Post IPO, Facebook’s Value Goes Far Beyond Advertising

At this point any argument in favor of or against Facebook’s chances at exceeding or floundering its $100 billion valuation on the heels of its IPO is entirely speculative, unless somehow you own a crystal ball and can see well into the future (if so, please let me know because I’d really like to borrow it).

It’s unquestionable though that Facebook, the social network that left no room for competition during its ascent to becoming a household name, has a lot going in its favor and sits squarely in the driver seat of it’s own future success of ultimate undoing.

While becoming a publicly traded company has certainly re-energized long time critics, much of the concern has been focused on Facebook’s revenue and how it’s not where it should be. As far as complaints are concerned, it’s a valid one, however it’s important to understand that Facebook’s value, in terms of a branding and marketing perspective, goes much further than just advertising.

It’s Time to Stop Acting Like Google and Facebook are Equal

Google and Facebook, regardless of their differences, are in many ways catering to the same audience, in that they’re fighting for a limited set of ad dollars from solo entrepreneurs, small to mid-sized businesses, and giant corporations. And although Facebook is winning the battle for pageviews – currently over 1 trillion per month – Google still dominates when it comes to click through rate and the ability to funnel traffic through ads. Thus far the fight for ad revenue hasn’t been much of a spectacle.

In 2011 advertising was 85% of Facebook’s $3.2 billion dollars in revenue. It’s a staggering number for any company, but it looks like chump change in the shadow of Google’s near $38 billion in revenue (96% of which came from ads).

This fact alone plays right into the hands of the Facebook naysayers; those who likely have a page and a fan base, but are still skeptical when it comes to the long term value of fan acquisition. As far as examples are concerned, one must look no further than General Motors, who just went on the record saying that they’re unconvinced when it comes to the effectiveness of Facebook ads. Until further notice GM have pulled their entire Facebook advertising budget, which was only a small portion of their entire ad budget to begin with.

What’s the True Value of a Fan?

An independent study in 2011 found that those who click the like button on a Facebook page were 291% more likely to interact with the brand than those who did not.

Fans also hold tremendous value compared to non-fans when it comes to acquiring sales. The same study found that an average cost per acquisition of $43.86, was reduced to $14.88 when a customer was a fan before making a purchase.

Syncapse, a company that specializes in social media data, surveyed 4000 participants in North America and found that the Facebook fans are worth an average of $136.38. The number was derived by looking at factors such as product spending, loyalty, probability of word of mouth recommendations, media value, and acquisition cost.

While keeping in mind that not all fans hit the average of $136.37, some are worth next to nothing and others are worth hundreds more, it has become increasing difficult to dispute the claim that Facebook fans have a quantifiable value. Hitting the like button has become the 21st century equivalent of signing up for a branded fan club. It’s the customer essentially saying:

I like what you’re doing. Keep doing it and I’ll continue to give you my attention and business. 

Unpaid Impressions = Free Advertising

Unlike other types of traditional and digital advertising, once a fan has committed to liking a brand on Facebook, the company now has a foot in the door to keeping that customers attention for life. So long as the brands messaging stays relevant and fresh, a Facebook fan acquisition can be the start of a valuable long term relationship.

Facebook’s leg up on the competition, and a big reason why top execs over at Google are aggressively pushing Google Plus in hopes of gaining market share, comes in part from the staggering amount of data that the company owns. Facebook has access to the the age, gender, location, employment history, and interests of 900+ million people.

Along with this vast data network, comes privileged access. Any activity that happens between a fan and a brand, such as comments, likes, and tagging photos, can also be redistributed as part of an individual’s news feed, thus further increasing a brands reach. These branding opportunities are hard to measure, but they shouldn’t be overlooked.

Some Myths About Facebook Fan Acquisition

Only certain types of people and customers use Facebook

Facebook covers just about every age and demographic imaginable in developed countries. The old misnomer the we shouldn’t be on Facebook because our customers don’t use it, passed by the wayside a long time ago.

It’s simple and it’s free

No one ever said this was going to be easy. It takes ingenuity and persistence to acquire fans, usually through a combination of approaches that include (but are not limited to):

  • Advertising
  • Contests and giveaways
  • Coupons / deals
  • Cross promotion with traditional marketing
  • Email promotion
  • Event marketing
  • Website integration

Facebook users are only in it for the deals

Sure deals are often used as a clever incentive for liking a brand, and for good reason too – it’s been proven to work. However, to say that most fans are only in it for discounts and free stuff is contradictory to the millions of interactions that occur on branded pages on a daily basis.

It’s just a numbers game

More fans are always better that no fans, but having a committed and engaged base is more valuable than acquiring likes just for the sake of trying to look popular. Instead of trying to run with a campaign that tricks people into liking a page, only to later regret it, the best long term strategy is to actually be the type of brand that fans are genuinely excited about interacting with.

With online marketing it’s normal and only smart to try and get the best return on your investment, however trying to have a balanced approach – without ever considering the full implications of what’s possible with Facebook as a tool for retaining customers and generating repeat business, just doesn’t make much sense anymore.

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