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August 6, 2012
Does Facebook Advertising Drive Dollars?
 
The crux of the Facebook advertising pitch is that the 800-pound guerrilla social network drives business for the brands that use it. New research from Forrester suggests that the chicken or egg question still remains open.
 
In a new reported titled “The Facebook Factor” Gina Sverdlov and team admit that quantifying the ROI of Facebook investments is difficult and then go on to run regressions against survey data. They asked respondents to their ongoing Q4 2011 North American Technographics Online Benchmark Recontact Omnibus Survey if they were fans of brands on Facebook.
 
They focused on Best Buy, Coke, Blackberry, and Wal*Mart — all iconic brands with lots of Facebook fans and large consumer audiences. They also asked survey questions about purchase frequency and volume. Then they did logistic regressions against the self-reported data.
 
The findings showed generally that fans are much more likely to know about, consider, and buy from highly visible brands. No surprise there. Forrester chose to spin the data to conclude that “Facebook fandom has the largest impact on purchase” based on the results of serial regression analysis. For Best Buy, Facebook fans were 5.3 times more likely to buy, though it’s not clear if they bought because they are fans or if buyers, already in a relationship with the brand, became a fan to publicly signal their ongoing endorsement or advocacy of the brand.
 
It’s the chicken or the egg scenario. The fancy math, which is based on self-reported and therefore inherently unreliable data sets, cannot show us if there is causality, correlation, or just coincidence. My hunch is that people who already love brands are the ones who fan them on Facebook primarily because they want deals and advanced or inside notice of new products, services, or prices.
 
The other significant value of fans seems to be their role as ambassadors and advocates. In the study, Blackberry owners had an 87% probability of recommending Blackberry to a friend while non-fans only had a 44% referral probability. Given RIM’s issues, these numbers are astounding (or dated) on their face. But I’d buy the idea that Facebook fans are also twice as likely to talk up and recommend brands as non-fans. It’s logical.
 
There’s also a healthy dose of RFM (recency, frequency, monetary value) evidence in the survey data. People who bought from any of the brands were 20–40% more likely to recommend the brands they bought. I’d guess they have an equally high probability or making a second purchase from the brand and it’s a fair bet that Facebook fans do this more and possibly more often than non-fans. There is self-reported data that suggests that Facebook fans spend from 2X to 3X more than non-fans, but in the absence of real purchase histories, color me skeptical.
 
This research seems to prove that Facebook fans can be powerful brand advocates. The jury is still out on their value as super customers. The real ROI question is…can brands cost-effectively mobilize these advocates to drive sales?

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Danny Flamberg, EVP Managing Director of Digital Strategy and CRM at Publicis based in New York, has been building brands and building businesses for more than 30 years.Prior to joining Publicis, he led a successful global consulting group called Booster Rocket, as Managing Partner. Before becoming a consultant, he was Vice President of Global Marketing at SAP, SVP and Managing Director at Digitas in New York and Europe and President of Relationship Marketing at Amiratti Puris Lintas and Lowe Worldwide.
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