Vitrue recently came out with a blog post explaining their methodology behind the value of a Facebook fan where they developed the first-ever published Facebook fan valuation.
The study indicates that a Facebook page with 1 million fans is worth a minimum of $3.6 million in earned media annually.
There has been some backlash and controversy swirling around the Internet since this report was posted, mainly by Matt Bowman of VatorNews in his article, How much is a Facebook fan worth?
Bowman fiercely challenges the study and states that “Brands have rushed to attract fans on Facebook in hopes of grabbing up consumer mindshare for a bargain. When it comes to estimating the value of such efforts, they’re shooting in the dark, given the embryonic stage of Facebook marketing and lack of data. Wednesday morning, Adweek tried to address that by publishing numbers from social media consultancy Vitrue, which put a price of $3.60 on each Facebook fan. AllFacebook and AllThingsD have parroted the number. Precision makes for great headlines… the only problem is, the figure is highly dubious. ”
Vitrue’s motives are questionable. They make money by managing companies’ campaigns on Facebook and if they can make brands feel better about investing in its services, it puts money in the bank.
Here is how Virtue got the figure:
The firm has determined that, on average, a fan base of 1 million translates into at least $3.6 million in equivalent media over a year.
The company’s findings are based on impressions generated in the Facebook news feed, the stream of recent updates from users’ networks. Vitrue analyzed Facebook data from its clients — with a combined 41 million fans. Vitrue arrived at its $3.6 million figure by working off a $5 CPM.
Vitrue estimates the average annual impression per fan by taking the finding that “most fans yielded an extra impression,” (over what time period?) and then multiplying that by 650, assuming two postings a day.
So what do you think? Is the math flimsy?