These days, any conversation about online marketing is required by law (OK, not really) to include extensive discussion of Facebook and Twitter. Social media is heralded as the way to generate buzz and virality, interact with existing customers, create demand among potential customers, and build your brand. Anecdotal evidence is plentiful – consider Orabrush’s 14 million video views on YouTube, Converse’s 15 million fans on Facebook, or Zappos CEO Tony Hsieh’s 1.8 million followers on Twitter.
These examples show the massive potential reach of social media, but large numbers alone do not a successful marketing campaign make. Indeed, in the world of SEM, success is not measured by clicks or impressions, but by conversions and revenue. A campaign with 15 million clicks in AdWords might be a rousing success – if it drives ROI for your business – but could equally be an utter disaster if these clicks don’t produce revenue.
Because social media marketing frequently does not result in direct revenue for an advertiser, it’s very difficult to determine just how much a fan, follower, or video subscriber is actually worth. Various studies have tried to place numbers around these different social actions, but trying to come up with an “average” value is really an impossible task. Again, think about paid search – if someone asked you how much a click was worth on Google, your answer would have to be “it depends.” We know that some clicks are probably only worth a few pennies and others – a famous example would be “mesothelioma attorney” – can exceed $50 a click.
So while it is impossible to state in absolute terms that one form of media is more valuable than another, I would strongly argue that the pecking order of value for most businesses is as follows:
1. Email newsletter subscriber
2. Facebook fan
3. Twitter follower
Think of your own online behavior. How many email newsletters do you subscribe to? According to a study by ExactTarget, the average American gets 12 commercial emails a day. MailChimp reported the average open rate for ecommerce emails is almost 15%. Translation: consumers don’t subscribe to many email newsletters and those that they do subscribe to they tend to read.
Now consider a Facebook fan page. Facebook makes it really easy to sign up for a fan page – I suspect that sometimes people sign up without really knowing they are doing so. If you are active on Facebook, you might have hundreds of friends and pages posting onto your wall. Of course, no one has time to really read every post to their wall, and if you only log-in once or twice a day, you are likely to miss many posts. Add to this Facebook’s “EdgeRank”, which will actually hide posts that you would likely not click on anyways, and there’s a good chance that many so-called fans will rarely if ever really see a message from a company. A recent study suggested that Justin Beiber’s fan page had the highest percentage of “active fans” – i.e. fans that do anything beyond simply becoming a fan – at a whopping 2.8%.
Has Converse sold 15 million additional pairs of shoes to their 15 million fans? Have they even sold 10,000 shoes to these fans? I tend to doubt it. Assuming that Converse is “best of breed” and has a 2.8% active fan number, their 15 million fanbase is really only around 450,000 (and likely much lower). Turns out it’s easy to sign up for a fan page and even easier to ignore subsequent messages from that fan page.
And then we come to Twitter. I allegedly have 671 people following me (@rodnitzky) on Twitter. And yet, whenever I tweet an update, only 4-5 people respond to my tweet or re-tweet it. It’s likely that of my 671 followers, a good 600 of them are followers in name-only – they have a 3rd party Twitter app that only displays a small percentage of their followed tweets, and they have really followed me to get me to follow them back. Indeed, the sheer volume of tweets makes such a 3rd party tool mandatory. As a result, the number of followers you have is actually somewhat irrelevant – what’s more relevant is the number of people who actually read your tweet and the “clout” of your retweeters. Again, like Facebook, it’s very easy to follow someone on Twitter but to never actually engage with them, which makes this a meaningless metric.
If you’re not already convinced that email is far more powerful than Facebook or Twitter, just look at how financial markets are valuing emails, fans, and followers. Groupon – which really is just a giant email newsletter – has a value is somewhere around $25B and has around 40 million subscribers – that puts the value of a subscriber at about $625. Facebook has 600 million users and a value of around $70 billion – that translates to $116.7 per user. Finally, Twitter has 175 million accounts (the number of actual users may be less) and has a value of around $4 billion – that’s about $22.8 per user.
All of this is not to say that you shouldn’t pursue a Facebook or Twitter strategy as part of your online marketing investment. Social media will continue to grow in importance, it will evolve, and marketing best practices will gradually be established. In the meantime, however, invest wisely and try to understand what marketing channels really drive ROI for your business. My guess: ‘old school’ online marketing channels like SEM and email marketing may not be as sexy as a cool Facebook fan page, but for most businesses, they are still the best way to grow revenue and profit. Fans and followers are hip, but hipness won’t pay your electricity bill.
David Rodnitzky is CEO of PPC Associates, an SEM agency in San Mateo, California. If you are currently spending $25,000 or more a month on SEM, contact David at david@ppcassociates.com to learn how his agency can optimize your SEM campaigns.
