Wednesday, May 5, 2010

How much is your Facebook page worth?

I should warn you before you read this that I initially studied math & physics before giving up halfway through my degree. Turns out it was rocket science…

I recently blogged about how much a Facebook fan was worth, and promptly disagreed with the research done, but I did not suggest an alternative. Not so good of me I am afraid.

Valuing a fan is a flawed way to look at things. Fans have different values depending on their personality type, and they are worth very little if they are not interacting with you.

So lets look at it differently, how much is your Facebook page worth?

There are two parts to this, the value of getting your message to your existing fans, plus the value of your fans spreading the message in a word of mouth style. I will use the fan page from my work to plug in some numbers as we go, but of course, you can use your own data to see how you are going.

Part 1

We will start with the easy stuff, the value of your info showing up on your fan’s home page feed.

Facebook charges a CPM of NZ$6.95 for an ad to be placed on a home page feed. So, for every 1000 fans you have, every time you post to your wall and show up on your friends home page feed it is worth $6.95.

We have 49 fans and have so far posted 13 times onto our wall. Pretending for a minute that every fan had always been there & seen every wall posting, we have shown up on our fan’s home page 637 individual times. Based on a CPM of $6.95, this is worth $4.43.

Not quite time for me to retire yet.

Part 2

By far the greatest value in having fans is to be found in interactions. This is where the word of mouth advertising comes into it. But how much is it worth?

According to Facebook’s statistics page, each user (and therefore fan) has, on average, 130 friends.

When a fan interacts with your page, this is posted as a news feed on the fan’s friend’s pages. Based on Facebook’s averages, each interaction would therefore generate 130 impressions on other people’s home pages.

Again using Facebook’s CPM of NZ$6.95 for an unsolicited ad on the home page, this equates to a value of 9.035 cents per fan interaction.

However, I am much more inclined to look at something that has been recommended by a friend. I estimate that people are 4 times more inclined to like/look at something if it is recommended by a friend/peer. This increases the value of an interaction to 4x 9.035 = 36.14 cents.

Not factored into this is the influencer group, the cool kids.

According to research done by Forrester, and detailed here, 16% of 10,000 American web users surveyed can be called “Mass Influencers”. This group was responsible for 80% of branding “influence impressions” on social networks last year, and are therefore 4 times more likely to spread the word about your brand than the rest of web users.

(WARNING: Now I am really going to get mathy)

We know that a “Mass Influencer” creates 4 times as much noise about brands as a “normal web user”.

1 fan has an 84% chance of being a “normal web user” and making me 4 times more receptive to an ad. But each fan also has a 16% chance of being a “mass influencer”, making 4 times as much noise as a “normal web user”, thus making me 16 (4 x 4) times more likely to see, and be receptive to, an ad.

We established that, based on Facebook’s CPM of $6.95 and on a multiplier of 4, a normal web user interaction (including the initial page like) is worth 36.14 cents.

An interaction by a “mass influencer” would be worth 4 times as much, or 144.56 cents, but only 16% of fans are worth this much.

Now, unfortunately we have to get really mathy to plug the numbers in.

(0.84 x 36.14) + (0.16 x144.56) = 30.3576 + 23.1296 = 53.49 cents per interaction.

Now you can plug in the numbers from your Facebook insights page to see what your particular page is worth. Based on the Facebook page I set up for my work last week…

49 new fans + 6 interactions = 55 times we have had our fans publish our company name (at least) onto their friends home page feeds.

55 interactions x $0.5349 per interaction = $29.41 worth of word of mouth advertising since we started.

Ok, we are almost there. To get a value for the total advertising our Facebook page has created so far we need to add part 1 ($4.43) to part 2 ($29.41), and from that we get $33.85.

So, since we started our page a couple of weeks ago, we have garnered $33.85 cents worth of advertising.
This kind of figure is changes depending on the number of fans you acquire, the rate you acquire them at, and the frequency with which your fans interact with your content. To be accurate, you would need to be updating the numbers regularly with the latest figures to create a rolling cumulative value.

My next step will be building an easy to use spreadsheet that will give you a figure for each day/week/month that can then be tabulated into a cumulative value. Ask me nicely & I will email you a copy.

But, have I got the multiplier of 4 right? By which I mean, have I overvalued the word of mouth component?

Am I forgetting something?

I would love to hear your thoughts.

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