The value of Facebook?

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.

Here is the paper, by Jay R. Corrigan et.al., via Jake Seliger, and here is Jake’s take on the recent Facebook disputes.

Comments

"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."

This may be true. But asking them how much they would need to be compensate to move to an identical platform run by a competitor might give a better insight into the value of Facebook as a non-monopoly business.

I think the point here is to estimate the value of this kind of service to the customers; since you don't pay for it, it doesn't contribute to GDP although it really adds value. You are right that this doesn't estimate anything about the value that Facebook in particular adds, just the value of this kind of social networking to people who get it.
This is similar to a previous study which found that giving up search engine access required the highest compensation with a median willingness-to-accept (WTA) of $17,530. Email ranked second with $8,414 and digital map services ranked third with $3,648. "Using massive online choice experiments to measure changes in well-being" https://www.nber.org/papers/w24514

'The value of Facebook?'

Priceless, if one believes in a for profit surveillance state.

Regardless of any privacy concerns, of course. 'Facebook targets users with location-based adverts even if they block the company from accessing GPS on their phones, turn off location history in the app, hide their work location on their profile and never use the company’s “check in” feature, according to an investigation published this week.

There is no combination of settings that users can enable to prevent their location data from being used by advertisers to target them, according to the privacy researcher Aleksandra Korolova. “Taken together,” Korolova says, “Facebook creates an illusion of control rather than giving actual control over location-related ad targeting, which can lead to real harm.”'

The link is to the actual work - https://medium.com/@korolova/facebooks-illusion-of-control-over-location-related-ad-targeting-de7f865aee78

"Priceless, if one believes in a for profit surveillance state."

It exists. What's funny is if you polled people, my theory is 90% would probably agree it exists while 90% still saying they don't believe in it (as in moral). But that is immaterial.

My other theory is that a major event in the next few decades will cause a paradigm shift in this sensibility. The misuse of the tracking data still doesn't scale for most users on the spectrum of evil....but one day soon something will.

Banksy was absolutely right, "the 20th century was about getting your 15 minutes of fame, the 21st will be about getting your 15 minutes of anonymity."

I am tired of being anonymous. When I post here and nobody replies it is like that I never posted.

Oh piss off

Counterfactuals are tricky here given the role that Facebook plays in social coordination. If invitations to all the parties are sent on Facebook then I would miss out on a lot by losing Facebook access, but if no one in my social circle had Facebook then invitations would be sent by email or something and the inconvenience cost would be much smaller.

I've used Facebook on a few occasions to look up people from the past, but otherwise I don't see what it adds to what was already available on the internet before it became popular. I'm guessing that it's mostly a deplorable basket of people who fell into using it because it was there and they didn't have to learn much else. Full disclosure, I find it irritatingly clunky and have never bothered to figure out to exploit whatever value it may have. But it sure ain't $1000.

"...who fell into using it because it was there and they didn't have to learn much else". That describes myself of 2007, and I still use it on 2018. Not sure if today I'd get into the trouble of setting up a new social media account (instagram?). For me, Facebook is kind of a bubble that trapped me and my friends 10+ years ago. Not so different to other parts of popular culture like music, books, movies. People born in the 1960s like completely different music to people born in the 1980s and it's fine. Something similar happens with Facebook.

Instagram is owned by Facebook, as is WhatsApp.

Which means that one reads about how Instagram was also used by various nefarious actors, we are still simply talking about Facebook.

Oddly, I though that this was such common knowledge that everyone knew that Facebook and Instagram are simply part of the same social media corporate entity.

It's not about company ownership, but doing things because you're bored and things were there at the time. Have you never done things just because other people do it?

'It's not about company ownership'

Well, for the company, it is all about the data collection, regardless of which of its UIs are used. The for profit surveillance state is a many splendored panopticon.

'because other people do it'

Without trying to get strange about it, isn't that pretty much the only reason we do everything, as true originality in doing something never done before is fairly rare.

