Understanding Facebook's data and its marketing and financial value in an interview with marketing data scientist, Rhonda Knehans Drake.
As Facebook's IPO approaches, financial analysts, marketers, and consumers wonder how the dominant social media site will change and where future revenues will come from. EMarketer forecasts Facebook's 2012 global revenues to be $6.1 billion while its advertising revenue growth rate continues to decline. But what these forecasts overlook is Facebook's one hidden asset.
To-date Facebook has three significant revenue streams from its participants.
So what's left that no one's discussed? Big data. To understand Facebook's data and its marketing and financial value, I interviewed marketing data scientist, Rhonda Knehans Drake, Drake Direct president and NYU professor. (Here's Rhonda's full analysis of Facebook's IPO.)
Heidi Cohen: What data does Facebook have that's most valuable and why?
Rhonda Knehans Drake: Facebook enables users to connect directly with their network and intimate details of their life via text, photos, and videos providing a variety of data elements, attributes, and monetization opportunities.
HC: Who would be the market for this data/information and why?
RKD: Every marketer would find Facebook's information valuable for targeting messages. Specifically, likes and life events data answer the marketing message's "what." What's this person in the market to buy given what's happening in his/her life and what does s/he like?
Relationships partially answer the "who" of marketing messages to allow tailoring based on a prospect's friends who already like the product giving it an implied endorsement.
Post information addresses "how" a message can be targeted. Through Facebook posts, a person's temperament is revealed allowing messages to be targeted based on values and temperament.
When we're active on Facebook it lets marketers know "when" to contact prospects.
HC: How would you value this data and what's your rationale for your pricing?
RKD: The data elements by themselves have a value of $5 to $10 per thousand per data element, consistent with offline data compilers' pricing for similar information. This equates to about $0.005-$0.010 per individual per data element per usage. The cost is additive for using several variables at once.
Additionally Facebook's targeting and delivery mechanism provides incremental value. Based on Facebook's model, a suggested bid pricing for message delivery would be used where higher demand prospects may be priced higher like keyword bidding on Google. Unlike search, Facebook delivers ads to your target audience without waiting for them to act.
To appropriately value Facebook's data opportunity you must include the value of the data combined with the message's delivery (impressions delivered).
To fully assess Facebook's value, you must include the full breadth of its big data offering combined with its ability to deliver the targeted message. What's missing from this analysis is consumers' perspective on privacy and the use of their personal information and how this would affect data usage.
What' your view on the potential of Facebook's data? Please share your perspective in the comments section below.
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Heidi Cohen is the President of Riverside Marketing Strategies, an interactive marketing consultancy. She has over 20 years' experience helping clients increase profitability by developing innovative marketing programs to acquire and retain customers based on solid analytics. Clients include New York Times Digital, AccuWeather.com, CheapTickets, and the UJA. Additionally, Riverside Marketing Strategies has worked with numerous other online content/media companies and e-tailers.
Prior to starting Riverside Marketing Strategies, Heidi held a number of senior-level marketing positions at The Economist, the Bookspan/Doubleday Direct division of Bertelsmann, and Citibank.
Heidi is also a popular speaker on current industry topics.
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