What is a Facebook Fan Worth?

Adam Goldberg recently took a stab at evaluating the value of a Facebook fan.  He calculated the fan value based on the estimated number of brand impressions a  new fan would elicit.  He then correlated a CPM value and came up with a number.  While it is great to see thoughtful analysis in social media, Adam’s conclusions are flawed.

In calculating the value of a Facebook fan, companies must consider the access they receive to their fans and the viral potential of fans in addition to the initial brand endorsement the company receives when someone becomes a fan (the area Adam focused on).

Let’s immediately dismiss the comparison to ad impressions.  Even Adam has to admit that seeing a friend become a fan is more valuable than seeing an ad.  Word of mouth endorsement will always trump paid endorsements.

Facebook fan worth is more comparable to the value of a user who opt-ins to an email list.  Fans choose to become fans (opt-in), and companies have direct access to their Facebook fans through fan updates and events.  Furthermore, Facebook fans can readily opt-out.  Any discussion of determining the value of a Facebook fan should start with the value of an address on an opt-in email list.

However, Facebook fans are arguably more valuable than opt-in email list addresses:

1. Facebook fans can easily be converted to opt-in email lists using contests, giveaways, or coupons from Wildfire
2. Applications such as Polls & Quizzes allow fans to share brands virally
3. Facebook recommends (seemingly more frequently) fan pages to friends of fans

Facebook Fan A vs. Facebook Fan B

The worth of one Facebook fan could be significantly different than the value of another.  If you are Budweiser, a 21 year-old fan living in a college town is worth more than a 16 year-old living in Tehran (guessing that Bud is not that big there).  A fan with three friends is likely worth less than one with 4,000.

When calculating the price companies are willing to pay for Facebook fans – because ultimately, fans are worth what someone will pay for them – companies should consider a number of factors:

1. Demographics of their customers – Using Facebook Insights, companies can readily determine the demographic makeup of their fans.  When adding fans, look to add fans in your company’s target demographic
2. On-site conversion – How do your company’s fans interact with your site?  Do they regularly convert into a lead or sale?  What about their loyalty metrics – do they regularly visit the site, view multiple pages, and spend significant time on site?
3. On-page conversion – Do you have a conversion point on your page?  White paper download or link to a specific section of your site?  Sales conversion using a tool such as Alvenda?
4. On-page interaction – I considered not listing interaction because many companies get hung up on measuring comments, wall posts, etc., but fan page interaction is important.  User reviews can go a long way and fan interaction can be a selling point to potential customers – just don’t confuse a comment with a sales conversion

So what is a fan worth?  Unfortunately, I don’t have a formula for you to simply plug in and go, but if you know how you want your fans to convert, how much that conversion is worth, and have access to web analytics, I can help you figure it out.