June 24, 2014 9:24am PT by Eriq Gardner
Lawsuit Over BET Show Explores Monetary Value of 6 Million Facebook Likes
Ten years after Facebook launched, what is the value of a page with six millions "Likes" on the social network? Ask one expert, he'll tell you it's worth millions of dollars. Ask another, he'll tell you practically nothing. Maybe that really says something about the value of experts.
Last year, an insurance agent named Stacey Mattocks sued Black Entertainment Network for stealing her Likes. The plaintiff had set up a Facebook page for The Game, a show about the lives of professional football players and their significant others, when it was canceled by The CW Network. Thanks in part to Mattocks' social media campaign, BET revived the show. The cable network then got Mattocks to hand over keys to the Facebook page and according to her complaint, eventually usurped her.
A judge is still due to address whether Facebook Likes can be subject to unlawful conversion, but if the case gets to jury, both sides are preparing experts to testify about what damages should be when a cable TV show's popular Facebook page is stolen.
Let's start with the rosy scenario coming from Fernando Torres, chief economist at IPmetrics, retained by Mattocks' side. In his submitted report (read here), he looks at things like TV ratings and ancillary income from a third-party website called Sulia.com that pays for referrals. Perhaps the most interesting (and of course, controversial) aspect of his report comes when he attempts to figure out what The Game's Facebook page would sell for if it was actually for sale.
Torres acknowledges that that "there are no organized markets" for such intangible property—unlike real estate or equities—but he attempts to consider how sellers and buyers would treat the expected revenue of a page. He starts out with the revenue that Mattocks made on her page from Sulia, coming up with a base annualized revenue amount of $107,273. Then, expecting a positive fan base accrual, he pegs growth at 1.04 percent annually. Some discounts for risk are then factored before he comes to a conclusion that a seller would not be benefiting unless the Facebook page was sold for at least $306,918. But that's just the seller's end.
Then, there's the buyer's, or BET's. Torres believes that its interest in owning the Facebook page is to maintain and expand interest for the show on television. And thus, he attempts to measure the expected ratings effect, concluding after analysis that the incremental ratings attributable to the Facebook page are 0.247. Then, he looks at what that means in terms of more advertising revenue, and factoring risk again, he comes up with the worth of the page from BET's perspective being nearly $20.6 million over the next five years. As for a reasonable maximum bid from a buyer's standpoint, he's looking at $1.39 per Fan (or "like") for a total of $8.7 million. So, somewhere between $300,000 and $9 million. He settles on the mid-point: $4.5 million for a cable TV show's Facebook page with about 6 million fans.
Hogwash, says Aram Sinnreich, an assistant professor at Rutgers University's School of Communications and Information, who was retained by BET. In his submitted report (read here), Sinnreich says that Facebook likes aren't assets, there's no market for them and their value is minimal. "In fact, to my knowledge, a Facebook fan site has never been bought or sold at market," he states.
Maybe the most interesting aspect of his report is his interviews with technology investors, marketing consultants and executives about the viability of treating Facebook pages as assets to be bought and sold. One marketing agency executive tells him that "the value of a 'like' has decreased pretty exponentially" in recent years due to Facebook's strategic shift towards charging marketers for visibility on users' feeds. Another investors fears that a user who simply "likes" a page might just be a casual action without further value. Another investors cites Facebook's terms-of-service as a reason for value caution, saying it is "the thing that would scare most investors. You [the curator] don't own those things."
Needless to say, both sides are attacking the others' experts as unreliable with faulty methodology.
In one motion brought this week, BET asks the judge to exclude the testimony and opinions of Torres because he does things like create a hypothetical negotiation between buyers and sellers without any real existence of an open market for Facebook pages. The network faults his $4.5 million mid-point value as being done "arbitrarily and without any logical basis." Torres is attacked for ignoring that the Facebook page allegedly has never derived BET any revenue and existed before and after the series TV rating bump.
In another motion, Mattocks asks the judge to exclude the testimony and opinions of Sinnreich because he's claimed to be more experienced in the realm of music and hasn't done much work in media, culture and technology. The plaintiff says he doesn't really have a methodology except to rely on hearsay opinions that allegedly were developed solely for the purpose of this litigation.
It's now the judge's call to determine the worth of an expert asked to determine the worth of social media.