Consumer Psychology for a Digital Age

Facebook Share Worth $14 ((RPA) Revenue Per Action), Converts at 0.2% [Report Download]

Social commerce platform ChompOn, which offers a white-label service allowing websites to set up, host and run their own on-site Group Buy and Flash Sales, has published some interesting data on how much a Facebook share and tweet is worth in terms of revenue generated.

Bottom line – a Facebook ‘Share’ generates $14 of revenue, and a Twitter ‘Tweet’ generates $5 of revenue.  ChompOn also deducts that a Facebook ‘Like’ generates $8 sales, and a Twitter ‘Follow’ $2 sales.  The methodology is below.

ChompOn, which allows website owners to create a Groupon/Gilt-like widget to embed on-site, only looked at the effect of social actions on immediate sales; thus potentially underestimating the total (lifetime) value of new customers co-opted via social actions.  Nevertheless, as with the recent Eventbrite analysis, the ChompOn ROI metrics provide much needed data points in a sea of social commerce hype. Click the report image to download the report.

Unfortunately, ChompOn did not provide their average deal price – which would have allowed us to calculate the relative value of social actions, that you could use to extrapolate for your own social commerce business case.  But if we take Stephen Carpenter’s most excellent Groupon teardown, we see the average price paid for a group-buy deal is $45.  That means a Facebook share is worth (indicatively) about 30% of the price of what you’re selling.

This seems high, but given an average number of people exposed to a Facebook share is 130 (the average number of friends someone has on Facebook), then the conversion rate would only have to be 14/(130*45) = 14/5850 = 0.0023 = 0.2% to generate the $14 revenue. 0.2% is high, but not so high as to be unrealistic.

So, selling a cosmetic product for $10, then a share is worth $3. Selling a car for $20K, then a share could be worth $6K.

Of course, all these back-of-a-beermat metrics are to be taken with a salt-mine of sodium chloride, but they are a start, and we think they still beat the pants off so-called engagement metrics.

Chompon Methodology (for more details see Chompon’s Sam Yam answering on the oh-so-hip-it-hurts Quora Q&A site)

  • For shares and tweets, ChompOn was able to directly attribute sales to the original action, so they simply took the total revenue attributed to each action and divided it by the total number of shares/tweets.
  • For likes and follows, ChompOn had to estimate attribution by looking at their traffic references and subtracting out purchases made through shares/tweets as well as purchases made through direct traffic.
  • None of ChompOn’s analysis captures long-term value of customers acquired through these social channels – which means the true value per action should be even greater.
  • Gross revenue depends on the products/services being sold, but due to the diverse set of ChompOn publishers, ChompOn still feel the comparison between actions is reasonable.

 

Comments (16):

  1. jin

    February 22, 2011 at 05:07

    so…. Can you guess how much Twiter Retweet is value? I think the Retweet’s value is more valuable than Facebook Like. What do you think about it?

    Reply
  2. ck

    February 22, 2011 at 16:00

    hi paul, is there any data on the conversion rate of groupons’ design? (from visitor to purchase)

    Reply
    • Paul Marsden

      February 24, 2011 at 10:14

      Good question, CK – not to my knowledge – would be a useful stat, although it’d vary deal by deal (how much the headline deal stacks up with the small print)

      Reply
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    August 4, 2011 at 22:32

    I am sure you will love for more for less

    Reply
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