I'm having fun with this - I can't believe The Business Insider's report on Want 5,000 More Facebook Friends? That'll Be $654.30 where it's reported ...
..... folks at online ad firm uSocial are taking that a step further: Pay them money .... they'll deliver you 5,000 Facebook "friends" for 7.6 cents per friend ($654.30), or up to 10,000 Facebook "fans" for a mere 8.5 cents a fan ($1.167.30).
..... It claims that since each Facebook friend or fan is worth $1 per month, buyers will make back their investment many times over in the first month (it's unclear how it came up with that number).
mmm ... one of the basic tenets of analytics, any analytics, you have to be able to explain how you come up with a number - your reasoning might be right or it might be wrong, or generally right but have an error or two, but uSocial should be able to explain their reasoning for why a Facebook friend is worth 1 buck, USD, per month, on average.
Let me reason though it and try to figure out what a Facebook friend is really worth - I'm more likely the come up with a fair assessment than uSocial since I'm not in the business of selling friends, and I don't know anyone who is.
Consulting Facebook's Statistics page I find out that, at the time of my writing this post, there are slightly more than 250,000,000 active users and, on average, each user has approximately 120 Facebook friends. According to Nick Gonzales at CheckFacebook.com (who I met last year in NYC and used to write for TechCrunch.com) Facebook has closer to 270,000,000 million users.
Another piece of the puzzle comes from Emarketer's predictions on annual social media spending per social network, as reported on by Mashable (see below)..
..... Facebook numbers seem to be an underestimate based on other reports we've been hearing. Most recently, Facebook board member Marc Andreessen told Reuters that he expects the social network to generate at least $500 million in revenue this year, and "billions" within the next few years.
If we take Marc Andeessen's numbers as being on target and, assume the average number of Facebook Users in 2009 at 250,000,000 (since the number of users increased each month - at might be at 270,000,000 but might have been 230,000,000 in March 09, I'd rather just take the 250,000,000 average users for 2009 and settle on that number).
If we assume the value of each user on Facebook is worth what advertisers are willing to pay for - then each "Facebook Friend" would have a value in 2009, of roughly, 50 cents USD. Therefore, on a monthly basis, each "Friend" would be worth about 4 cents.
Ha ... 4 cents, USD, per month per Facebook friend in 2009 - that's my logic! You may disagree or agree with my reasoning - but at least, I explained how I derived my number, uSocial, didn't.
Based on my reasoning - uSocial is charging users about twice what a friend is really worth, per month - but then - maybe their going out and getting the friends for you is what your paying for. But then, is it really worth having "friends" like that?
For me, personally, no. For a marketing campaign...... maybe; many PR Social Media campaigns have a hard time showing results that are meaningful to the CPM, hits trained, marketing expectation of the clients - in such a situation - might not paying for a bunch of "Fans" to be quickly added - make some sense? If it were me, no - but I can see some people going for this. The problem is quality of what you get and there's a certain ethical issue with buying friends that goes against the grain of many people, including me.
And the idea that a Facebook Friend is worth $.04 cents vs. $07. cents - uSocial says that you can make money off your contacts that is not reflected in the 500 million dollars Marc Andreessen estimates Facebook will make in Advertising fees this year. That might be true, but there's no way to qualify the worth of an average user unless a large number of advertisers on Facebook are willing to share what they think their Facebook campaigns are worth, to them, in profits, after expenses, and that information is extremely difficult to find.
This reminds of stock valuations, when buying a company the value of the acquisition offer is anywhere between 8 - 24 times the annual revenue - why that is, I don't know - by that reasoning, a Facebook friend at 4 cents per month could be worth 1.00 USD per month based on a valuation model that says you can monetize that friendship at 24 times it's worth, based on advertising.
So that's where uSocial's 1.00 per month probably comes from. Another calculation comes from Clara Shih post on lifetime value of a friend.
Customer lifetime value can no longer just be viewed as the present value of future cash flows from a particular customer in isolation. The new calculation should be something like this:
CLV_new = CLV_old + (Level of influence x Size of Community) + (Level of influence x Size of Network) + (Sales resulting from idea contributions)
* Obviously a very rough approximation, assumes there is little to no overlap between the individual's network and the vendor community. Sales resulting from idea contribution can be defined as total revenue (or incremental increase in revenue) resulting from new products or features suggested by the community, divided by the number of participants in the community.
Assume, then, the CLV of a Facebook friend is some value (between 4 cents and 1.00 USD per month) with a Level of Influence which is currently undefined - since we have no easy way to measure it - but let's put it at neutral, say .5 for now, and sales from the ideas your friends give you (again, we have no way to know this since we'd have to ask everyone).
Again, if we could get the data, we might end up with a function that draws a diagonal line that says - based on the the value of an average Facebook friend, of average influences, who brings in so much income in your network - you can figure out the value of acquiring more friends.
I just made up this chart (above) based on some assumptions, below
Assuming I can rank the influences of all the friends an average user has (and that is a whole different discussion) I can create segmentation in analytics that would say, for a certain groupings of friends, they are worth 1.00 USD per month, where as others, might be worth 12.00 USD per month, etc.
The values I came up with are totally hypothetical, I make no bones about it, or apologies for it, my numbers are probably as good or better than anyone else has come up with, so far, and if I could come up with some way of measuring average "influence" the chart would be even more interesting. My point is - we need to move to something like this - that chart - segmentation of groups of friends. etc.
In saying this, I by no means want to devalue the nature or meaning of friendship - virtual or real (as if there's much difference anymore) I am looking at it mainly as a way to justify and explain why need to spend money on friends - as if I should have to explain it - but I do - because Social Media Marketing, as I wrote about the other day in Limitations on Social Media as a marketing medium, is really about "Marketing to Friends" in one form or another .... would you disagree?
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