Is it possible to start a self-reinforcing loop of Facebook advertising resulting in exponential revenue growth? Sure!

1. Make a facebook page
2. Promote it with Facebook ads > get fans
3. Use page status updates to drive traffic to your site > monetize the landing page
4. Invest the earnings in more Facebook ads > goto step 3

This basic cycle is possible with with any form of advertising, but does it work any better on Facebook than it does with TV ads or Adwords? The big difference is that once you have earned a Facebook fan, you can reach them many times until they unsubscribe from your page. This makes Facebook page marketing more like time-tested email marketing.

Facebook social games are a great example of a similar cycle. The addictive games keep users returning daily, and monetize this traffic with virtual currency and often scammy offers. The cycle is reinforced with paid Facebook ads and social advertising (mostly personal status updates).

But these games are social, interactive, and fun. The tight integration between the game platform, social platform, and ad platform has lead to domination of online gaming. So how fast can a Facebook page grow, if it only monetizes weakly through a non-interactive landing page?

Facebook page growth: not good

The below graph is one possible answer to "how fast can a page grow" with this strategy. After an initial $100 investment in Facebook ads to build a starting fan base, you can expect to be making US$800/month in ad revenue after two years. Of course, all this would be plowed back into Facebook ads, and you’d still be out $100. The calculation parameters are explained further below.

In this base case, each fan will "pay" for their acquisition cost after 6.3 months, or after 100 status updates have been made (at the rate of 4 per week). The characteristic (doubling) period is 18 weeks.

Better cases

I graphed a rather pessimistic case so that nobody is even tempted to actually try this. But like all cases of exponential growth, the outcome is highly dependent on the factors that determine the exponential growth rate. Here, those factors are cost per fan, CPM of the external site, and fan clickthrough rate.

If you reduce your cost per fan from 15 cents to 13 cents, the fan growth rate would double. Or if 20% of the fans clicked-through instead of 15%, you would make $4000/mo in ad revenue instead of $800. And of course if you extended the base case to the 3-year mark, ad revenue would hit $5,380/mo.

The most likely improvement is in landing page monetization. The assumed $5 CPM is possible with a good general-content site, but a site for a more lucrative market can bring much higher CPM through higher CPC ads and affiliate programs. According to this model, a site with $10 CPM would make $80,000/mo by the 2-year mark.

This model is probably reasonable for under $1000/mo revenue. Beyond that, the cost per fan would escalate since you simply wouldn’t be able to buy enough ad impressions at that low price ($0.12 CPC) to maintain exponential growth.

Base case parameters

eCPM – How much you can earn per thousand visitors to your landing page. Depends entirely on your visitor demographics an interests, and resulting from your Facebook page targeting and fan page topic. Assume $5 CPM and 2 pageviews per visitor, making US$10 per thousand fan visits.

CTR – Click-through rate of your status updates. Depends mostly on how intriguing your content is. I’ve seen between 5 and 30 percent of total fans click-through to a status link. Assume 15 percent.

CPA – Cost for acquiring one Facebook fan. While it might cost about $0.12 per click with a fan conversion rate of about 40% (meaning $0.30 per fan), social actions (Facebook page recommendations and status updates of joining fans) can at least double the value. Assume overall cost per fan of $0.15. I’ve also assumed a fan attrition rate of 0.2 percent per week.