(What is) The Value of a Fan?

One of the most worrying questions in Social Media today seems to be, “what’s the value of all these fans? How can I mark them down as an asset, and not a cost?”

Recently I was invited to talk about these at Warc’s “Social Media: Beyond the Hype” conference and at Webit Congress 2011 (Webit is the digital industry’s get-together for CEE. It’s huge: very energetic, very exciting and great fun.)

Below are the slides, and below that, my script. I know that it’s hard to read the two together. Actually, someone told me that I mumbled a bit during the presentation (I wasn’t used to my Madonna-style headset mike to be fair) so the script is for them (and for anyone else who was too polite to complain.) You can download the script here.

NB: I write my scripts (like all my stuff) in a kind of lazy version of Markdown. This works great, but can make for a fairly ugly layout.

The Value of a Fan: Webit 2011
View more presentations from Mat Morrison

Script

0

Ask audience to hold up iPhones, iPads, MacBooks.
How many of them are fans of Apple?

1

So there’s this social media revolution going on around us. Everything has changed. We need to change the way we think about everything.

Only this doesn’t help advertisers allocate their budgets. And if you’re an advertiser or a planner, the way you allocate your budgets will play a big part of your ultimate success or failure.

Everything may have changed, but we still need to be able to compare apples with apples.

We can’t just pretend that social media valuations exist in a vacuum. We need to find ways that we can relate them back to familiar metrics.

One of the biggest questions that we have to deal with is “what’s the value of a fan”? This is the most divisive questions in Social Media planning.

2

Let’s take a step back. What do we mean when we say “Fan”?

3

Here’s a definition from Kevin Kelly – from a brilliant blog post that you should all read when you have time.

Read Quote

That’s instructive, but unless you’re a musician or an artist that’s probably not relevant.

4

What motivates people to become a fan of something? Briefly, fandom helps us tell a story about ourselves, about who we are and where we belong. They are badges we adopt to identify ourselves as individuals, and as part of a group.

5

Of course, there’s a whole spectrum of fandom. What you should notice here is that most people just don’t care very much.

Another way of looking at it is that you can only reasonably be a fan of one or two things. Otherwise you’re not really a proper fan, are you? For example, how many football teams could you support and still call yourself a supporter?

This is interesting for marketers; we’re mostly used to targeting and engaging with the fat belly of the distribution curve, and not the mad bits at the edges.

6

Here’s an interesting thing. Those people with the mad love create the space for the ordinary fans to exist. The more mad fans you have, the more you’ll find that your average fan population grows.

You could argue, for example that the existence of a few hardcore Apple fans makes it possible for lots of other people to call themselves Apple fans. After all, no-one calls themselves a Dell fan, or an HP fan.

Have you noticed how people will take their iPhones out in meetings or at a bar or restaurant and put them on the table? No one does that with a Nokia.

So these Superfans create the space for this behaviour.

It would be good if we could create a measurement for that; if we could understand the correlation and causality.

7

This is all very interesting, but that’s not what I’m here to talk about. I’m not talking about True Fans or Superfans, but about Facebook fans. Statistically speaking, Facebook fans aren’t True Fans or Superfans. So why am I talking about Facebook? What’s so important about Facebook?

8

Well, for one thing, Facebook is very big. It’s currently valued at around $100 per active user, and it has around 800 million users.

That whole “value per user” is all very late nineties, isn’t it? All very dot com boom. A bit devalued.

But Facebook’s numbers are BIG

9

Just looking at Europe, Facebook accounts for 85 BILLION European user minutes per month. If you were to go back in time 85 billion minutes, then the Neanderthals and wooly mammoths would still be around. Every month.

10

And those users consume 163 billion page views.

That circle there is Google. And that one is Vkontakte.

11

So brands are understandably interested in how we capture a share of that audience attention.

About 4 years ago, Facebook introduced advertising and brand pages.

They told their users “we’ve built a way for you to connect to things other than people”. What they meant was “now you can tell people who you are based on the things you like.” Fan Pages were originally intended to be a bit like t-shirts, mugs and tattoos.

Brand Pages are free to build. When Facebook introduced them, they effectively set brands’ Facebook marketing strategy for the next 4 years.

We were going to make people Like our Page.

12

So now, four years later, Brands are beginning to ask this question: “I’ve got all these fans. Which is great. But what are they worth to my business as a marketing asset?”

