Customers Acquired via Facebook, Twitter Are Not as Valuable As Those from Non-Social Sources

Lifetime customer value is one way of measuring the impact that certain people have on business. The factors used to calculate this include customer acquisition - the cost of marketing - and, of course, the amount they spend or are expected to spend over a figurative lifetime based on historical data as well as statistical projections.

It is from this sort of analysis that marketers determined the significance of customer loyalty, which is why they try so hard to keep you with promotions, discounts and other enticements.

So as businesses acquire more data and enhance their ability to analyze it, they are beginning to concentrate on how the customer came to them. The net is clearly a fertile source of information in this regard. And the initial news for social media is discouraging. It seems that customers acquired via social sources, especially Facebook and Twitter are a lot less valuable than those from even seemingly random sources such as pay per click ads or so-called 'organic' search (a clever way of avoiding the word Google).

There are some issues with this analysis such as the fact that it is easier to calculate the value of a direct search or click-through because it is immediately obvious what the customer is looking for. As the ability to refine such analysis improves, it may become apparent that social provides other attributes as a source of business. Social may become an essential tool for raising awareness if not directly stimulating sales. For the immediate future, however, it may be that consumers' view of Facebook and Twitter as forms of personal communication rather than explicit drivers of business will inhibit the growth of their value to investors and marketers. JL

John Koetsier reports in Venture Beat:

Social networks have a long way to go to be as lucrative as search engines. (Yes, we might as well just say as lucrative as Google.)
Customers acquired via Twitter are worth 23 percent less, and Facebook brings in just barely average clients. But pay-per-click advertising brings in customers worth 46 percent more, and organic search brings in buyers who are worth a massive 54 percent more than your average customer.
Even lowly old e-mail marketing beats social, with 12 percent more valuable customers.
Lifecycle marketing company Custora regularly studies customer acquisition and other key metrics in the $200 billion U.S. digital marketing and commerce market, based on aggregated data from millions of U.S. customers and top e-commerce retailers. Today, the company released data on the lifetime value of customers based on the channel used to acquire them.
The results are astonishing.

Channel	Customer lifetime value (as a percentage relative to average)
Organic searchPay-per click and cost-per-click adsReferralE-mail Affiliate marketing Facebook Twitter	54.25%46.5%26.1%11.81% 7.53% 1.31% -23.36%

Those results also have to be disappointing to social networks such as Twitter and Facebook, both of who have been ramping up monetization efforts in the past year. Twitter in particular has pushed its new ad solutions hard, with new targeting tools, big deals with big ad agencies, and a rumored ad exchange.
But you must take the results in context.
It’s much easier to prove immediate and clear customer value when the client comes in via an organic Google search or an ad specifically for a specific product.  Those kinds of channels operate on the intent graph — searchers are looking for something specific — which social networks struggle to access. However, both Twitter and Facebook are seeking ways to access that intent graph indirectly via retargeting and, eventually, via graph search. Of more immediate value, however, is that the sheer number of impressions on Facebook and Google can add up to an awareness campaign that appropriately sets up more specific and targeted channel campaigns.
One other interesting result? Rural areas offer higher-value customers, mostly because rural residents have few shopping options and are more likely to buy items online, particularly specialty items. Who would have known that Wyoming customers are 28 percent more valuable than the average American?
The only unfortunate thing, of course, is that there are so few of them.
Custora’s results are based on two years of data from 72 million American customers shopping at 86 U.S. retailers spanning 14 industries.