Not long ago, an article by Vitrue made a big splash in social media and internet marketing circles. The article was titled $3.60 Facebook Fan Valuation Is Just the Tip of the Iceberg and here are the key points from the article:
- According to our research a Facebook Page with 1 million fans is worth a minimum of $3.6 million in earned media annually. Honestly that’s just the tip of the iceberg as I’ll explain.
- How many impressions can a single wall post receive? To our surprise we learned the average was approximately 1:1 (0.96:1 to be exact).
- We factored a very conservative $5 CPM – how much would you pay for highly targeted impressions?
- 1M impressions x 2 posts (per day) x 30 days = 60M impressions
- 60M impressions / 1000 x $5 CPM = $300,000 per month ($3.6M annually)
A few key points from the article and social media:
- A community of social media and web ‘friends’ has real value. Now is the time to engage or expand your community as earlier adopters always have an easier, lower cost entry. But, it does save time and cost to know the best practices.
- Vitrue’s math shows that a business can save $3.60 per year per friend by posting to their social media community at little to no cost.
- Of the business is well priced, the profits for those customers would be more than the $3.60 per year. If not, you are may be paying too much when your marketing costs more than your profits.
- The math: If the fans are valued @ $3.60 per year, that means with proper ‘care’ they will create an ongoing revenue steam of $3.60 year after year. Being a finance major, the way you find the asset value from an income stream is to divide $3.60 by the current interest rate. Using a 4% (current mortgage) rate shows a REAL value of $90 each. Meaning if you invested $90 @ 4%, it would pay you $3.60 year after year. So, the income may be $3.60, but the asset value is closer to $90! If your cost of capital is closer to 8 or 10%, then the value to your firm per ‘fan’ is in the $36 to $45 range just on the cost savings. Much less their profit.
- The value of an impression is much higher when the viewer has opted to receive the information. The $5 CPM (cost per million) is a quite conservative number since most web sites cover a pretty wide range of topics and interests. While Amazon has an amazing number of visitors, could you imagine a more varied set of viewer interests? How about CNN, YouTube or Google?
- In traditional media you are also paying for the opportunity to make an impression with your message on tv, radio, newspaper or other media. But, you never know how many people actually see those ads versus the internet’s ability to measure both the number of times the ad is viewed, but more importantly how many times the ad is clicked on to get more info.
- The real value of social media, web or any other media is the number of impressions that turn into customers, and the profit from those sales. That is much harder to measure than the baseline value Vitrue used. Vitrue’s math shows how much you would have to pay on a general web site for the same amount of ‘viewers’. However, when your community sees your message properly crafted on a site they opted into, it simply has a higher value than viewers on a general web site.
- Just like web site names, social media names are being rapidly claimed.
- The question is not are people talking about your brand or business on social media. The question is: Are you Participating in the Conversation?
We can help you research, claim your social media and web names, and engage your community. That is one of our core business values.