13

Now I could just tell you that every business case is different.

This is a great answer that you’ll hear from time to time. You can’t fault it. It’s true.

But it’s not very instructive, is it?
If I tell you this at any point in the presentation or the Q&A you have my permission to throw stuff at me.

I want to give you some framework for thinking about and answering the question; three simple general approaches. And I’ll try to tell you how to make the most of each of these approaches.

14

The Pages may be free, but it costs money to recruit fans and it costs money to maintain that community.

So we know what our cost-per-fan. That’s fairly simple.

15

But when it comes to public Value of a Fan studies, there’s a massive discrepancy. How can this be?

Actually, let’s get rid of these two — even though analysts refer to them as “Value of a Fan” they’re actually just sales referral values; nobody became anyone’s fan in those calculations.

16

When we started in this space, we asked our clients why they wanted fans. Here’s what it boiled down to. There are some good reasons here; and we shouldn’t dismiss the top one.

17

We can reduce those reasons even further to this short list. We want to value our fans by:
– the value of the Earned Media that they deliver
– the value of the sales that we can directly attribute to our fans
– and how recruiting fans improves brand measures like preference and likelihood to purchase

18

Let’s look at these in more detail

19

Here’s that Earned Media Value model that Vitrue published last year.

The calculation’s fairly straightforward – But I won’t waste time reading it out to you — it’ll be in your packs.

20

Instead I’ll touch on how that model falls apart.

Most importantly – brand posts don’t reach every fan. We find that only 5-20% of fans receive the impression.

When we’re planning media campaigns, we try to cap frequency. That avoids wastage and burnout. We’ve no control over how often Daily Average Users are exposed.

That’s OK, but it’s hard to value those subsequent impressions as much as we’d value the first ones.

Are 20 impressions against 50K users the same as (say) 2 impressions against 500K?

I’d like to take you on a bit of a detour now to look at how this works.

21

This is a very simplified model that shows how fans interact with Facebook Pages.

This is taken from real client data.

And here are some real client numbers.

What you need to see here is that users see and engage with Brand content on their News Feeds. They don’t really visit the Page very often.

And one of the key factors controlling whether they see that content is timing.

Are they online and active when you post your content?

How many other voices are competing for their attention? That’s partly other brands, but most of the competition comes from their Facebook friends’ photos and status updates.

22

So we pay particular attention to timing. Here’s some before and after charts that show how one of our clients has responded; We found that audiences were more active, and more likely to engage at weekends — so they’ve upped their posting activity on Saturday and Sunday.

Timing isn’t everything; it’s only half the story.

23

Facebook uses an algorithm called EdgeRank to try to make the stories that appear in your News Feed as relevant and interesting as possible. I hope you’re all at least vaguely familiar with this, but if not, I’m happy to chat about it afterwards.

Here’s the thing: Facebook owns the relationship between you and your Fans. That relationship lives as a record in THEIR database, not yours. And Facebook decides what’s interesting to your fans and what isn’t – not you. Facebook owns the content that your fans post on your Wall, and the rights to anything that you post there. If you haven’t read the Terms & Conditions you signed when you created your Page, now might be a good time!

For now, the thing I want you to understand about EdgeRank for now is that — if users don’t engage with your content, EdgeRank will – over time – show them less of your content, till they no longer see any of your content at all.

That’s how you can have 1m fans, but only reach (say) 200K of them.

24

The Vitrue model assumed that Pages were posting twice a day, every day of the week.

Our own research shows that our clients’ posts have an active window of engagement between 3-6 hours long.

That implies that we could profitably increase impressions by posting twice in a day.

And if we were chasing Earned Media Value, then more impressions = more value.

So there’s a lot of pressure to increase frequency.

What might the impact of that be?

25

Our research shows that it has a strong impact on impressions; if we double our post frequency, we more than double our impressions.

Reach grows too; less strongly, and there’s an upper limit – only a certain portion of your audience will be online in any given day.

26

But unsubscribes also increase. If we increase post frequency, we have to be prepared for fan attrition.

27

Here are our big problems with the Vitrue model;

  • This is incremental media value. It’s not like we’re saving media budgets. So we can’t count that as real ROI
  • Fan audiences are small relative to our total target audiences.

