One of the topics talked about ad nausea in online marketing circles is measuring social media ROI. Another topic of equal weight is building your Facebook Fan base. For obvious reasons, the more Fans, the more of an audience you have to talk (and let’s face it, by “talk” I mean “market”) to, and more people who will share those messages with others.
If you look at your Fan Base as a group of individuals who have opted-in to receive messaging from you, beginning to calculate ROI becomes easier. For example, if you bought a list of people who fit your target demographic, you might pay anywhere from $5 to $100 CPM depending on the quality of the list. I’d peg Facebook Fans as premium simply because A) they’re willing to receive messaging from you once they are a Fan and B) because there’s a greater likelihood for that message to go viral.
One of the ways to build a Fan base, and keep them engaged is to invest in building a Facebook App to integrate into your Facebook Fan Pages. In a recent Forester study, it was reported that 55% of tweens and 42% of adults want to see social applications from their favorite brands. Audiences are definitely there, and willing to interact with quality applications from brands they use, follow and admire.
Facebook application development runs the gamut. We’ve done apps for less than $10K, all the way towards $100K. Let’s assume you invest $5K to initially create your Fan Page (anyone can create a Fan Page free-of-charge, but we’re taking the leap you’re investing a little in an agency to design and configure something nice), and then later add a Facebook App at a cost of $20K, you can establish an ROI funnel to measure the impact the total investment ($25,000) adds to your bottom line over time. So an ROI plan and funnel may take the shape of:
- Correlate expansion in Fans to app usage/adoption
- Send messaging to Fans that includes links to specials, coupons, etc. via your Fan Pages Wall (which subsequently appears on Fans Newsfeeds)
- Measure click-throughs on links, and ultimately, conversions
- Calculate cost-per-conversion against total Facebook investment
- Calculate direct sales from Facebook
Based on this, let’s assume Brand X builds a Fan Base of 50,000 people, and sends out specials once a week. From this, 5% click-through and 20% convert. Extrapolated over 12 weeks, (assuming 500 conversions per week), that becomes a cost per conversion of $4.17 if measured over a 3 month time span. With a Fan Base of 250,000 we get as low as 83 cents—not even considering repeat business.
However, this assumes that things remain static, and in social media, it’s anything but. Inevitably, you aren’t starting out with 50,000 fans, and over 12 weeks, the Fan Base may grow past 50,000. Also consider some of your messaging may reach people (through social sharing) that aren’t Fans. As more time passes, as long as your conversion percentages remain consistent, and your Fan Base grows, your conversions costs get exponentially lower.
This last part, really, is one of the primary reasons to invest in Facebook Apps and Facebook Fan Page content. Chances are pay-per-click campaigns on Google will only rise in conversion costs, not go lower. What other online marketing medium around today can you identify where your cost per conversion falls the longer you market? Email? Well, maybe, but let’s face it, email is tired and attrition is high. SEO? Yes, but you should be doing that anyway. Twitter? Sure—same principles apply, but users are only engaged through your messages, not content they can interact with.
While investment in Facebook Development is front-loaded, it pays off the longer you stay engaged and relevant to your fans. Additionally, some agencies (ourselves included) create arrangements where development can be paid over time, so that ROI can be realized more quickly, and in parallel to development fees. We predict once the Facebook Gold Rush settles, more agencies and marketing departments will adopt similar ROI calculation models, further justifying investment in the platform.
