The value of social media channels

Social media has become an integral part of the media landscape. The channels available today can be used as free channels (followers and likes) and paid channels: with the use of advertising. By far the most popular are Facebook and Instagram.

We often get the question: what is the value of my followers and likes? Read more about it in this article. There are roughly two ways to determine the value of social media accounts. 

Discounted Cash Flow

All valuations we do at Businessforsale.eu are based on the discounted cash flow valuation method. In other words: the future earning capacity of a company is discounted from the future to the present. What is the impact of likes and followers? Basically, these followers and likes are part of your "brand". It provides extra reach and -if all goes well- revenue. The margin and profit you make already include the impact of social media; after all, what is the value of followers who buy nothing? Therefore the value of social media performance is reflected in the business profit, and is not valued seperately. 

Conversion Value

Conversion value is more common to apply to an email database, but can also be used on followers. Suppose for an e-commerce company the average conversion through paid channels costs 10.00 euros. This can be derived from Google Ads, for example. If you assume a one-time mailing or message to followers then the value of an the database is the conversion times number times the average profit per sale. A very rough number but a value that can be worked with. This is an alternative calculation when the discounted cash flow is more difficult to apply, for example with a content or affiliate site. 

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Practice

So what is the value of Social? Most importantly, it supports your brand. Potential customers check the credibility of your shop by searching for reviews, experiences and also followers. Here, you can quickly see if a young shop overpromises, or if there are loyal fans who support your promises. In practice, we do not assign an additional amount to followers and likes; these should be reflected in the number of customers, conversions and spending.