THE VALUE OF A FACEBOOK FAN:AN EMPIRICAL REVIEW

JUNE 2010

Presented by Syncapse in association with hotspex

THE VALUE OF A FACEBOOK FAN:AN EMPIRICAL REVIEW

Exectutive Summary

As Facebook matures as a viable marketing and customer service channel, manyorganizations are looking to quantiy and understand the impact o their overall marketinginvestment on their business. Quantiying the Return on investment (ROI) o Facebookmarketing eorts includes multiple variables and companies oten ail to understand andto properly value their eorts in terms o the potential long-term business benets o theFacebook channel.Many brands overcomplicate their measurement requirements by tracking dozens oindependent variables. Many oversimpliy by trying to apply a single number concept ovalue, and ar too many ail to quantiy ROI in such a way as to convince a CFO o the merito increasing or shiting investment towards Facebook marketing.Syncapse has adopted a unique approach tounderstanding the nancial returns that social members onFacebook provide to a business. Facebook an ROI canbe understood though a knowledge o key perormanceindicators that have traditionally led to increased salesand prot in business and the key dierences betweenFacebook users who have opted to “an” a brand andthose who have not.This study will examine the ve leading contributors toFacebook an value. (1) Product Spending (2) BrandLoyalty, (3) Propensity to Recommend, (4) Brand Anityand (5) Earned Media Value.

Introduction: Understanding The Value O A Fan

Brand marketers have been struggling to understand the impact o their Facebook marketing eortscontribution to their overall marketing success. Many are attempting to establish the return througha campaign-based analysis rather than by a consideration o long-term business value. Conusion inthe industry is widespread and clear principles or Facebook measurement have not been commonlyadopted. This has resulted in missed advantage across agencies, brand teams, and executives in ullyrealizing the potential benets o Facebook marketing.Understanding long-term Facebook an value is a complex undertaking with advanced calculationsrequired across multiple variables. This understanding is rooted in the measureable dierencesbetween users who have “anned” a brand and those who have not. The value is refected not simplyby the action o being a “an” but rather by the value o the audience and the benets “anning” oersthe brand.

Value is refectednot simply by theaction o beinga “an” but ratherthe value o theaudience.

Deriving Fan Value

Identiying dierences in behavior and motivation between ans and non-ans is signicant inunderstanding the true value oered to an organization. Syncapse has identied and isolatedthese actors and associated them with key actors recognized across the industry as driverso shareholder value. The actors studied are widely identied as undamental to bothshort-term and long-term sales perormance and have been tested across multipleorganizations to conrm their importance.The variables studied in this paper or the purpose o understandingFacebook an value Include:

1. Product Spending:

The ability to understand the methodology oincreasing product spending.

2. Loyalty:

The ability to understand the available meansto infuence and promote brand loyalty within atarget audience.

3. Propensity to Recommend:

Probability and propensity or word-o-mouthrecommendations leading to sales.

4. Brand Afnity:

The impact on brand perception and recall.

5. Media Value:

Eciencies o earned reach and requency viathe Facebook platorm.

6. Acquisition Cost:

Eciency o Fans in enticing others to participateand drive organic membership.03