The value of Facebook and other digital services

Women seem to value Facebook more than men do.

Older consumers value Facebook more.

Education and US region do not seem to be significant.

The median compensation for giving up Facebook is in the range of $40 to $50 a month, based mostly on surveys, though some people do actually have to give up Facebook.

I find it hard to believe the survey-based estimate that search engines are worth over 17k a year.

Email is worth 8.4k, and digital maps 3.6k, and video streaming at 1.1k, again all at the median and based on surveys.  Personally, I value digital maps at close to zero, mostly because I do not know how to use them.

That is all from a new NBER paper by Erik Brynjolfsson, Felix Eggers, and Avinash Gannamaneni.

Comments

I am shocked that you do not know how to use digital maps. Is this some Straussian message? Do you never drive a car? They are very simple to use, just type in the address, tap driving directions, and it will read to you how to get to your destination.

Yes, I think this is the most shocking claim I've ever seen on this site. I would like a full post from Tyler on the subject.

The most shocking claim seems about right. Most of the time Tyler has the excellent balance of insight -- surprising, but too persuasive to shock. This was legitimately shocking, and has stuck with me after walking away from my computer. Curious in the extreme.

When you figure out that this place is mainly for show, as so many things connected with both the GMU econ dept. and the law and econ people in Arlington, the less shocked you will be at Prof. Cowen playing a digital visionary. One who does get lost every now and then, as digital maps are apparently being beyond him to use.

What surprises me here is how many people think it is "normal" or necessary to use or follow a digital map. Some have enve said in shock "don't you drive a car?" as though you can't get from A to B without a digital map. My car has a GPS with pretty multicolor maps but I never use it. It is more of a distraction than and aid. Don't get me wrong, I can see it's value in some cases but not as a normal part of driving.

Agreed. Unless you are quite young, you learned to drive by remembering for to get places, or writing down directions. It's still a good skill to have, because GPS will try to re-route you around traffic in often very counterproductive ways. You need to know what's what to override it when that happens. GPS is obviously very useful when you are in a completely unfamiliar city.

I suppose youngsters will grow up always using their GPS and having weaker mental models of their city. Then again, at some point even they will learn where things are in their familiar places.

Add me to the list of people shocked by Cowen's claim. Maybe he misspoke?

remembering 'how' (not 'for')

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But of course, Prof. Cowen's opinions about something like net neutrality are clearly the well informed musings of a digital infovore, and not something that can be easily mocked due to a lack of fundamental awareness of how the Internet has functioned till now.

Well, maybe not so digital when the curtain is pulled aside. Prof. Cowen should be commended for being honest, however.

However, for shocking, the Nazis as mere roadbumps to the better future that eugenics offers test was by far the most shocking thing I have read that Prof. Cowen has written. The building of favelas (with better Internet connections) in warmer parts of America suggestion was a distant second.

Can you keep your comments shorter? Ever since the death of NN it takes a long time to load them over my dial-up modem.

Really amusing comment, thank you.

...and that post should start with "I did not payed for a car navigation system".

'Do you never drive a car?'

Actually, he would not necessarily need to - GMU has the CUE system, and the GMU Arlington campus is very conveniently served by Metro. And if you drive, you most certainly do not need an app to go between Fairfax City and Arlington

Well, enjoy your usual snark, but I don't use digital maps either, and I drive more than three times the average miles for an American driver. My car has a navigation system I have never used, I did not buy the car to deliver pizzas. If you know where you are going or have even the slightest sense of direction, why would you need a digital map and point to point directions?

Part of being a sentient being is having the awareness of your surroundings and interacting effectively with the world. Waiting for a screen to paint a diagram showing you where to go is pretty pathetic, but many people these days apparently like being led like sheep by their digital overlords.

OK this is the most shocking (Luddite, unbelievable, nonsensical) comment to the most shocking (Luddite, unbelievable, nonsensical) posting by Prof. Cowen. "If you know where you are going or have even the slightest sense of direction" -Oh, this is obviously a joke. Nevermind.

Clearly Tyler has no abstract visual-spacial ability. Some people can never seem to grasp maps, even a century ago. An innovation in public transit was the simplied system maps that left out nearly all geographic details other than general preservation of n-s, e-w placement, and then connecting named places with straight lines via intersections for changing vehicles.

