Experimental Period

Just a few years ago, major brands treated social media marketing as an experiment. Budgets for social media marketing were minimal, and social media “campaigns” were often handed off to the PR team, which would complete the requisite checklist: put up a Facebook page, post to the wall, and then send out a few tweets. Goals for social media campaigns were very static, and their main purpose was often to demonstrate to the C-Suite that “something” had been launched on Facebook and Twitter. Hard metrics were almost non-existent, and social media campaigns were not integrated with other traditional marketing initiatives. This was Social Media Marketing’s experimental period.
 

Adolescence and Rapid Growth

Fast forward to the summer of 2011. Social Media Marketing is demonstrating tremendous growth on many levels. Facebook and Twitter have achieved critical mass, and before long, Google+ and Foursquare could join the standard shortlist of social media marketing platforms.

eMarketer estimates that 80% of companies will participate in social media marketing this year, which is nearly double what it was just a few years ago. Brands are investing heavily in social media marketing, and their social media budgets are burgeoning. This year, companies spent over $2 billion on social media advertising, and analysts from BIA/Kelsey expect that number to quadruple to $8 billion in the next few years. This growth rate will far outpace the rate of growth for SEM, email marketing, mobile marketing, and affiliate marketing.

Brands are racing to reach and connect with consumers on Facebook. In December 2010, Facebook reported over 2 billion “like” button clicks on 2 million websites. The Facebook page has become an essential marketing tool but it is critical for companies to get it right. Unlike other forms of online marketing, social media marketing is especially effective in convincing consumers to give up personal demographic data that includes their interests and social connections. In return, social media has provided consumers with additional social connections, engagement, unique content, and social status.

To obtain this data and build brand relationships, companies like Vitrue, which is a ScaleVP portfolio company, were started to help companies and brands create Facebook pages, drive users to their pages and engage users after they have liked their pages. Social media marketing companies also help companies report on key metrics such as the number of Facebook fans, Twitter followers, impressions generated and content shared.

It is also worth noting that “hard” or at least, “nearly-hard” metrics are starting to emerge in the social media marketing space. Various studies have started to pinpoint the value of a Facebook Fan in either customer lifetime value (CLV) or earned media equivalents. For example, a 2010 Syncapse study of larger brands showed that the average CLV in one year of a Facebook Fan is $72. For larger brands (such as Coke and McDonald’s), the figure was closer to $140 per fan.

In addition to CLV, Facebook Fans can also be evaluated in terms of an earned media equivalent.   Vitrue offers a tool on their site that helps companies place a value on the engagement through an earned media calculation.

Based on a few assumptions, here’s what the annual earned media could be for a brand’s Facebook page.

  YouTube Disney Oreo Cookie
# of Fans 43,476,772 27,821,432 22,694,637
# of posts per week 4 5 4
CPM $5.00 $8.00 $3.00
Annual Value
of Earned Media
$45,215,843 $57,868,579 $14,161,453

 

We estimate that some of these larger sites like YouTube could generate over $45M in earned media value, which translates to $1 per fan.

As the different CLV and Earned Media Equivalent values demonstrate above, metrics for Facebook fans are still evolving. But with that said, it is clear that Facebook Fans have tremendous value at some level for each brand, especially since the acquisition of Facebook fans can be leveraged as a powerful “top of the funnel” marketing tool. Savvy brand marketers understand this, and hence, there’s been a social media arms race in the past year or so to acquire Facebook fans, which is an easy metric to focus upon.

The growth of the Facebook Fan pages for brands has been tremendous. Currently, the top 1000 Facebook fan pages are growing on average at about 1.6% per week, and this growth rate can be increased significantly through ongoing social media promotions. Brand managers know this, and when they launch a social media marketing campaign, they follow the burst of fan acquisitions in the same way a Hollywood studio executive obsesses over the weekend box office.

So what does the Social Media “box office” look like? We took a look at the Facebook top 50 page list (from AllFacebook). The list is dominated by pop culture pages such as Texas Hold’em Poker (#2) and Lady Gaga (#6), but numerous prominent brands such as Coca-Cola (#14), Disney (#22) and Starbucks (#31) make the top 50. In fact, a single product like Oreo Cookies (#40) has acquired over 22M fans on Facebook.

As of August 2011, here’s the top 15 “most-liked” brand pages on Facebook.

Page Rank
Brand
# of Fans
1
50,561,999
4
43,476,772
14
33,441,133
22
27,821,432
25
27,004,388
31
24,374,132
40
22,694,637
45
21,900,668
50
20,525,491
55
19,016,392
63
16,935,806
66
16,434,556
78
15,209,779
98
11,974,453
99
11,937,455

 

But despite the near-term emphasis on Facebook Fan counts, brands are already in the process of evolving their social media strategy into something more sophisticated since their fans also want to have a conversation and more deeply engage. In other words, convincing fans to “like” a page is no longer enough, especially in the ever-more-crowded Facebook brand space.
 

Heading Towards Maturity

So where is social media marketing heading, and what will it look like when the space matures? We believe social media marketing is poised for 5 or more additional years of explosive growth. Over this time period, social media budgets will begin to rival traditional advertising outlays, and social media campaigns will be consistently integrated with traditional campaigns. In turn, brands will demand more comprehensive and integrated tool sets from social marketing platforms; these tools will allow brands to track campaigns and performance metrics across four or more platforms in real-time. Additionally, metrics will be much more sophisticated, integrated, and precise. The ROI of social media marketing will be easily comparable to the ROI of traditional advertising and other online marketing campaigns.

The challenge for brands will shift from acquiring fans to maintaining engagement, and then finally, monetizing fans at a greater rate. To accomplish these goals, and to maintain high rates of fan acquisition, brands will have to work harder, and they will have to more frequently offer exclusive high-quality content, chances to win aspirational prizes, and loyalty rewards.

Finally, in the coming years the rapid proliferation of social media marketing companies will taper off; consolidation in the space will become the norm. In recent months, we can see the beginning of this consolidation trend as Buddy Media recently acquired Spinback, Vocus acquired North Social, and Efficient Frontier acquired Context Optional. Almost all of these acquisitions occurred so that these social media marketers could offer a more comprehensive “one-stop” set of social media marketing tools.