Facebook is a single sign on service, meaning it lets you register for a website with one click. Incidentally, facebook gets to know at least that you're interested in that service, but for you it's very nice that you don't have to make a new username, new password, etc.

So is google etc. but a lot of apps default to or require facebook.

The difference between Facebook and previous sites like MySpace is that Facebook aggregates all of your friends updates into a feed that you can easily scan, so you don't have to go around checking all your friends webpages, or deal with RSS readers or anything, it's just all already there for you. It's like if all your friends had a blog instantly set up for them and you had an RSS reader that automatically aggregates all of their blog postings.

Not really. Theoretially, there's an aggregation, but since FB began using algorithms to design what goes into your feed you miss updates from those with whom you don't engage frequently (or who don't engage with you frequently). While you can revert to "latest" in your feed, each time you click away FB reverts to its preferred feed for you.

I loathe FB and would give it up for practically zero $ if not for (a) the need to manage a business page and (b) friends who are too lazy to communicate using other methods.

The problem with this paper is that it excludes, entirely, individuals and businesses who use Facebook as a (or The) e-commerce channel for their commercial activities. That's a common mistake, especially in the US and Europe, where the platform is widely viewed as a means for non-commercial social interaction. But elsewhere in the world - especially Africa and India - it's also viewed as a crucial commercial and trading platform (that Facebook is trying to leverage). Ask a Nigerian secondhand goods trader how much he'd accept to give up his account, and I'm pretty sure it'll be more than $1k! Anyway, I touched on some of this back in April, here: https://www.bloomberg.com/opinion/articles/2018-04-19/emerging-markets-can-t-quit-facebook

That's interesting.

Still, how much does a Nigerian secondhand goods trader typically make in a year? I don't know. Nigeria's per capita GDP is about $2,500. If the secondhand goods trader makes $5,000, would he refuse more than 20% of his income for leading faceboook ? That seems a lot...

The only problem is, for most Nigerians (and most Africans), Facebook IS the internet. So if a Nigerian trader gives it up, he's essentially giving up the only e-commerce channel through which he can sell. So I don't think he'd give up 20% for that, no.

Ill-timed.

It's called the network effect, which is not something Facebook or any other social network creates. Rather it's a positive externality created by the users. It's the network effect, not something uniquely produced by Facebook, that is behind most of that $1,000.

There are quiet a few competitors to Facebook, including one which actually had more people on it than Facebook. So they must be doing something more than just exploiting the network effect.

People use Facebook because that's where all the other users already are. That's the main reason they use it.

Facebook has created a searchable database of almost every person in the developed world. Unless someone has their privacy settings on lockdown, they are easy to find on Facebook with simply a first name and one other piece of information such as where they live, work, or went to school. Even if their privacy settings are on lockdown, they can still be found and confirmed by their name and profile picture, which are never private, and then you can search Facebook for photos or posts they are tagged in, because they can't control the privacy settings of others' photos. The point is, anyone can find out information about the life of the most private person with the right search skills/intuition, which most young people have.

You can use this search function to creep on people you aren't friends with, or you can use it to search every post ever by any of your friends that includes the word "Patriots," etc, which can be pretty handy.

So while Facebook is certainly exploiting the network effect, give them props for creating a UI that attracted 2 billion people in the first place, then developed an extremely effective search engine to creepily learn much as your imagination can think to search for about almost any person on Earth.

Nobody joins Facebook because of its UI, and you know it. They join because other people are on it. No network effect, no Facebook value.

Being a host for the network effect is a valuable service. Just ask any convention center.

Yes, being in a position to exploit network effects is highly lucrative. You can capture rents from other people's activity. Just like a landlord can capture the gains of economic growth. The value of the network effect is not created by the host.

Hypothetically, let's say I participated in this counterfactual auction and answered $1000.

That doesn't mean Facebook provides me with $1000 of value.

