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What social media costs to do…or not do…and the value of a Facebook Fan

Posted on May 23, 2011 by Rob Petersen

The most vexing question in social media is cost, especially since the primary currency is time, resources and knowledge: Pay someone to do? Hire someone? Or do it yourself? 

For a brand or business, it mostly comes down to the return. What’s the ROI? Resource conmmitment. Out of pocket costs. Time involvement. How long to see results? It’s natural, if you have to shell out money for something, to want to know when you’re going to get it back.

For the person, business or agency doing the work, it’s proving value and profit.  How much to charge?  For what activities and deliverables. Measurements and results.  How is it sustainable and scalable? It’s equally natural, if you’re doing the work, to want to know how it makes money.

I am asked these questions frequently.  Fortunately, WOMMA just published helpful information to answer them.  To cut to the chase, here’s what social media costs to do…or not do…and the value of a Facebook Fan.

WHAT IT COSTS TO DO: The average cost to staff and execute a social media effort is $210,600/year.  This might sound like a lot so here’s the breakdown.

The cost for the two staffers, a Community Manager at $93,600 for 30 hours/week at $60/hour, and a Social Media Strategist at $52,000 at 10 hours/week at $100/hours, also does not include overhead or health insurance if your hire someone as opposed to outsource. 

Many companies hire Community Managers first because, from a salary standpoint, it costs less per hour.  Without some strategic direction, this tends to end up costing more.   The numbers suggest a balance would be better.  

Whether you agree with these costs or not, the allocation of cost at 25% for strategy, 45% for community building and 30% for an online and mobile hub is, in my opinion, very sound.

Another point to consider is, for companies spending this amount today, they spent zero 3 to 5 years ago.  If we do a post on this topic 3 to 5 years from now, my guess is the number will be considerably more that $210,600.

WHAT IT COSTS TO NOT DO:  Companies often ask is: “What is the value of a Facebook Fan?”  WOMMA took the time to figure this out.  On average, Facebook Fans of a brand spend an additional $71.84 because they are 28% more likely to contiue using  the brand and 41% more likely to recommend it to a friend. 

 The number varies by company and, for well-known brands, it’s roughly double.

How does this relate to ROI of your social media costs?  Let’s say McDonald’s spends $210,600/year on social media and a Facebook Fan is $159.79 more valuable ($310.18 – $150.39).   This means McDonald’s needs 1,314 Facebook Fans to pay out the investment; 2,628 to double it and so on.

My guess is McDonanld’s probably spends more than $210,000/year; then again, they can afford to because they have 8,514,416 Facebook Fans.  Given the math, they gain $1,354,726,000 (8,514,416 X 159.79) through a Facebook following.  Bear in mind this is just Facebook and not they’re entire social media effort.

The spending perameters may be different for your business but the principles of investment and return probably aren’t.

The full inforgraphic is below.  It’s worth a look.  It doesn’t cost anything.  What would you decide?

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4 to “What social media costs to do…or not do…and the value of a Facebook Fan”

  1. Rob,

    My only question would be: Do Facebook fans spend + $70 more because they are Facebook fans (ie becoming a Facebook fan produces this result), or do people who would spend + $70 more all the same just happen to be those that also would become Facebook fans? A big difference in worth and ROI.

    Kevin
    @mediasres

  2. Rob great way to put smart questions in front of your customers when they want to talk ROI. My question to them would be have you done this with the rest of your business? If you have not then why are you doing it for only social media. Look where you are making bad choices in other areas, what are the costs, and you will find the budget to get effective social media to grow your business.

  3. Rob Petersen says:

    Hi Kevin,

    Good questions. In a recent post, “12 surprising stats..” a fews down the page, there is a chart that shows the top reasons consumers “Like” a brand on Facebook. They are to receive discounts, freebies etc as and show support and stay infromed on a brand. So, it says to me the Facebook Fan is someone who is a brand supporter but wants something in return for their support. Since $70 (on average) is a lot of money per Fan, I think the smart marketer would do well by rewarding them and building a relationship. I hope I answered your question. Thanks for the comment and your tweets.

    Rob

  4. Rob Petersen says:

    Agree with you Michele. The WOMMA finding really just point to the value of Fans in any channel and their word of mouth value. A smart choice for any business is to ask: 1) who are my fans, 3) how do I build a relationship with them and 3) have Fans help me build my business. I’ve learned this principle from a variety of experieces but, one of them is listening to what people say on your #speakchat chats.



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