Marketers Search For Social Media Metric

by David Goetzl , May 6, 2009

Marketers place a lifetime value on customers with addresses on its email list based on their purchasing activity. For Netflix, it could be $9. At US Airways, maybe $2. But how do you place a similar value on a person who is active on a company's Facebook or MySpace page? With social-networking booming, marketers are now in hot pursuit of the metric.

Identifying those pacesetters and understanding what drives them can help marketers send them more targeted messages, aiming to drive even more referrals and launch successful viral marketing.

They agree that a person who simply visits a "fan" page and is a static follower is of minimal value. But people who can be tagged as influencers, who forward information to friends or other contacts that result in transactions, have tremendous value.

Email marketers are working hard on algorithms to quantify the worth of those influencers operating via social media outlets. Tim Schigel of ShareThis.com, who spoke on a panel at the MediaPost Email Insider Summit on Wednesday, said: "We'll see a better understanding of that (soon) ... the industry is trying to figure it out."

Also on the panel was Craig Swerdloff, CEO of LeadSpend, who said the value of a social-media influencer should be "another variable that you put into your algorithm to determine the lifetime value of a customer."

What is that amount? A back-of-the-envelope calculation could be as follows: If a Netflix customer is worth $9 alone, but that person has 500 Facebook friends, and is able to drive even 1% of them (5) to make a purchase, that individual's value could be as high as $54.

Peter Horan, also on the panel and CEO of Goodmail Systems, suggested that marketers consult the work of MIT professor Eric von Hippel, who has a method to identify so-called "lead users," those trendsetters who can drive influence across a range of categories.

marketing, media measurement, social networks, viral

2 comments about "Marketers Search For Social Media Metric".

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Howie Goldfarb from Blue Star Strategic Marketing, August 14, 2009 at 3:42 p.m.
How can you judge the 'lifetime' value of a customer. I could be the most dedicated brand champion in the world and have a high value placed on me today. Yet in 3 years that brand could have quality problems or service issues or plain piss me off. Will the value from Positive to Negative be accounted for?
Kind of like the Federal Government presenting budget projections 10 years out, yet have no idea how the world economy will be nor other outside influences (like a hurricane or war). So in a sense this 'value' would like Securities have to be recorded at market value continuously. Good luck!
Remember you Marketeer's can chatter all you want about value....if the CFO isn't sold on your views watch out! Because as much as people in Advertising/Marketing hate to admit it is the CFO who controls their budgets and destiny...not the CMO. And CFO's require hard numbers not fuzzy logic.
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Carolyn Hansen from Hacker Group, August 14, 2009 at 5:47 p.m.

I'm seriously confused. The lifetime value of a Netflix customer is not $9. That's closer to a "monthtime" value.

In answer to Mr. Goldfarb, you judge the lifetime value by averages. Say the average customer continues buying from you for five years. If the average customer spends $100 a year, the lifetime value of a customer (not any particular customer) is $500.

If you happen to be a dedicated brand champion and then get pissed off, your actions will change the averages.

So, yes, this involves predicting the future based on what happened in the past, but it's a rule of thumb that's better than just guessing. There are no hard numbers from the future.

But I don't think "lifetime value" is the right metric for this conversation. The question, "What's the value of a fan or follower?" makes much more sense. And the answer is probably not a heck of a lot in itself. My guess is that some critical mass needs to be reached before there's much value -- then there's significant value to the aggregate. But after that critical mass, each incremental add isn't that helpful. But that's just my opinion.