Alex's Notes

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.

Mechanical Turk is a system for crowdsourcing small tasks. And it rocks, if you don’t like doing small tasks.

Amazon developed the system in 2005 to crowdsource the job of categorizing its own products, mostly CDs. It’s been open for public use (in Beta form) ever since.

I’m writing about it because mTurk has remained impressively unknown over the years, even among techies. But for entrepreneurs trying to build web systems fast (and gain users, content, discussion, etc.), it can be a powerful secret weapon.

The Idea

Mechanical Turk bridges the gap between completely automated tasks (such as counting the words in a book), and creative tasks that require human thought (such as writing the book). The mundane tasks that live in this gap are not quite doable by machines yet. An example is re-writing a book, paragraph-by-paragraph, to retain the original meaning but with a different wording (as with avoiding duplicate content penalization).

How it Works

1. Break your crazy task into many micro-tasks (called “HITs”: Human Intelligence Tasks”).
2. Design your HIT on mTurk: describe what each “Turker” must do, how they submit the answer, and how much you will reward them.
3. Submit your HIT, and wait…
4. When the work is done, approve it so the Turkers get paid.

Read their FAQ to learn the rest.

Who does these tasks?

Turkers seem to come from every country, with most from the US and India. In fact it’s surprising there aren’t more in India considering the state of Elance, ODesk, and other crowdsource-ish markets. The last I checked, Amazon only direct-deposited earnings into bank accounts or paid Turkers in Amazon credits, which would work best for North Americans. In any case, you can specify which countries are eligible to complete your HITs.

How much do I have to pay?

You can set any prize for your HITs but since it’s a free market, you need to set a reasonable price to get any work done. Many HITs are priced at only $0.01 for simple tasks like image tagging, while others are over $5 USD. I try to keep the effective hourly rate for my hits between $8 and $12 per hour.

Example Uses

My first useful task for Mechanical Turk saved me days of work and hundreds of dollars. I had a video aggregation task; I needed metadata and embed codes for one thousand YouTube videos which met certain criteria. I planned to employ some of my friends for this task and pay them very fairly, which would have run a bill of about $500 and taken about a week. Instead, I broke it into 100 HITs of 10 videos each and posted it on mTurk. To my amazement, the next morning (7 hours later) I had one thousand videos indexed as needed for a quarter of the planned cost.

Other great mTurk uses include:

• Tagging content (photos, videos, articles, etc.)
• Rating and sorting content
• Writing comments, making posts
• Writing reviews, answering simple questions
• Surveys
• A/B page testing
• Aggregation (eg. building a directory)
• Research (eg. finding competitors)
• Clicking ads, Digging articles (just kidding! Totally against TOS, but you were thinking it, weren’t you…)

Surveys

My main use of mTurk has been rapid market research in the form of surveys. In five minutes you can make a basic survey using mTurk’s native forms, or you can link to your own survey system (I prefer PHP-based LimeSurvey).

How fast and how much? About $0.03 per survey question equates to a fair wage, and if you need less than 50 responses (such as with a pilot survey) you won’t wait more than half an hour for all your responses. Of course there is some selection bias with these surveys that you’ll have to consider.

And remember, Turkers are customers too! If you are doing a market research survey for your new widget-thing, why not allow the Turkers to opt-into a mailing list so they can hear when you launch? In the last big survey I did, about 20 percent of respondents gave their email for just that purpose, meaning the survey can pay for itself in leads. It worked for Pixlin.

One problem

When I last checked a month ago Mechanical Turk was still not available to Canadians, but I’m sure you’ll find a way around that.

How much traffic can a Facebook page bring your site? Is it worthwhile to build a fan base on Facebook?

For sites serving a passionate niche market, fan pages are an excellent investment because:

• You can build you fanbase quickly using Facebook’s very targeted ads
• You can gather quality community feedback
• You can encourage fans to interact directly with your site (increasing site traffic and user-generated content)
• Pages provide tools that your site may not have (discussion board, wall, photo albums, etc.) to better engage your users

In this short post I’ll discuss the level of fan engagement you might expect from your page. My experience is mostly drawn from building the pages for the video site FightTube, which include: FightTube, FightTube – Taekwondo, FightTube – MMA, and others. The main content on these pages are links to FightTube videos, updated frequently.

How Pages Deliver Value

Initial Contact and Exploration

When someone discovers your fan page they’re likely to click-through to your site if they’re presented with engaging content. I found that about 85% of new fans clicked a video link to our site on the same day they became a fan. Other engaging content could be links to photo albums or to full articles. Visitors could bounce off your fan page if your content becomes buried between fan comments, so setting the “Default View for Wall” to “Only Posts by Page” will keep things clean. You can also showcase your most engaging content by creating an FBML tab for it, and setting that tab as the landing page.

Fan Updates

You can "send an update" message to all fans, which goes to the "Updates" section of their inbox. This isn’t terribly useful in my opinion because I don’t think most people check their "updates", and I’ve had poor response rates using this.

Page Status Updates

When you update your page’s status (the "what’s on your mind?"), it can potentially reach the news feed of all of your fans. Of course it won’t reach them all, because:

• Some fans won’t visit Facebook in time (other content will bury your status)
• Some fans may use filters that exclude it (page status updates are seen under the filters "News Feed" and "Pages", but not "Links" or "Status Updates").

So how many fans can you reach with a status update? That’s a great question; I don’t know because there’s no direct way to measure it. For short statuses featuring a video link (and video thumbnail), I’ve measured about:

• 5 to 15 percent of fans click through to the video
• 0.1 to 2 percent of fans "like" the status
• 0.1 to 1 percent comment on the status

The chart below shows interactions for one particular fight video. This link was posted at 2 P.M. on a Sunday, but I feel the optimum time of day for a page update (assuming North American and Western Europe fans) is 3 P.M. from Monday to Thursday. The graph illustrates how about 80% of interaction occur in the first eight hours.

Photos, Videos, Events, Links, and Notes

These can also be used to reach your fanbase, but I don’t use them so I don’t have much to say here. Note that videos are special: any videos a page uploads to Facebook will have a "become a fan" button permanently attached to it. If the video becomes widely spread (using "share"), it could win you many new fans.

Next posts:

The value of a fan: Monetizing Facebook Pages

The cost of a fan: Growing Facebook Pages