Abstract
Facebook, the online social network, has more than 2 billion global users. Because those users do not pay for the service, its benefits are hard to measure. We report the results of a series of three non-hypothetical auction experiments where winners are paid to deactivate their Facebook accounts for up to one year. Though the populations sampled and the auction design differ across the experiments, we consistently find the average Facebook user would require more than $1000 to deactivate their account for one year. While the measurable impact Facebook and other free online services have on the economy may be small, our results show that the benefits these services provide for their users are large.
Highlights
In 2012, Facebook broadcasted its first-ever television advertisement, entitled “The Things That Connect Us” [1] The ad compared Facebook, in its utility and meaning, to a chair; an object that has functional value to individuals, but can be at the heart of building and maintaining social relationships
If Facebook were a country, it would be the world’s largest in terms of population with over 2.20 billion monthly active users, 1.45 billion of whom are active on a daily basis [2], spending an average of 50 minutes each day on Facebook-owned platforms (e.g., Facebook, Messenger, Instagram) [3]
Though auction procedures and subject demographics varied across our four samples and different procedures, we consistently find that our 1,258 auction participants derive over $1000 of value annually on average from Facebook, reinforcing the idea that the computer age’s effect on society’s well-being is much larger than its effect on gross domestic product (GDP)
Summary
In 2012, Facebook broadcasted its first-ever television advertisement, entitled “The Things That Connect Us” [1] The ad compared Facebook, in its utility and meaning, to a chair; an object that has functional value to individuals, but can be at the heart of building and maintaining social relationships. Because Facebook’s users pay nothing for the service, Facebook does not contribute directly to gross domestic product (GDP), economists’ standard metric of a nation’s output [15]. To measure the value of a product or service to consumers, economists would generally estimate consumer surplus. According to the Pew Research Center [30], 54% of American adults had home internet access in 2004 Applying this percentage to America’s 112 million households in 2004 [31], Goolsbee and Klenow’s results suggest that Americans received $150 billion to $230 billion in consumer surplus
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