The Economics of Attention

by on October 24, 2017 at 7:25 am in Economics, Music, Television, The Arts | Permalink

David Evans on the economics of attention:

In 2016, 437 billion hours, worth $7.1 trillion dollars, were exchanged in the
attention market in the US based on conservative estimates reported above. Attention
platforms paid for that time with content and then sold advertisers access to portions of that
time. As a result, advertisers were able to deliver messages to consumers that those
consumers would probably not have accepted in the absence of the barter of content for
their time. Consumers often don’t like getting these messages. But by agreeing to receive
them they make markets more competitive.


The economics of attention markets focuses on three features. First it focuses on
time as the key dimension of competition since it is what is being bought and sold. Second,
it focuses on content since it plays a central role in acquiring time, embedding advertising
messages, and operating efficient attention platforms. And third it focuses on the scarcity of
time and the implications of that for competition among attention platforms.

The $7.1 trillion estimate for the value of content seems too high. The high value comes from Evans assuming that the marginal wage is higher than the average so the average wage which he uses to calculate the value of time is, if anything, an underestimate while for most people I think the marginal wage is lower than the average (many people don’t even have jobs) so the average is an over-estimate. Brynjolfsson and Oh, however, using somewhat different methods estimate the consumer surplus from television as 10% of GDP and from the internet of 6% GDP or combined about $3 trillion at current levels. Either way the attention economy is very large and understudied relative to its importance.

1 chuck martel October 24, 2017 at 8:08 am

Figures are given as to hours and the worth of the attention market, all estimated, but no figures are given for the actual costs, where real money is spent purchasing the rights to that attention. In any event, it seems unlikely that the costs were anywhere near $7.1 trillion. This would indicate that activity in the attention market is an investment of unprecedented effectiveness.

Returning to reality, the idea that any particular human’s time has a value over and above his productivity in a specific marketable task is simply preposterous. Does the fact that highly-compensated actress Jennifer Lawrence sits on the couch and watches a Seinfeld re-run make that half-hour in her home worth some ridiculous amount of money? What was the value of the time spent by me thinking about this subject and then broadcasting those thoughts? Probably zero.

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2 NPW October 24, 2017 at 9:22 am

I’m unconvinced of the logic. Few of us are paid for watching TV and to count time spent watching at the same rate as our income is nonsensical. Just because A goes to B and B goes to C, doesn’t mean that A goes to C.

For instance, Cocoa comes from a plant…Vegetables are plants….Chocolate is salad.

I’ll agree that attention matters, but the units are hours not dollars.

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3 derek October 24, 2017 at 9:58 am

Depends which side you are on. If you are selling it then you want it to be worth $7.1 trillion. If you are buying it the worth is the sales you get out of it.

The second one is why all of a sudden I see places that were free now wanting money to visit their sites. The value of that attention isn’t that much and people were being overpaid for it. The market is correcting and the internet is about to see another massive adjustment in how it functions.

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4 NPW October 24, 2017 at 10:29 am

When I’m not at work, my attention is on different things than when I’m at work. Should my attention spent boxing, sleeping, or eating be measured in dollars? I don’t see the justification that the argument that the unit should be dollars, and that the rate should be the same as when I’m at work.

Even if one were to measure the TV watching in dollars, the logic of why that rate should be the same as when at work doesn’t seem to hold.

I have three different jobs. Each pays me at a different rate, which makes sense since they are three different activities.

TV watching =! Gainful employment(for most people)

Sales people can want a pony, but a con is still a con.

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5 Thiago Ribeiro October 24, 2017 at 10:47 am

I sleep US$ 80, 00 a day.

6 Thor October 24, 2017 at 9:58 am

Which Seinfeld re-run? Because if it’s the one where they can’t find their car, then her time is worth more than Puerto Rico’s debt. (Yes, it has come to this.)

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7 Andrew Beeve October 24, 2017 at 8:09 pm

> no figures are given for the actual costs, where real money is spent purchasing the rights to that attention.

That figure is given in the first paragraph of the linked paper. It is “roughly $199 billion.”

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8 A clockwork orange October 24, 2017 at 8:12 am

We are seeing a convergence in programmatic advertising. Often confused for spam advertising, programmatic (like classical music) is simply a delivery methodology, based on behavior.

