I recently read a fascinating article by Judy Shapiro (@judyshapiro) titled “Question: What’s a Facebook Fan Really Worth to Marketers?” (See: http://adage.com/digitalnext/article?article_id=144437) which took research from two companies and looked at formulas for how you might value a Facebook fan. Let’s start by stating that the approach of both companies is very different.

Syncapse look primarily at the additional spending power of a Fan, which it estimates at $71.84 over a two year period with a total value to the brand of $136 per fan when taking other performance factors into account. (See: http://www.syncapse.com/media/syncapse-value-of-a-facebook-fan.pdf)

Vitrue on the other hand look at the comparison between the brand value of a Fan and the equivalent advertising spend, and conclude that each Fan generates $3.60 of awareness when considered along with a $5 per thousand impressions banner ad campaign. (See: http://vitrue.com/blog/2010/04/14/360-facebook-fan-valuation-is-just-the-tip-of-the-iceberg/). (Please Note: Currently the link is down, this should be available again soon.)

Ok, so far so interesting, but what does this mean in practical terms? Well, let’s consider some real world scenarios:

A banner ad campaign with a $5000 budget and with a 6% click-through rate (that’s our average, rather than the industry standard 2%) generates 60,000 clicks†. Now for a standard campaign that’s where it ends, but what if the destination is a Fan page, or has a prominent and purposeful “Like” option?

Being conservative, let’s assume that only 15% of our active clicking visitors become Fans. That translates to 9,000 fans, and if each of those is generating the equivalent of $3.60 worth of advertising then that equates to a staggering $32,400 of follow-on market infiltration. So your $5k campaign is now punching as hard as a straightforward $37k campaign!

Let’s take that one stage further. Let’s give the Fan something to engage with –a loyalty platform, instant win or prize draw say? Maybe even just a cute app to tease their friends with, or virtual gifts.

Our own statistics show that a well-constructed Facebook application or dynamic tab which promotes and incentivises users to share, invite and post to newsfeeds can directly generates an average of 300% uptake in new users (we’ve achieved as high as 2000%, but let’s keep this manageable! (See: http://brandmovers.co.uk/portfolio/my_boys.html). So our 9,000 fans beget 27,000 fans. Using the same formula as before, that now gives us the equivalent of $97,200 of marketing punch.

Let’s assume the application costs $25k to develop, and add to the $5k we started out with. Your $30k investment has generated as much awareness as a campaign you’d otherwise have to spend over $97,000 to achieve!

Finally, the Syncapse formula suggests that those 27,000 new fans could bring a sales increase of $242,460 over a typical promotion period of 3 months.

Drop a tweet to @Brandmovers_uk or @johnnieego for more information on Facebook as a potential monetisation model.

† $5000 at $5 per thousand = 1000,000 impressions. 6% of that = 60,000 clicks.