Facebook apps: How do you estimate the market potential?

Revenue projections for a Facebook app should be done like you would for any product, say a refrigerator, or service. Here are a few steps you could consider:
  • You need to first define your target audience, then estimate how many people from your target audience are already active on the platform [e.g. Facebook] and in the geography you are targeting [i.e. the markets you are addressing].
  • Once you have the number, you need to calculate the number of people you CAN reach through your media spends and the activities that are within your control ( e.g – ads in the press or online) and your distribution channels (e.g. if the product/app is bundled with another existing brand or sold through app stores, etc). Remember, just because your app is on Facebook does not  mean that your marketing & advertising channel should also be Facebook. E.g. you could put efforts on PR – get a few TV interviews, press articles, etc. – and you could probably reach a much larger audience with your limited budgets.
  • Then you make some assumptions on how many additional people in your target audience can be reached through means like PR, viral effect, etc.
  • Once you have these numbers, you make assumptions on the percentage of people who are likely to buy/download your app.
  • If your revenue is based on buying/subscriptions, you estimate how many people X how much per download. If your revenue is advertising, you estimate how many impressions, and use existing media rates to estimate your revenues.

Now, to extrapolate this to the future, you make various assumptions on the base target audience size. You can use various media reports on where the target audience numbers are likely to go on the platforms you choose to be on.