Even Coca Cola only has 35m fans — and in theory they have a global audience of 7 billion people. So that’s 0.5% of their audience they can reach through Facebook

Of course, because of EdgeRank they can only reach a minority of those fans.

And how much does Coca Cola NEED to advertise to people they call Fans? How much more Coca Cola can these people drink?

  • Thirdly, impressions aren’t a proxy for incremental revenue growth. Media impressions need to be carefully planned to have any value. One impression is not the same as another.

28

That’s the BAD news. Here’s the GOOD. Social Media is all about taking advantage of homophily and social proof. What’s that?

29

We all prefer to hang around with people like ourselves — that’s homophily. You instinctively prefer the company of people who share your values and beliefs and preferences.

30

And conversely, a lot of our decisions are based on unconsciously copying our friends, their values, beliefs and behaviours.

This self-reinforcing behaviour is very important for advertisers.

31

Because it allows us to find more people like our fans. And it allows us to use social cues from fans to make our messages stronger, more noticeable.

For example, targeting friends of fans with increases our media efficiency by around 20%.

And running Facebook’s sponsored stories (where the message comes from the friend, and not from the brand) increases efficiency by between 300% and 400%

32

Here’s the output of some famous Nielsen research:
– Facebook ads improve brand metrics, but not as much as Facebook Ads that contain a friend’s name. It seems that peoples’ eyes may naturally be drawn towards their friends’ names, and dwell there a little longer.

And if there’s an organic impression, a spontaneous, untargeted earned impression, that seems to improve brand measures further.

(11 mins fluent)

33

So here’s my advice about how to make the Earned Media Valuation work for you;

  • Don’t focus on fan growth at any cost.
  • But DO focus on the fundamentals, and on what makes social interesting. Look at how you can encourage sharing.

SHARING is very important. Focus on fans as a means of reaching friends of fans.

34

Let’s take a look at the Direct Response value.

35

After all, survey data shows that a good proportion of fans Like a Page so that they can be alerted with news and deals. We should be able to convert some of that interest to value.

36

Here are some casual examples – not from my clients. Tesco regularly posts deal links on its Facebook Page. They seem to drive a lot of traffic; some of that has to convert. So Tesco can begin to work out some kind of Average Lifetime Value for their Facebook fans.

Obviously it has to be Average Lifetime Value because Facebook owns the relationship; Tesco can’t segment or target. But it’s still good.

37

Here’s a lovely example. ASOS, an online clothes retailer, got 130K clicks in a single day when they ran their live sale last weekend. That’s pretty impressive.

You’ll see that they were offering dresses for £1 – but believe me ASOS aren’t in this business to be generous fools. You can bet they were making money off the back end.

38

Here’s how you make Direct Response values work for you.

Track everything.

Make sure that you use unique links, and that those links pass campaign data to Google Analytics (or whatever site analytics package you’re using.)

Never use the same link twice. Track source, message, campaign.

And make sure that you continue to optimise your Earned Media metrics.

Focus on being able to compare your performance here to other non-social channels. How does your fan base compare?

39

Of course, if you’ve not got an e-Commerce (or a publishing) business, this isn’t going to mean anything to you.

You’ll want to focus on brand measures.

40

1-to-1 engagement is great. Here’s an example from some activity we ran for our national bakery client, Hovis earlier in the year.

That personal touch is great; it’s really meaningful, and has tremendous impact.

Only no-one sees it.

I’d argue that this is a customer service role. Customer service is a brand attribute, it’s part of the product that people offer. Tony Hsieh at Zappos built it into his business; everyone in the company has to spend some time on Customer Service. As a result, he was able to cut back his marketing costs massively.

Customer Service is great, but it’s not what I’m talking about.

41

So we’ve been running a series of major surveys across Brands “Leased Spaces” — Twitter, YouTube, Facebook.

And what we find confirms others’ research: people who engage with a brand show improved measures against brand metrics compared to people who only visit those spaces.

Which sounds like common sense; and which continues to leave us open to the question – “Is this a causal relationship? Do they engage because they like you, or do they like you because they engage?”

We’ve got smart people working on that question, but we have access to a level of granularity that’s useful when it comes to planning activity.

42

And that granularity tells us that what we REALLY want people to do is share our content or recommend our product.

It’s about making a public declaration.

