Everyone is talking about Social Media Marketing today but no one has a real good handle of the value of a Social Media Connectors: Follower (Twitter), Fan (Facebook) or Check Ins (Gowalla).
We’ve seen valuations across the board that rate these social media digital entities or connections from under $5. to $300. This is ridiculous - how can you ascribe a number to a specific type of Social Media Digital Connection point - your dealing with moving targets, with shifting landscapes behind them.
Ad Rates Measurement
Some have tried to propose valuations based on fancy formulas using spreadsheets (bet this went over well in the VC pitch sessions) about impression rates (CPM in Ad Speak) as being the best measurement tool, compounded by lifetime values, demographics, time of day, multiple visits, ancillary visitors/Friends or Followers, etc. We won’t even bore you with the formulas, as we are in violent disagreement.
Just because Facebook charges an advertiser a $5-20 CPM (Cost Per Thousand Impression) rate to show ads on your account doesn’t mean you can extrapolate the number of Friends in some way to link to the Ad Rates in some linear fashion.
But, as soon as Twitter for example, starts pushing out sponsored Tweets this will blow the smithereens out of any complex formula done today. And, trust me they will commoditize (to a certain extent) their networks in some way moving forward as they drive to revenue generation.
Bottom Line Social Media Value
So, where’s the bottom line value in Social Media Connections? Our simple answer says its pretty easy to figure out. How much traffic did you generate for your site, what per centage of this traffic took some specific action (purchase, newsletter sign up, register for webinar, etc.) and how did they engage with your brand. Google Analytics will fill in this particular formula.
To understand some core metrics, review site bounce rates of individuals from specific Social Communities and Social Media Marketing Campaigns. Yes, there’s great residual value created by referrals to others in a Followers community; but right now it’s hard to ascribe value to these entities with any real accuracy.
Your brand value, market segment and positioning also impact the value of Social Media Connections. Here’s why: a “Friend” on Facebook “connected” to Porsche is going to have much more value than one associated with Toyota - based on brand value, suggested retail price points and we hate to say it, the position of the brand in a moment in time.
The bottom line, value of Social Media Connections is a moving target, driven by market circumstance that may or not be driven by the brands uptrend or downtrend - BP or Toyota come to mind for the latter, with Apple for the former. These “big picture” items greatly impact the Value of Social Media Connections!
Ignore the hype - it all comes down to basic old school measurements (conversions, visitors, purchases). We need to ground the business more in basic ROI fundamentals in order to really help companies value Social Media Marketing and Connections.