Social Media Measurement, Social Media ROI

A New Way to Calculate What Facebook is Worth to Your Business

Facebook for business is email newsletters 2.0.

Facebook ValuationYou’re trying to accomplish the same things on Facebook that you are in email, aren’t you? You want to keep your business top-of-mind among people that are already aware of you, and encourage those people to buy again and tell their friends.

The number of Facebook “likes” you’ve accumulated is akin to your email list. The number of impressions your Facebook musings receive (findable in your Facebook Insights report) is akin to your email open rate. The number of thumb ups and comments on your musings is your Facebook feedback rate, which is statistically similar to click-through rate in email.

I’ve been thinking about the mechanical and psychological similarities between email and Facebook for quite a while, and some additional thoughts on these similarities can be found here.

But, until being inspired by a recent issue of AdAge (whose coverage of social media has gotten vastly better in the past 18 months), I’d never thought about valuing Facebook interactions within an email framework.

Valuing Facebook Through an Email Prism

Almost every company has some sort of email newsletter, and that communication channel has a cost associated with it, comprised of fees paid to send the email using a company like ExactTarget (client); fees or staff time needed to design email newsletters; analysis time; and probably some business rules and marketing time to think through sequencing, offers, subject lines, etc.

You can easily determine what that program costs your company on a per email basis, and what the equivalent “value” of your Facebook impressions are, based on your email investment. (download the spreadsheet below to help you calculate)

Ideally, you should now use the formulas above to determine whether a Facebook impression has a higher cost to your company (design and management only, since there aren’t any sending costs on Facebook yet) than does an email impression, and adjust your valuation accordingly.

Is this an appropriate way to calculate Facebook’s brand value? I know there’s been other studies that conclude a Facebook fan is worth $100 or whatever, but that’s based on surveying and presumptions of downstream purchase by advocates, etc. I think I like this model because it uses something we’re already paying for (email) to determine the brand-building value of something that’s a newer addition to the marketing program (Facebook). But this model doesn’t prove ROI because there is no “R” in this equation. We are assuming that an impression on Facebook (or email for that matter) will yield more in return than it costs your company in investment. We can model that too, but that’s a post for another day.

How does this strike you?