Personally, I found road signs for such people to be difficult as they marked roads for some destination place that I was not going to, and thus unaware of, instead of "route 5 west" which I knew I was following, even if it was heading northeast at that point to get around a mountain.

Digital maps incorporate what individuals had to go to AAA to get with TripTiks, though I think they were developed for truckers. These maps produced shortly before trips included road hazards, traffic congestion, vehicle restrictions, etc. Mapping software a decade ago created paper maps that were much like TripTiks, the overview map, then the detail maps for each segment in the trip route.

Technology now allows access to these maps while mobile, but the map on your phone is no different than printed maps. And they don't eliminate the need for printed maps for many cases, like hiking. Even GPS units with built in maps fail if in terrain that blocks GPS signals. A good paper map provides the large view to match terrain with map features, hard to do on a 3 inch screen. Assuming you can read a map.

Ironically, digital maps include features for people who can't use maps to get around, thinking they know where they are and how to get to their destination. Thus they get lost in the woods not far from a road, or drive off the end of a ferry dock.

I would love, just once, to scroll through MR comments without seeing a reference to Strauss. And, no, I mean nothing Straussian by saying that. Also, no offense to the commenter above.

I learned how to drive in 1969 and I learned how to ride a bicycle before that. How did I ever manage to find anything without digital maps, which were invented around 2000? I got this paper thing...oh never mind.

Not knowing how to use a digital map, or not wanting to bother learning, does *not* mean you don't have a sense of direction. It means you already do have a mental map of your environment - and maybe a paper one - and that the mental map is fairly accurate.

If TC truly doesn't know how to use a digital map then he is saying that he has never tried to use a digital map.

The value of Google Maps is far higher in the USA than elsewhere. GM is foremost a road map for drivers. It's tough to pick out the main streets in many cities because they are pedestrian and therefore a thin line. Want to see what route your train takes from A to B? Good luck. Have you ever tried searching for a river on Google Maps? Google Maps is also tending towards more obtrusive advertisements.

All of this is fine if you are driving to a new city and need to find a hotel, but there are many cultures where that usage of maps is not as dominant.

I find it very valuable in the UK. Not just for driving, but for waking, cycling, and public transport.

In the UK it does show "the route your train takes from A to B" and works very well for public transport, better than any alternative I know of.

I tried searching for a river just now and, yeah, it isn't great at that.

In the US, too. I use it all the time for public transport planning. Most locales have given up trying to come up with their own crappy navigation features, and now feed directly into Google and let them worry about it.

I've never tried to use Google Maps to travel by river. I've also never tried to use my microwave to make a pina colada. Or my eyeglasses to drive a nail through a wall.

Google maps is very valuable for walking and public transport in Sydney and Tokyo too.

Google maps does a pretty good job of highlighting commercial districts in cities, including pedestrian main streets. They are highlighted pale orange, which appears at certain levels of zoom. It's a relatively new feature; check it out - it's cool.

I feel like Google Maps should be better at helping me figure out what body of water I'm driving near.

I was say digital maps are probably the valuable thing on the internet, in terns of avoiding wasted time and optimizing if travel, they are a revolution. What are we missing Tyler? Is this one of those oldster rants about how we are losing our identity because some skill which used to be hard is now easy?

I've used the navigation fiction twice; I was in a city and I have this gizmo, let's see if it works. I use the satellite feature to replace topographical maps. My photos are geotagged and at one point I'll use that information. Maybe.

I like following my nose. I'm aware of where I am, so can backtrack. General directions by the sun or mountains, sometimes the compass in my phone helps.

New and different places, people. The necessary awareness means I see my surroundings.

Maps are useful, but reality is far more interesting.

A new website but still no comment editing. The stagnation persists.

Function, not fiction.

But I took it as a Straussian meaning first time!

Google maps may decay in the future . today cars include a tablet size screen and maps. For some time it was cool to use the phone to do the job, today?

Today we have Android Auto. Almost all built in car navigation systems are years behind what Google Maps does for free.

This is really just a poor comment. As Arnold said, the best car navigation systems use the Google Maps platform. Beyond the en-route navigation, Maps is extremely useful for use from a desktop/laptop. I have used it to plan many hikes, find restaurants, search areas for the best places to live, etc. Maps is literally the reason I have an awesome apartment location right now.

Google Maps is great in a 24" screen. For smaller devices, it's just bloated. For a map or instructions that you need to understand while driving a car, it's good to be years behind Google innovations, less is more.

