The real cost of brand-building with Facebook

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I remain a social media sceptic. Although Facebook is an important and incredibly useful tool for many brands, its impact has been wildly overstated on three fronts.

First, the belief that social media somehow changes or even revolutionises the business of marketing communications. Second, the widespread promotion of social media as a relevant tool for all brands, in all situations. Third, the wild defence of social media by acolytes of the discipline who reject any and all criticism of it as the actions of out-of-touch dinosaurs rather than objective marketers keen to assess value through critical thinking.

As more and more brands pump ever greater proportions of their marketing budgets into social media, there has emerged a desire to prove that these investments are worthwhile.

Initially, therefore, there was a concerted attempt to show that driving the numbers of consumers that liked you on Facebook conferred immediate and inarguable financial advantages. In 2010, social measurement firm Syncapse put the revenue potential of each Facebook fan at an impressive (and highly unlikely) $138.38. More recently ChompOn assessed the value of each ’like’ as $8 per head, while Vitrue, another online firm, estimated their value at $3.60.

However, there was always a sense that these simplistic and rather arbitrary estimates were doing more harm than good. Indeed, more than one senior marketer has sat in stony silence at the end of a social media presentation unsure of whether what they have just seen is good, bad or something in between.

More complexity and brand-specific sensitivity was needed and, as a result, many critics welcomed the recent report from Facebook and comScore entitled ’The Power of Like’ as a more thoughtful and robust attempt to assess the value of Facebook fans.

The report highlights three brands and examines the behaviour of their fans compared with the general online population. In the case of Starbucks, for example, an analysis of in-store purchase behaviour during May 2011 revealed that Starbucks fans and friends of fans bought 11% more frequently and spent 8% more than other Starbucks customers.

In another case study, fans of the search engine Bing conducted 68% more searches on the site than other Bing users. And Southwest airlines’ Facebook fans visited the carrier’s website nearly five times more often than other internet users.

It all sounds impressive. And no doubt each of these brands has enjoyed some success thanks to their increased investment in social media. But there are a couple of snags with this kind of analysis that I would like to underline.

The first problem is selection. It’s great that big brands like Starbucks, Bing and Southwest Airlines have been selected for the report. But using what criteria? All three strike me as extremely switched on and very social mediasavvy companies. It would have perhaps been fairer to have selected some alternative and more representative brands to test the Power of Like. For example, it would have been great to see some banks and FMCG brands in the report, given both sectors are developing a reputation for big spending, low impact social media strategies.

The second problem is more severe. Even if we accept the three case studies, there is still the annoying issue of causality. Let me explain with an example from my own life. Occasionally I get drunk and when I get very drunk I inevitably fail to undress before I go to bed. When this happens, I invariably wake up in the morning fully clothed with an excruciating hangover. It would be all too simple for me to review these past experiences and infer some form of causality between sleeping in my clothes and developing a bad headache. In reality, there is what statisticians call a lurking variable that drives both of these outcomes booze.

In the same way, it is entirely feasible that the reason that a consumer spends more at Starbucks and becomes a fan of the brand on Facebook is because both actions are driven by a pre-existing love for the brand, and not by any actual causality between Facebook liking and purchase behaviour.

And finally, it’s worth recalling that Facebook and the other social media options are not the only games in town. Let us always remember the opportunity cost of embarking on social media namely the impact of not investing that money and time on other marketing options. Even if the brands chosen in the report were representative (and they weren’t) and the causality issue was not problematic (and it is), would the amount of time and money spent on Facebook get better results elsewhere?

These questions should worry marketers who have invested heavily in social media because I’d be starting to get a little worried if this report is the best defence that Facebook’s head of measurement research can come up with to justify your efforts to drive Facebook activity.

Mark Ritson is an associate professor of marketing, an award winning columnist, and a consultant to some of the world’s biggest brands

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