The Influencer Algorithm

EIS 2009 Marketers place a lifetime value on customers with addresses on their 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 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.

1 comment about "The Influencer Algorithm ".
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  1. Jonathan Graber from Three Pillars Recruiting, May 7, 2009 at 10:05 a.m.

    Very interesting article. Right now, I am working with a company that does this in the Blogosphere. This company is a niche ad network that developed a proprietary software that IDs top "influencers" in the blogoshere and uses inventory space on those sites to place ads. It seems like Web 3.0 will try to answer the question of "How can we tap into the social media space to increase ROI?"

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