Fan is worth around 0.8$ (at a CPM of 45$ and an average CTR of 3.6 clicks per fan per month). Taken the CPM of Vitrue…every Fan would be worth around 0.1$. So I suppose every Fan has it’s worth, but it depends on what your situation and what you want to achieve with a Facebook Fanpage.
http://www.social-brand-value.com/2010/04/14/putting-a-value-on-your-facebook-fanpag/
Hi Daniel – thanks for the comment. In looking at your post, I see where you’re going with this.
First, you illustrate very well one of my main points: trying to establish a universal formula for these matters is likely impossible. Driving traffic to a site (one assumes) is about more than gaining ad impressions for potential advertisers. But as a publisher, if you were advertising-supported, this would be a logical way to monetize your Facebook fans — you’re gaining logical data.
However, if you’re not a publisher, or not ad-supported, the data doesn’t help you. If you try to use this same formula, you’re making all content equivalent to advertising (problem!)
I will object to your use of assuming CPM – you have to use actual numbers — what you are charging for ads — for the Fan value to be real. You also might benefit from changing what you are calling AdImpressions — they’re visits, right? Number of unique visitors, time on page, views per visit: all of these are good, solid data. You might want to read Seth Duncan’s paper (it may be a lot of review for you), which in its second half, delves deeply into the relationship between web traffic and various intermediate outcomes (sometimes called outtakes).
http://www.instituteforpr.org/research_single/web_analytics_a_methodological_approach/
Thanks again for your comment…
Hey Sean,
Thanks a ton for the link you sent me. I can use it great as reference for my thesis and for the literature review.
To your points:
1. Well yeah, I see the problem of the comparison of ad-supported websites with not ad-supported websites. Now, if I’d take a non ad-supported website, like coca cola, the traffic I generate with Facebook, I would not have to pay as advertising to an other publisher (opportunity cost calculation). Yes, I’m making all content equivalent to advertising (It’s the only way to calculate a real number – As you said: Fan Value is Poppycock). I suppose tough you’d at least have a lower-limit with this number, since a Facebook fanpage generates emotional attachment and all the good things all of the social media marketers are talking about.
2. Well, for us as publisher every CPM is different (especially I think here in Switzerland we have very high rates). I just went ahead and assumed something (To give you a hard number our average CPM is about 30CHF, which is around 26$) . Of course every advertiser would have to take his own CPM he pays to publishers, to check what a Facebook Fan is worth.
So in the end you are right. You can’t measure the value of a Facebook fan but at least you can set a lower-limit and evaluate if it is more beneficial to display advertising on a secondary website or create a Facebook page and have the lower-limit + not measurable value.
I posted an article by the way, that says that marketers don’t believe that social media boost revenue (http://www.social-brand-value.com/2010/04/23/does-social-media-enhance-your-roi/)
To Ad Impression: I just looked it up and the term is obviously only used over here in the German speaking parts ( weird!, since the term is in English). Would have to check what it is in English.
Thanks again for your link and the comment…would be great to hear what you think!
Cheers
Daniel
After my last post, I did some thinking,
Lets not think in terms of ROI or CPM, reading through and being involved in Social Media I do know that there are generally 2 kinds of marketers, Those who believe in “frequency” and those who believe in GRP. Social media (I’ll use FB for now) as I see is SOV (share of voice) of both! Because I lean more towards the “frequency” marketing due to the long span between purchases for a retail mattress company, being top of mind in critical. Social media really is getting the most share of voice for your brand or product. Segmenting the info and targeting the DMA from FB can give you great insights. If you have a product that is more targeted to the Millenial generation ( born bet 1982 ansd 2000) then Social Media is your vehicle providing you blog about it. There are more seniors on FB than High schoolers, they may not be blogging but advertising on there is a good move, maybe tying in product ratings? Anyway, forget CPM and ROI, the world is on social sites, If you can show your ad or posts to people and fans who spend 4-5 hrs a day on there, well then, what’s to measure?
Hi Daniel – I don’t think comparing content to advertising is “the only way to calculate a real number…” You certainly can quantify the number of qualified prospects it takes to convert to a sale and trace Facebook fans all the way to the sale. You also can look at Goodwill on a balance sheet and have some idea of the worth of your brand, then look at impact on reputation, etc. There’s a ton – Katie Paine writes a lot on this — you just have to dig beyond the “easy.”
Greg – Share of Voice (or discussion) is an important metric, usually placed in the intermediate category between output and outcome. As a consequence of Share of Discussion, something happens in the business — you have higher awareness (and inclusion in the consideration set), or build greater understanding of your brand messaging, or your reputation improves, etc.
But the more important point of your comment is about the information you receive from participating in social media! If your potential customers (or their influencers) are on social media or are moving to it, you need to be there to participate in the discussion with them. Otherwise, you rely on advertising and mainstream media that are losing audience to social.
Connect that 4-5 hours a day on social media to some aspect of business outcomes, and you’ve won the war.
Thanks again for commenting.