Syncapse Value of a Facebook Fan

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

Executive Summary

As Facebook matures as a viable marketing and customer service channel, manyorganizations are looking to quantify and understand the impact of their overall marketinginvestment on their business. Quantifying the Return on investment (ROI) of Facebookmarketing efforts includes multiple variables and companies often fail to understand andto properly value their efforts in terms of the potential long-term business benets of theFacebook channel.Many brands overcomplicate their measurement requirements by tracking dozens ofindependent variables. Many oversimplify by trying to apply a single number concept ofvalue, and far too many fail to quantify ROI in such a way as to convince a CFO of the meritof increasing or shifting investment towards Facebook marketing.Syncapse has adopted a unique approach tounderstanding the nancial returns that social members onFacebook provide to a business. Facebook fan ROI canbe understood though a knowledge of key performanceindicators that have traditionally led to increased salesand prot in business and the key differences betweenFacebook users who have opted to “fan” a brand andthose who have not.This study will examine the ve leading contributors toFacebook fan value. (1) Product Spending (2) BrandLoyalty, (3) Propensity to Recommend, (4) Brand Afnityand (5) Earned Media Value.

Introduction: Understanding The Value Of A Fan

Brand marketers have been struggling to understand the impact of their Facebook marketing effortscontribution to their overall marketing success. Many are attempting to establish the return througha campaign-based analysis rather than by a consideration of long-term business value. Confusion inthe industry is widespread and clear principles for Facebook measurement have not been commonlyadopted. This has resulted in missed advantage across agencies, brand teams, and executives in fullyrealizing the potential benets of Facebook marketing.Understanding long-term Facebook fan value is a complex undertaking with advanced calculationsrequired across multiple variables. This understanding is rooted in the measureable differencesbetween users who have “fanned” a brand and those who have not. The value is reected not simplyby the action of being a “fan” but rather by the value of the audience and the benets “fanning” offersthe brand.

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

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Deriving Fan Value

Identifying differences in behavior and motivation between fans and non-fans is signicant inunderstanding the true value offered to an organization. Syncapse has identied and isolatedthese factors and associated them with key factors recognized across the industry as driversof shareholder value. The factors studied are widely identied as fundamental to bothshort-term and long-term sales performance and have been tested across multipleorganizations to conrm their importance.The variables studied in this paper for the purpose of understandingFacebook fan value Include:

1. Product Spending:

The ability to understand the methodology ofincreasing product spending.

2. Loyalty:

The ability to understand the available meansto inuence and promote brand loyalty within atarget audience.

3. Propensity to Recommend:

Probability and propensity for word-of-mouthrecommendations leading to sales.

4. Brand Afnity:

The impact on brand perception and recall.

5. Media Value:

Efciencies of earned reach and frequency viathe Facebook platform.

6. Acquisition Cost:

Efciency of Fans in enticing others to participateand drive organic membership.03