Instead, it means Facebook is extorting me with $1000 worth of penalties if I don't have a Facebook account, mainly in reputational damages when somebody else creates an account with my name, pretending to be me.

More interestingly, how much would I pay to destroy all of Facebook, so they no longer have this power over me? Also up to $1000.

So Facebook's actual value is somewhere between [Userbase]x[$1000] and [-1]x[Userbase]x[$1000].

Good on Corrigan et. al. to establish an upper and lower bound, but that's all they have established.

1) Why would anyone be creating an account in your name pretending to be you?

2) What's stopping someone from doing that while you have a facebook account?

3) People that don't have facebook accounts are actually still accounted for in Facebook -- "holes" in network graphs are filled in with presumptive details about the people. I assume Facebook knows that you exist when people post photos with your face in them, but I don't know for sure.

Anyways your reasoning is bad.

> 1) Why would anyone be creating an account in your name pretending to be you?

Jilted lover, colleague bucking for the same promotion, sales staff at competitor trying to sink my bid, abusive parent/spouse/child, internet rando for the lulz, etc./

> 2) What's stopping someone from doing that while you have a facebook account?

Nothing's stopping them, but if you're already Friended with my real account you're less likely to be bamboozled

Anyway you're rude.

And yet I deleted my account a few years ago for free and, if anything, have found my quality of life improved. My wife found the same to be true of deleting her instagram account (no more endless status competition!).

Anyway, this seems an example of counting benefits and ignoring costs. How much damage does facebook do? Here in the UK it's certainly helping scum like tommy robinson attract a larger audience by helping to eliminate cooridination problems between racists. I'd definitely pay to stop them being able to access social media.

Facebook is not the origin of status competition.

As a married avaricious guy, I'm OK with FB because it's cheaper to compete with the average friends with FB accounts instead of competing with actual rich people =)

No, it is not the origin of status competition, but it does rather have the tendency to turbo-charge it. Instagram is even worse! I find my time is better spent in non zero-sum activity.

Exactly. Facebook exploits status competition to keep people posting. Consequently, it has the effect of amplifying status anxiety.

The price of addiction is high. What may change the status quo is the decline in free online content, forcing users to an ever decreasing number of choices of free content pushed by Facebook in its quest to maximize revenues from advertising. Could it be that gated content will free users of their addiction? Or will it simply mean that more and more users will be pushed to free but fake content? I'm surprised that Facebook has thrived for as long as it has, given the dynamics of the internet. Then again, alcoholics and drug addicts have many other choices yet cannot break their addiction.

Most of us have experienced a bad relationship from which it is difficult to break free. I have. And so it is with Facebook. Here is a good article that describes efforts to break free of the addiction: https://slate.com/technology/2018/12/delete-facebook-movement-lessons-on-quitting.html

Dubious. $1000 seems way too high as an average. It is probably worth that amount of money for the students participating to the study but not everyone.

I deleted my Facebook account about a month ago for a variety of reasons. Mostly I have noticed that I spend about the same amount of time on social media, substituting Instagram and Twitter. Maybe I will use Reddit more often too.

For me, Facebook stopped being “fun” a long time ago. Too many features were added, it was trying to be too many things at the same time and succeeded and less and less.

I do miss the event pages for concerts where you can often find out what time the act will play and of course if any of your contacts are also attending.

As Instagram is part of the Facebook corporate entity, you have not left Facebook behind, you have merely switched UIs.

Well, God bless facebook, then. And by the same logic; Hooray for crack!

See also "endowment effect".

Aside from generic issues with hypothetical surveys like this, the skewed WTA distributions are quite notable. The authors do report both, but use the much (much) higher mean values in their extrapolated values for Facebook. I have doubts about the validity of those mean values. They did remove some unrealistically high WTA respondents, but I think the unreliability of those very high values probably also reflects something unreliable about the non-excluded values. But perhaps I'm just out of touch. I have a hard time believing that anyone puts a high value on Facebook. Disclosure: I do have a FB account, but thankfully it was created using an email that is no longer active. Otherwise, I'd turn it off.