Ps. Western Europe experience, company car, business trips.

Turn off detail. Old maps prided themselves on detail, but now they needed to be big, plus needed frequent updates. After oil companies promoted burning oil by handing out free maps, people expected costly free maps, which they threw away. So the oil companies switched to maps lacking detail, helped by Interstates that now provided 90% of all connectivity. So, map detail level has been a problem for ages. Digital maps have provided varying level of detail at the touch of a setting for a decade or two, far better than most maps.

However, system maps were invented about a century ago to allow easy use of transport, mostly public transport, but in some cases highways and walking trails. As far as I know, these are produced initially by artists, then updates by technocrats, who can turn them into confusing things.

Google Maps is very popular in Europe too: drivers, walkers, bikers, ... Whenever you have to find your way to an apartment, service, ...

Maybe they are worth what people pay for them? Plus advertising revenue? Google's revenues are 100bn for say 1bn people equals 100 dollars per year. Netflix costs 10 dollars per month.

That doesn't include consumer surplus. Text companies don't capture all the value.

Consumer surplus of 100x price seems dubious unless you believe in benevolent monopolies.

Search isn’t a monopoly.

While 17k is a tremendously high figure it is possible if the survey was skewed to the top quintile. Search is the fundamental tool in how office workers provide their services.

E-mail at 8k makes sense as well, it is a fundamental work tool.

It's amazing living in the future. My wife and I were discussing an old Star Trek episode and in 20 seconds she had it pulled up on the TV, and in another 10 had scrolled to the scene in question.

I'm not sure search has 17K of consumer surplus, but the fact that I can go from "how to I change the pull cord on my lawn mower" to a video of a guy taking apart my exact model and showing where to thread in less than 60 seconds is pretty amazing. I don't need to call up my uncle or go to the library or anything.

100x consumer surplus is something I'm skeptical of, but it's not entirely impossible.

I don't know if I'd pay 17K to replace it if it disappeared, but one thing Google and Facebook did do was make "buying" their services very unsticky, where I hardly even think about the purchases I'm making with my privacy. (Well, I don't use FB, so I guess I do think about it.)

And it's not so much that the monopolies are benevolent, it's that they can't capture any more of the surplus, either because competition or people just wouldn't feed a $5 bill into their computer each time they search even though it turns out to be way worth it in time saved.

This blog post on the value of Facebook and the previous one on modeling focus on the predominance of words for both. But then this blog post concludes with the admission that Google Maps has little or no value to Cowen since he doesn't know how to use the app. Cowen is a scholar who communicate in words; indeed, his speed-reading skill and the enormous volume of words he devours each day is legendary (well, maybe not legendary). I have commented several times about the movement away from words to communicate, to pictures and symbols, and grunts. It's unclear to me if Facebook and Google are leading this movement, or successfully exploiting it. Maybe it's a combination. This morning I read the transcript of a short interview with Marissa Mayer (you remember her, don't you?). On her time as CEO of Yahoo, she said this: "You’re rebuilding something and you know that it worked once, so it should be able to work again." Of course, she didn't, or couldn't. Social media had changed from her years at Google, but she kept attempting to rebuild Yahoo in the mold of Google. Words. They may be the past but may not be the future. Cowen best learn a skill other than speed-reading. [Here's the link to the Marissa Mayer interview: https://www.nytimes.com/2018/04/18/business/marissa-mayer-corner-office.html]

Google Maps is incredibly useful for walking or public transport in both a familiar - and especially unfamiliar - city. C’mon!

Makes you wonder about how intrepid an explorer Prof. Cowen must be in an unfamiliar city, compared to everyone using digital map services of one variety or another. Or else he uses the services of those who do use such digital services.

I know, right? I was recently in Tokyo and was glued to Google Maps. Took a great walk from the Miyako Sheraton to Sengakuji through all sorts of little, winding streets that I would have never seen otherwise.

Get with it TC! ;-)

You have it backwards.

Some possibilities why Tyler doesn’t use online maps.
1- He is paranoid about his comings and goings being tracked by Google.

2- He is visually impaired. Digital maps can be hard to read.

3- A big hobby of his is cartography. He is very disappointed with Google maps and sticks with the paper kind.

4- He is challenged by maps and has a lot of trouble reading them ( some people are ). Just like the teacher who couldn’t read, he is now ready to come out and tell the world he has never read a map.