RTL, Vivendi (Canal+), many major television content companies are now in the programmatic ad business. Vivendi owns Havas. The New York Times first programmatic director was in 2012. International Data Group first opened the position in 2012. All publishers have bought into programmatic as a proof of concept for greatly improving revenue since then. Television and internet optimization for advertising will be certainly leaning on synchronicity, joint programs. Is digital over 20% of the 7.1 trillion? Probably, 100 billion in revenue coming from Google in 2016.

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9 Steve Sailer October 24, 2017 at 8:21 am

How good is measurement of the value of advertising these days?

In the early 1980s I worked for the finest real world test marketing facility of television advertising ever developed. Initially, it proved extremely popular with advertisers, who largely wanted justification for increasing their ad budgets. But it became unpopular by the late 1980s because it seldom showed that increasing advertising would increase sales of consumer packaged goods.

This would seem like a pretty interesting subject to study, but I have seldom seen anybody being all that intrigued by it.

I suspect the world hopes that advertising works and doesn’t really want to test that hope too hard.

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10 EverExtruder October 24, 2017 at 8:51 am

Not just suspects, probably knows. Additionally, it is not a little off in efficacy. It is WAY off.

Ad blockers and AdNauseum are just the tip of the iceberg here. I and a growing population will specifically discard and disincentive products for purchase based on their aggressive advertising or marketing campaigns. I suspect it will eventually get to a point where advertisers have to pay individual consumers to pay any attention to them at all. It has already somewhat occurred in the “likes” market on facebook where certain users are able to benefit for brand loyalty, and up until recently, Youtube advertising monetization and now demonetizations.

Furthermore, youtube ads are getting very short, probably because I’d estimate over 90% of consumers are hitting the “skip ad in 5 seconds” and I read recently the same is happening with some TV ads, which will be very useless in 10-15 years as the main TV cohort starts passing on en masse in the West.

The future does not look good for traditional advertising models, and will likely start moving in the direction of individual “taste-makers” and/or “outrage” marketing. Either way, the broad spectrum access will end, as will the volume.

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11 A clockwork orange October 24, 2017 at 9:04 am

But the fast food market will always lead the artisanal grocerie and everglade ads.

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12 MOFO October 24, 2017 at 9:36 am

Ive always thought that is why on line advertising is so much cheaper than print or TV ads. Not because its any better or worse, but because people could see how infrequently anyone interacted with it.

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13 Thor October 24, 2017 at 10:01 am

“I suspect the world hopes that advertising works and doesn’t really want to test that hope too hard.”

This. For advertising, substitute ——-.

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14 apoptosis October 24, 2017 at 5:52 pm

education spending?

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15 Albert October 24, 2017 at 11:07 am

Which makes sense, it seems obvious that the ad industry is best at selling itself as a useful tool. There was never any chance they’d underestimate their own value, after all, so their evaluations should always have been taken as an extreme upper bound.

Like my boyfriend has this weird habit of asking salespeople for advice on things, even at places like Best Buy where the employees obviously know nothing whatsoever. He calls me cynical for accurately predicting that, 100% of the time, the salesperson says “this is the perfect product for you” which 100% of the time turns out to be incorrect.

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16 harpersnotes October 24, 2017 at 8:32 am

Stating the obvious perhaps, but seems strongly related to the puzzle of increasing mark-ups, the economics of intangibles, and the individual differences in tech proficiency between corporations blog posts earlier.

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17 rayward October 24, 2017 at 8:36 am

Attention markets! That’s a fine euphemism. Google and Facebook capture about 65% of total revenues from digital advertising in the “attention markets”. 65%! Of course, the marks in the attention markets don’t complain because they are receiving the services of the minders for “free”. Yes, people actually believe the services are “free”. People will believe most anything.

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18 A Truth Seeker October 24, 2017 at 10:02 am

A chilling snapshot of life in Trump’s America.

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19 Robert Rounthwaite October 25, 2017 at 11:27 pm

How should time spent on this blog be counted?

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20 Lexical Mentat October 26, 2017 at 6:24 pm

You really ought to have given a glance to the book with the title you gave your post. I know the author and and the book and you would be popularizing something worthwhile.

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