This seems dated. I know many people and even businesses that have abandoned Facebook this year.
Facebook is a classic example of the right product at the right time. The site expanded to the general public during the downturn, when many people had extra time on their hands and were seeking the solace found in community.

I mostly agree. I signed up on FB because my kids and family were using it. Since the start of all the scandals (Nightline last night laid it out well, as well as FB's indifference, inability or unwillingness to fix itself) there's been a significant decline in the number of posts by my friends. If I owned stock, I'd sell it.

The downturn in Facebook use is not caused by the "scandals", but by the generally toxic social media atmosphere, which is if anything an amplification of the generally toxic political atmosphere in the country.
If you weren't on Twitter or Facebook you would think "geez, our country is really politically polarized right now!" But on Facebook, it's several times worse.

For example, in a recent thread I had one Facebook friend declare that Republicans were vicious evil people who would stop at nothing to destroy their way of life, and that they had to be fought. To which I replied that "they think all the same things about you", and the response was basically "this is war! if you're not with us you're against us!".

That is the reason I am not using Facebook so much recently. Because it's a horrifying hellscape of vicious partisan warfare. Not because I give a shit about Russian agit-prop.

Some firm announced in the past week its offer of $100,000 to anyone willing to dispense with his cellphone for one year. (I already do not have a cellphone, otherwise, I might sign up, too.)

What does this say about perceived values of cellphones?

Which company? I'd do that.

A link:

https://www.cnbc.com/2018/12/13/vitaminwater-offers-100000-to-stay-off-smartphones-for-a-year.html

I'd not heard of the company, either.

If suspending cellphone use for one year is worth $100K, exiting Facebook permanently could be worth far more than a measly one grand.

I'd assess Facebook as toxic to both individual users and society in general.

The evidence increasingly suggests this is not accidental, but is at best viewed as acceptable collateral damage to carefully engineered efforts to maximize profits. Pretty much in the same class as tobacco companies.

+1K. Yes, unfortunately this couldn’t be more true

There was a tweet ..

"I know we live in a time and place where we’re supposed to treat billionaires like Zuckerberg like geniuses but I feel like “fucking up constantly” and “getting caught fucking up constantly” and “accidentally almost collapsing society” are the qualities of a huge dumbass"

A good thread, actually.

https://twitter.com/MarkAgee/status/1075218570588622848?s=19

I don't Facebook, but it would probably take $500 for me to quit Twitter. Another brilliant service run by an idiot.

And maybe but Thiel in that bucket.

I neither use Facebook nor Twitter and would be perfectly happy if both went away forever. The Cambridge Analytica scandal is a good example of a negative externality with consequences for all of us, but of course judging counterfactuals is still hard. If Facebook didn't exist, maybe someone else would have fucked the potential user base over in similar ways. Not sure how to gauge the probability.

That's true, we are a social species that loves free stuff. That creates a path of least resistance.

How much would you have to pay the average heroin junkie to give up heroin?

I am always skeptical of survey studies like this. It's a lot easier to claim that you would pay $1,000/yr for something than to actually do it.

Here's a thought experiment: If facebook announced that they were now going to charge users $80/month, how many users do you think they would still have in a year? How about if they charged $10/mo? In either case, I think their user base would decline rapidly.

What this tells us is not how much people value facebook, but how little they value their private data.

When I said "$500" above I assumed a third party payer. That invokes a loss aversion in me in the way a $40/mo fee would not. The second changes the nature of the Twitter offer and the medium.

Pure speculation - but I imagine the lump sum payment overstates the value.

I bet you could pay someone $100 for a week to deactivate their account, then on day 7 offer them $50 for another week, and as they stopped being so accustomed to using it every day they would eventually go down to like $1 per day or less.

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