We should put a gold star on this post and enter it in the contest for the "most astounding" blog on the Internet this year. I wonder if Professor Cowen is trolling us as even my technology challenged spouse knows how to use Google Maps. One assumes that any PhD economist can run FRED models with ease; Google Maps is so much simpler.

I'm astounded at the reaction. I love maps but I know where I am. I know the smell and feel of neighborhoods. The focus required to get somewhere means I'm open to experience and learning. Maps are an abstraction of reality. Useful, but an abstraction.

Last year a road opened that joins two valleys. They are forestry roads, so passable but rough. A washout had been fixed. I was working in the valley over, so I decided to commute home on this road. 16km then turn right. There is a sign. Indeed there is, but unclear, so I explored. My destination was to the east, and I followed roads until I saw a very recognizable peak ahead, that happened to be North and West. Gimli in the Valhalla range. I was surrounded by mountains and valleys leading here and there. Magnificent country. As I was enjoying the view two motorcyclists showed up. They didn't know where they were either. Their destination was different than mine. But we talked, described what we had seen, took our bearings then backtracked and found our respective ways.

That was a good day that I remember.

Lived experience over digital abstraction, bingo!

OK in doses, some of the time, but most of us have places to be in short amounts of time.

Also, it sounds like derek prefers not using GPS but is still able to do so if he needs to. Saying you don't know HOW to is really weird.

Cowen rarely posts in the comments but he does sometimes. He really needs to get down here and clarify what he meant.

Here's a preliminary version of the paper: https://www.aeaweb.org/conference/2018/preliminary/paper/YiDBztQt

Women seem to value Facebook more than men do.

It's very well suited to displaying pictures of your grandchildren, pictures of your lunch, and pictures of cats.

Older consumers value Facebook more.

(1) Grandchildren; (2) shirttails; (3) collateral relations we're fond of but haven't seen in 30 years.

1 endowment effect
2 stated preferences

Yes. Additionally, you have the issue of substitutes and network effects. People are imagining what it would be like to live internet free in an internet dependent society, and indeed that would be a hassle. But that greatly overestimates the aggregate society level value of these technologies. A society deprived of the internet would find other ways to meet human needs and these "next best" solutions would be work reasonably well. Indeed, they DID work pretty well and, I would argue, better in some respects.

If i understand this synopsis correctly, the numbers don't sound right -- about 30K annually for all this stuff? And how much would be left over for food, housing and clothing?

Pfft. Why do we need housing? The internet is like a narcotic. We're like junkies hocking all of our tangible possessions.

Agreed. These numbers all seem vastly inflated to me. Email MIGHT be worth $8k annually to some people, but (as someone else mentioned in this thread) that really depends on whether we're talking about email vanishing from the face of the Earth vs. from just my own life.

Search engines have revolutionized research, but again: is the average American taking in half their annual income from some sort of web-search-dependent income stream? $17k is just bonkers.

From my reading of the synopsis, the question was, "how much would you have to be paid to give up these services?" It's not, "how much would you pay for these services if they weren't free?"

From the article: "We explore the potential of massive online choice experiments to measure consumers’ willingness to accept compensation for losing access to various digital goods and thereby estimate the consumer surplus generated from these goods."

If I had to give up e-mail and conduct all of my correspondence via phone, postal mail, in-person, fax, or text message; $8k actually seems low. I keep all manner of documents in my e-mail - receipts, confirmations, reservations that would have to be stored on paper. Making hotel, transportation, and other reservations for international travel would be a headache - long distance phone calls, postal letters, miscommunications, etc.

Would I take $3.6k to not use digital maps for a year? I'm not sure.

It's worth noting that almost none of this value is captured in GDP.

Yes, the entire point of the paper is to use choice experiments to attempt to measure the changes in well-being that GDP cannot.

FYI, a typo

Brunjolfsson -> Brynjolfsson

(with a "y" not a "u")

For the next draft, we'll ask about the value of crowd-sourced spell-checking...

if only I could add these corrections to my academic CV...

Happy to see that you saw this and made the correction. I am sure Erik's online spirit is pleased. Now to see if I can use this as a peer reviewed publication ;)

I like Google Maps, but I am surprised sometimes when they tell me it will take 22 hours to get across town.

It turns out they want me to walk.