Psychologists will tell you that people want to behave in a consistent manner (it’s all to do with preserving a sense of self.)

Previous behaviour isn’t just a predictor of future behaviour: if I have committed to something on a small scale, I’m likely to eventually commit to that same something on a larger scale in order to be consistent to myself.

So asking people for a small public commitment is a fairly secure method of confirming their brand preference.

Essentially we can create fans simply by asking them to identify themselves as fans.

This is social media at its BEST.

43

What do you need to make the Brand Metrics Valuation work?

You need to invest in market research. And you need to be able to compare your social media research with your press and TV and PR market research. Otherwise, I’d argue, you’re just taking a shot in the dark.

And – again – you need to optimise your earned media metrics; with a strong focus on how people are SHARING your content and messages.

44

Now — just to make things a bit interesting, I think it’s worth pointing out that someone doesn’t need to be a Facebook fan in order to share your content.

These are four examples of brilliantly shareable content. They all use the same method, more or less; they allow the user to make the story about themselves, and not the Brand.

Remember those tattoos from the beginning of the presentation?

Remember Facebook’s initial reasons for allowing users to connect to Brands?

To tell stories about THEMSELVES Not to tell stories about the brands.

Mugs and T-shirts and Tattoos.

These four examples all make great use of Facebook. And only one of them (the Aviva case) insists that you become a fan first.

They all care more about the Share. About the Brand action.

45

So where does this leave us?

46

Let’s take a look at this survey data again. We should notice that only two of the reasons given are “Truly Social” — the others are a bit self-centred.

Arguably, the other reasons could apply equally well to (say) subscribing to an email list. It’s all old-think. Not new-think.

These people are subscribers; only they’re subscribers whose data you don’t own.

Look at the Terms & Conditions of your Facebook Page. Facebook – quite rightly – owns the data, and the relationship.

Through EdgeRank, Facebook controls which of your fans see your content, and which don’t.

Should this make us think?

47

On the left is the traditional Social Media funnel. If we follow that, we recruit people in at the top of the funnel, keep them engaged, then occasionally try to sell them something.

On the right is an alternative way of looking at things. What if some brands are making a mistake with all this fan stuff? What if we unbundled the user journey?

For example, what if we DIDN’T insist that they became a fan before they engaged with our content, or bought our products, or recommended us to a friend? What then?

Here’s the big question – does every brand need to maintain a day-to-day relationship? Because in this competitive world, in a world where your Facebook Page automatically becomes a new customer service channel that needs maintaining in public, and with EdgeRank breathing down your neck, day-to-day is what it takes to maintain a Page

48

Here’s more for you to think about:

Facebook has changed almost beyond recognition since they introduced Pages 4 years ago. Remember that graph? Back then they only had 50m users. Not 800m. Back then, MySpace was worth $65bn. Facebook was barely a fraction of that.

I’d argue that Facebook has begun quietly to change the rules. And smart marketers need to change along with that.

49

Here’s how Facebook used to be: you had all your leased spaces, Pages, Places, Apps INSIDE Facebook, where your audience was.

Today, Facebook provides a platform that lets you connect Facebook to your Owned spaces OUTSIDE Facebook.

You can pass data and communications back and forth between the two spaces. You don’t even need to have a Facebook Page to make Facebook work for you. In fact, if you’re thinking about Fan recruitment, that may even be holding you back!

50

So it’s not about building your brand on Facebook. It’s about building Facebook into your brand’s products, services and communications; and about understanding how you tie your Paid and Earned Media together.

51

Before I dismissed the valuations from EventBrite and Spinback because they weren’t really about fans.

What they are is a valuation based on incremental sales delivered through the Facebook sharing mechanisms built into their sites.

These are reports of REAL money being made by REAL businesses, not interesting models and theory.

Was I wrong to dismiss these?

52

I’d like to leave you with a thought.

Is a fan someone who likes you on Facebook?

Or is it someone who engages with your content?

Or someone who buys your product?

Or someont who promotes your content

Or your product?

Or is it someone who by using your content to promote themselves becomes themselves compelling content for your campaign?

Why not ALL OF THESE!?

Here’s what I say. A fan isn’t worth ANYTHING unless they DO something.

Focus on what you want them to DO.

You define and control the relationship. You decide what the value is.

Make sure that you’re in control, and not some 4 year old model of how we might do business in the future.

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