Monday, April 12, 2010

Your Loyalty is Worth $3.60

AdWeek recently republished that the value of a "Fan" on Facebook is about $3.60 - which is a number that's going to cause a lot of people a great deal of grief, as some decision makers will invariably (mis)interpret the number to mean real dollars and pressure their marketing staff to drum up its "fan" base or use the value of Facebook fandom to decrease their advertising budget for more productive channels.

The calculations were done by a social media consulting firm, whose interests lie in pumping up the value of fandom as a way of getting businesses to hire them, but even so, they seem fairly reasonable: they consider the value of a "fan" to be equivalent to the cost of buying advertising that reaches the same number of people. So this "value" represents the amount the company would have paid if it had bought conventional advertising to reach the same number of people.

I don't see an inherent value of being listed on a person's profile as something they're a "fan" of: many users' profiles are cluttered with "fan" references to a lot of inane things. However, if the company uses social media in a less frivolous manner, each "fan" receives a stream of news and updates that add to the brand experience and may serve to bolster customer loyalty and word-of-mouth appeal ... so there's certainly some value there.

And naturally, accounting-minded types compulsively want to assign a dollar-and-cent amount to anything that has "value" - so this calculation will fill a void and give an appearance of specificity to something that is only vaguely understood.

But in the end, it isn't "real" money in terms of profit (or even revenue), nor is it even a cost savings, unless the company (unwisely) decides to reduce its advertising budget by a corresponding amount and rest on the assumption that a "fan" on facebook is as good as a paid promotion to a well-targeted audience .... which is the specious and unfounded assumption upon which these calculations are based.

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