What goes up must come down according to Sir Issac Newton. But Sir Issac never had to buy Facebook advertising.
The gravitational pull on Facebook is not quite as simple. According to Syncapse, who has measured the value of Facebook Fans since 2010, the value of a Facebook Fan went up to $174, an increase 28% in 2013 from 2010. Yet, the organic reach of Facebook went down at a greater rate to 6.53% per Fan according to TechCrunch.
To understand, you should know Facebook measures reach in the following ways;
- Organic reach is the number of unique people, Fans or Non-Fans, who saw any content about your Page in their News Feed, Ticker or on your Page.
- Paid reach is the number of unique people who saw an ad or Sponsored Story that pointed to your Page.
- Viral reach is the number of unique people who saw this post from a story published by a friend.
If the value of Fans goes up but the ability to reach them organically goes down, it means:
- Facebook is pulling back on organic reach to push paid reach for those who pay for it
- There’s only so many posts and content that can go in a News Feed and it’s overloaded.
Here’s 4 reasons why value of Facebook Fans goes up but reach goes down.
FACEBOOK USERS (source: Facebook Shareholders Report 2nd Qtr 2014
- 1,317,000,000 total active users on Facebook (+14% vs. year ago)
- 829,000,000 of these active users are on Facebook daily (+19% vs. year ago)
- 1,070,000,000 active mobile users on Facebook (+31% vs year ago)
- 654,000,000 of these mobile users are on Facebook daily (+39% vs. year ago)
- CONCLUSION: Users and daily usage are increasing, especially on mobile were there is a smaller screen
FACEBOOK REVENUE (source: Facebook Shareholder Report 2nd Qtr 2014)
- $2,910,000,000 in 2nd Qtr 2014 (+61% vs. year ago)
- 92% of revenue comes from advertising in this period
- 88% of revenue comes from advertising in the year ago period
- $2.24 is average revenue per user in 2nd Qtr 2014 (+40% vs. year ag0)
- CONCLUSION: Facebook’s revenue model is dependent on advertising. It’s is increasing significantly but revenue per user is not keeping pace with total revenue
FACEBOOK FAN VALUE (source: Syncapse Value of a Facebook Fan 2013)
$174.17 in Average Facebook Fan Value for major consumer goods brands in 2013 (+28% versus 2010)
- Facebook Fans are 85% more likely to recommend their brand versus 60% for Non-Fan users
- 66% share information with other on social networks versus 52% for Non-Fans
- 43% spend more in respective categories than Non-Fans, despite not having a higher income
- 18% more satisfied with their brands than Non-Fans
- 11% more likely to continue using a brand than Non-Fans
- Average spend is $255 on the brand they are a Fan versus $139 for Non-Fan users
- Spend 11 hours per week on Facebook versus 6 hours for Non-Fans
- CONCLUSION: Facebook Fans are more valuable consumers than Non-Fan users, not only individually but based on their value to spread the word
- 1,500 stories could appear in a person’s News Feed. For people with lots of friends and Page Likes, as many as 15,000 potential stories could appear (source: Facebook for Business)
- Of the 1,500+ stories a person might see whenever they log onto Facebook, News Feed displays approximately 300. To choose which stories to show, News Feed ranks each possible story (from more to less important) by looking at thousands of factors relative to each person (source: Splashscore)
- The total number of Pages Liked by the typical Facebook user grew more than 50% last year (source: TechCrunch)
- 50% more recall and 35% higher online sales lift occurs when a person see their friends like a business on Facebook (source: Facebook for Business)
- Average CPM (Cost Per Thousand) on Facebook goes from about $3 in May to $10 in June 2014 (source: Splashscore)
- CONCLUSION: News Feed are overloaded but Facebook Fans have high value. This justify Facebook increasing ad rates and push Paid Reach at the expense of Organic Reach for users
Does this explain what goes up and comes down on Facebook to you? Did the facts lead you the same conclusion? Does it change the way you think about Facebook advertising?