Tom Webster, writing and speaking

The ROI of Facebook: It Isn't Fans; It's Fandom

Added on by Tom Webster.

Ventilador Electrico PisoOlivier Blanchard has a piece today detailing five basic rules for calculating the value of a Facebook "Fan." It's a practical post, and makes a number of points that I agree with; namely, that the value of a "fan" is elastic, idiosyncratic to brand/product, and not the cost of acquiring that fan (I hope no one is actually confused about that?) If you need to calculate the value of a Facebook fan, this article is a pretty good start, and you may find more thoughts in Olivier's book. It's a question that seems to pop up with increasing regularity, and his answer is as good as anyone's.

But I think there is a more interesting question.

I suspect Olivier would agree with me, and I'm not constructing a straw man here. The value of a fan, however, is a static snapshot of a consumer who may or may not have already been a valuable customer for your brand or product. The fact that they are a "fan" may simply be a trailing variable; your Facebook page a convenient aggregator of advocates who were already among your top quintile or decile of consumers. Don't get me wrong--that's useful in its own right. But it isn't enough to base strategic financial decisions upon.

Tracking the value of your fans is a useful diagnostic measure. It isn't, however, a predictive measure. For that, it isn't the value of a fan that you need to calculate - it's the value of fandom. In other words, what is the incremental value associated with becoming a fan? This is not a simple static measure, but it isn't rocket science to figure out. You design a study. You track a cohort of your customers over time. You look at their purchase behavior before, during and after they become a fan, or engage in a Facebook promotion. You calculate their intrinsic value before they become a fan, so that their value after they become a fan actually has meaning.

The static value of a fan is useful, but only in context of your other efforts. If I take a customer who already has a lifetime value (LTV) of, say, $500 and convert them to "fandom," that effort might cost me $3.00 and yield an additional LTV of $150. Pretty decent return. But I also might send that same customer a fifteen-cent postcard and double their LTV. That doesn't invalidate your Facebook efforts, but it does allow you to weight them appropriately in your media mix and make better decisions.

Calculating the value of fandom is certainly more complex than calculating the value of a fan. It's also the key to truly understanding what social media is actually doing for your brand or product. It's a bit more work. But if you are a regular reader of this blog, you do that work. You stand apart. And you ask better questions.