These figures are ridiculous and have no relation to reality. Back before Google Maps was available on smartphones I bought my father a Garmin GPS navigation device for $129; and so did a modest number of other people. If digital maps were worth $3K+ those Garmin devices would have sold like iPhones.
These numbers fail any sort of empirical market test and should be laughed off.

If you use Uber or Lyft, you use digital maps. Garmin was a good start but today's phone based GPS's are a lot easier to use, and thus used by an order of magnitude more people (and self-driving cars).

Agreed. Everyone would have bought early IPhones too.

Sanity check, median US household income is $59K. Those "how much is it worth" numbers (search engines 17k a year, Email 8.4k, digital maps 3.6k, video streaming at 1.1k) are really hard to believe; 29%, 14%, 6%, 2% of household income.

I've had email since 1982, when it was intra-company among less than a dozen sites. I'd hate to give it up, but Its certainly not worth 14% of household income for many people. Digital maps for $300 a month? Seriously?

You can value the goods and services you own at many multiples of your household net worth. I would pay $1,000/year for a toothbrush if I had to, but thankfully I don't have to.

I just don’t believe it. Electric power or a dependable clean water supply, worth up to a large fraction of income, ok. Digital maps for convenience? Not credible.

The studies are identifying the consumer surplus, the difference between the most you would be willing to pay and what it actually costs. I literally could not do my job without the Internet - I would rather go out of business than recreate a no-Internet version of what I do. The consumer surplus is in six figures. Likewise with a toothbrush, which I would pay $1000 for if I had to. Fortunately I don't care much about digital maps and would only pay a few dollars for them.

By the way, there are some very strange goings on in international internet connectivity.

In modern Russia, you don't quit social media, Russia quits for you.

https://tech.slashdot.org/story/18/04/18/1356227/russias-telegram-ban-is-a-big-convoluted-mess

The valuations don't make sense. The way I'd price them:

Digital maps are worth a slight convenience premium over the paper kind.

Email is much closer - the utility is huge, and if if vanished overnight, it might cost me more than 8400 to set up parallel systems as useful to me. (Professionally, our business costs would jump through the roof if we moved to paper communications, and we'd end up repricing the products. Don't know what that would do to the business - not my area - but it wouldn't be good.)

Facebook holds negative value for me. I don't use it and resent their panty-sniffing surveillance addiction, so I go out of my way to block their beacons. It costs me money to avoid them.

Video streaming - eh. I've been watching more TV lately, but it is easy to stop, and after a week of habituating myself to more useful activities, I don't miss it. Netflix is roughy appropriately priced to me; ~$10/mo. for a lazy distraction.

Geez, folks. It's not that we can't find or remember any place, or grew up unable to read paper maps. It's that digital maps (a) are helpful in locating optimal travel routes - I've cut my daily drive to pick up the kids from a best-ever-18-mins route to a counter-intuitive yet easier drive that averages 14 minutes; (b) assist in finding the best parking vis-a-vis event venue & multiple dinner or pre-party site options; (c) provide crowdsourced construction updates and almost instantaneous traffic accident updates that allow one to quickly re-route; (d) holiday errands? out-of-town guests? Anything that requires out-of-the-ordinary destinations in succession in a single day can benefit from a digital map to help you solve your own "traveling salesman" problem.

Google maps are OK but I really like the Streetview feature -- virtually cruise down a few streets to see if a neighborhood looks viable for work or play or is better off avoided

The problem with this study is that the internet has made these digital services, which have marginal utility on their own, but huge relative status increases available to all. Taleb's minority rule (https://medium.com/incerto/the-most-intolerant-wins-the-dictatorship-of-the-small-minority-3f1f83ce4e15) forces everybody onto a social network or you risk being a pariah. Once you're all using it, the increased status disappears and all you are left with is three minutes off your commute, but higher social demands on your time.

A similar problem exists in startups. AWS and other business services online made it too cheap to start a business, and paradoxically harder for a startup to succeed. As everybody floods the market with businesses, the signal of quality has gone down because it's too easy to start one and now it takes less conviction, skill, guile and grit than it used to.

None of those things provide a fundamentally new good or service. Rather, they provide a faster and more easily accessed version of specific types of goods and services that were previously accessible to those who wanted or needed them.

Although the estimates are interesting, for practical application/consideration these values should be compared to the next best thing (e.g., their predecessors), not the stone age.

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