The ROI arithmetic of acquiring likes and creating a “fan community” for your brand’s page on facebook has changed significantly versus just a year ago. Brands aspiring to be friends with their ‘fans’ would require to be more careful in evaluating whether the likes are really valuable and how many of these make sense to on-board.
Why was acquiring ‘likes’ attractive?
An analogy could help explain this. Acquiring likes was like creating a large database of potential buyers. A brand could nurture these potential buyers by ‘be-friending’ them, engaging them with good communication and creating a positive bond. Eventually, these potential buyers would become actual buyers, repeat buyers and possibly pro-active advocates.
Acquiring ‘likes’ and communicating with them was and is a much better tool than email marketing. Emails change, mail-clients become smarter in quarantining promotional messages and open rates decline over time. Importantly, emails provide for one-way communication (for the most part) while facebook posts could be interactive and have different forms (image, video, offers, and sweep-stakes). Certainly a no-brainer versus emailers.
The strategy of acquiring likes also compares very favorably versus display ads because of “native” nature of ads (brands being seen ‘at par’ with friends) and not as disruptive pop-ups or ‘distractions’.
The most significant advantage clearly was that you pay one-time and “own” the fan for his/her lifetime and have infinite opportunities to ‘convert’. This wouldn’t be true in the case of display ads or emailers, where you pay to the provider for every click through or email shot, respectively.
What has changed?
In nut-shell, acquiring ‘likes’ does not guarantee that a brand will be able to actually communicate with the fans or followers. This is a significant change. Why has this happened and does acquiring likes still make sense? We deal with both these questions below.
Why has facebook made this change?
User experience has reigned supreme in the changes which have occurred and that is good for the platform. A platform is as valuable as the time the users are on it and that should and is the primary consideration. A corollary to this is that as long as users find the platform useful and spend time on it, it would continue to be valuable for the brands. To quote from facebook’s own rationale: “Ultimately, what’s good for people on Facebook is good for the businesses that use Facebook to reach and engage them.”
As the popularity of the platform has increased, so has its attraction for brands. There are more people posting on facebook and there are more brands trying to communicate with their ‘fans’ as well. There are simply far too many contenders vying for the user’s attention. Facebook using its algorithm, tracks the viewers’ response to any communication from a brand’s page (or even posts from friends). So a brand’s communication is now pitted against a friend’s wedding pics or stories from a vacation your relatives took. The engagement metrics are being stacked and the pages (or friends) whose communication offer the lowest engagement are shown less often or not shown at all. Now, that is a big change!
This change makes sense from the users’ point of view and therefore the platform’s point of view (and therefore the brand’s point of view too!). But this has implications on the ROI metrics as well as strategy the brands need to take.
How does the ROI arithmetic change as a result?
The number of impressions of your brand is now only a fraction versus before. Therefore your chances of conversion or life-time-value of the “fan-base” is certainly lower than before. Let us take an example. If you could on-board a like for $1, 100,000 likes would have cost the brand $100,000. If annually 1% of this like-base converts to buy your $100 product, you get $100,000 worth revenues every year and this continues every year. A great ROI if you are selling at decent gross margins.
Enter the changes which we discussed above. An additional filter has been added, which shows your communication to only a fraction (let us say, 10% of your fan-base). We are talking 1/10th the impressions versus earlier. Even the best case scenario would suggest that the brand would be worse off than earlier in terms of ROI, given that its impression opportunities are 1/10th of before.
One may argue that with this change, the ones who really “engage” with the brand see its communication and therefore the conversion % of those who see might be much higher than the 1% assumed before. This could be true to an extent, but one should acknowledge that not all “buying fans” would necessarily like, comment or share a brand’s communication. Those valuable potential buyers would definitely get knocked off from the brand’s audience. And that adversely affects the ROI.
How should brand-teams’ change their strategy on facebook?
The bottom-line is that ROI on like acquisition is not as attractive as it used to be. One needs to evaluate whether the ROI is still attractive versus other mediums of communication or not. We define a framework to help brands decide how to re-define their ‘likes’ strategy based on the changes by facebook.
The changes by facebook are clearly making the brands work harder. Brands now really need to be choiceful in the ‘friend’s’ they select. They must then ensure that they truly ‘be-friend’ the ‘fan’. This would ensure that the brand would come out clean when pitted against real world friends of user. That now becomes the key for brands. Clearly, there are no easy ways, no windfall ROIs to be had. Brands would need to work harder to get meaningful ROIs. They’d need to become true friends, not a pest!