Sofa Moolah

Facebook Case Study: How PayPal UK Got 177,000 Fans for Under $5,000

There’s been a lot of discussion recently about the true value of a Facebook fan. Some, particularly those in the direct response world, have said that having a lot of fans on Facebook isn’t necessarily going to translate into revenue. Others, primarily those in social media, have claimed that the real value of a Facebook fan varies from business to business, with some proving quite profitable.

It’s not my place to comment on the real value of a Facebook fan. They do vary from one industry to another, and it’s definitely a field that benefits some businesses more than others. Local brands, for example, tend to do very well on Facebook, whereas high-value services and expensive niche products rarely appeal to the wide audience that Facebook is capable of generating.

Given the going rates for ‘allowing’ a Facebook application to interact with your account, at least those passed around the various cost-per-action advertising networks, it seems like anything from fifty cents to five dollars is the going rate for Facebook fans. Other sources, such as social media group Syncapse, have claimed per-fan valuations of $136 – a fairly lofty value prediction.

Knowing this, let’s look at a recent promotion from PayPal UK. It’s tough to find anyone who works online that doesn’t have an opinion on PayPal. Some of us think of it as a highly valuable tool, some others rank its value slightly lower. What all online professionals share is that we know and use it on a fairly frequent basis. But what happens when PayPal wants to reach people that don’t?

Just a few days ago, PayPal UK ended their iPad promotion, giving away a grant total of ten iPad 2′s to various winners. The only requirement to qualify for the prize – become a fan of PayPal on Facebook. It’s a simple incentive that can prove remarkably effective in situations like this. Let’s look at just how effective it’s turned out to be for PayPal UK.

With 177,000 new fans and a huge new network to market to, PayPal UK managed to acquire its fans for an individual CPA (cost per acquisition) of just $0.028. That’s less than three cents for every fan – a truly stunning metric. Given the valuations given to fans – all of which range fairly dramatically – it’s tough to argue that PayPal’s promotion was anything but a success.

This CPA was calculated using the net cost of the ten iPads – $499 each, for $4,999 in total – and dividing it by the amount of fans gained by the promotion. Although there are other expenses that PayPal would have no doubt run into – staff and others spring to mind – it’s tough to argue that the overall cost-per-fan was anything more than four cents.

Let’s compare this type of promotion to other methods of generating fans through Facebook:

Purchasing this amount of fans from market leader uSocial – a Facebook fan purchasing service – would have cost PayPal almost $10,000. While this seems like a cost effective option, albeit not as cost effective as the actual promotion, there are other concerns. Would uSocial provide fans that are as high quality as the ones PayPal gained manually?

Even using Facebook’s advertising platform, renowned by most as a source of fairly inexpensive traffic, would have cost PayPal a fairly large amount of money. Suggested bids for UK traffic are fairly high, and even with a high click through rate, it’s likely that PayPal would have paid above thirty cents per click. With a thirty percent click-to-fan rate, this would have cost them almost one dollar per individual fan.

There are, of course, free options for generating fans on Facebook – methods that don’t even require the purchase of iPads or other competition prizes. PayPal could have conceivably put a ‘like’ button on its website, aiming to turn its current UK-based users into fans. But this would have been a slow process, and one that attracted PayPal’s current customers instead of newer, high-value customers.

Watching PayPal’s success is one thing. Learning from it, however, is an entirely different situation. As marketers, we’re accustomed to using platforms like Facebook Ads and Adwords to acquire leads for our businesses, often at a fairly costly rate. We’re profitable, no doubt, but when you see a CPA like that of PayPal, it becomes tempting to explore alternative options.

There are some easy ways that you, as a marketer, could run a similar promotion to this. Whether using iPads or gift vouchers, or even a sample of your own service, you can attract fans through a smart incentive program that costs a fraction as much as other leads would. There’s going to be a drop-off in interest from your fans – that’s inevitable – but it’s very likely to become profitable.

If you’re a blogger, this type of promotion could produce opt-ins and regular readers. If you own an affiliate offer, or work as an affiliate for one, it could produce low-cost sales and cheap leads. If you have a business that appeals to people on Facebook, running a promotion like this and using it as a marketing platform could help you reach tens of thousands of people in your local area.

Best of all, it’s reaching people that, besides the obvious incentive of a contest prize, are actually interested in what you’re offering. While PayPal reported a decline in their fans after the prize was drawn, it wasn’t significant. Even following the draw, the total cost-per-fan was still substantially lower than three cents. That is a cost-per-acquisition that’s very tough to argue with.

If you’re tired of spending money on Adwords lead generation, Facebook ads, and slow SEO lead generation efforts, consider marketing using incentives on Facebook. While the value of a fan can range from one business to another, it’s challenging for your business not to profit from fans that cost as little as three cents each.

16 Responses

  1. Not really successful though as nearly all them people will unlike them now after finding out they havn’t won an ipad unlike other services where people tend to stay on. Lets be hoenst people liked it for the ipad nothing more and will unlike it I too have done so. Besides the winners names look fake too so it probably didnt cost them either! William Williams??

    1. Interesting thoughts. PayPal told me the maximum number of fans they got to was 195,600 and as I write this it’s at 194,053. That’s just over 1,500 people who’ve disliked the page.

    2. Most people will in fact probably only like it to win the iPad and with the intention to dislike it again after the contest is over. However, I’m pretty sure people will forget about it and just leave the “like” alone.

      1. I agree with both points. Their fan count has gone down to 193,555 which is almost 500 people disliking the page since I last updated a few comments up.

  2. Interesting article, 3 cents for a first meeting with 177 000 potential clients (because that’s what those likes are in my opinion, potential customers) really isn’t a lot! Giveaways have always been a great marketing tool, why wouldn’t anyone click the like button and try to win a great prize for nothing!

    1. Agree. We’re using giveaways here at Sofa Moolah as an incentive for people to subscribe and it’s working really well – no reason for it not to work anywhere else.

  3. One more thing I wanted to add (blame the no edit button for double posting, sorry!)

    I’d like to suggest to increase the line-height on the H2 title tag, because it is a bit annoying to read right now. A line-height of around 25px would do the job I think.

    Just a suggestion though!

    1. Haha, sorry ’bout the lack of an edit button, we’ll try and get that fixed ASAP. Thanks for the suggestion, we’ll add it to our to-do list and test it out, see what it’s like. Thanks mate.

    2. Hey, the line-height was too small at launch so we increased it to 32px, is it too large for you now or still showing up too small?

  4. Interesting study. I’m wondering how much PayPal UK had to spend in advertising to get the word out about their promotion. PayPal has a significant online presence already and I’m guessing that smaller companies would need to invest a tidy sum to get such a response.

    However, I might be underestimating the viral nature of free crap giveaway promotions.

    1. It would be good to know what advertising they did. I think I might reach out to them and see if I can get a comment. I’ll keep you updated. 🙂

  5. So, how many extra sales has this promotion got for Paypal? Now that would be a very interesting question. Other interesting questions;

    How many people who will “like” a page because of an iPad giveaway are looking for an online payment solution, but aren’t already PayPal customers?

    How many people who joined in the giveaway promotion will now hang around Paypal’s facebook wall trolling on everything that’s posted and reducing the value of Facebook to the brand?

    1. PayPalUK hasn’t gotten back to me about sales or anything like that. What’s interesting is that the PayPalUK Twitter account is now suspended (at at 18/07/2011) and the Facebook page is no longer their. Weird…

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