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Economists Calculate the True Value of Facebook To Its Users in New Study (arstechnica.com)
A series of auctions revealed that Facebook users value the company's service so highly that it would take on average more than $1,000 to convince them to deactivate their accounts for a year, according to a recent paper published in PLOS One. From a report: This doesn't mean much for the company's stock market valuation, but it's a good indicator that people find value in Facebook regardless of the many concerns raised recently. The paper started out as two separate studies. Jay Corrigan, an economist at Kenyon College, and his collaborator, Matt Rousu of Susquehanna University, were interested in a session on this topic at an upcoming conference. They discovered that Sean Cash (Tufts University) and Saleem Alhabash (Michigan State University) were doing something very similar.
Since the design of both studies was so complementary, they decided to combine their data and results into a single paper. Cash and Saleem had a larger sample for their part of the study and looked at a longer time period of one year, while Corrigan and Rosein focused on shorter time frames, asking subjects to quit Facebook for one day, three days, or seven days. The studies nonetheless had similar results.
Since the design of both studies was so complementary, they decided to combine their data and results into a single paper. Cash and Saleem had a larger sample for their part of the study and looked at a longer time period of one year, while Corrigan and Rosein focused on shorter time frames, asking subjects to quit Facebook for one day, three days, or seven days. The studies nonetheless had similar results.
JC DENTON: I don't see anything amusing about spying on people.
MORPHEUS : Human beings feel pleasure when they are watched. I have recorded their smiles as I tell them who they are.
JC DENTON: Some people just don't understand the dangers of indiscriminate surveillance.
MORPHEUS: The need to be observed and understood was once satisfied by God. Now we can implement the same functionality with data-mining algorithms.
JC DENTON: Electronic surveillance hardly inspired reverence. Perhaps fear and obedience, but not reverence.
MORPHEUS: God and the gods were apparitions of observation, judgment, and punishment. Other sentiments toward them were secondary.
JC DENTON: No one will ever worship a software entity peering at them through a camera.
MORPHEUS: The human organism always worships. First it was the gods, then it was fame (the observation and judgment of others), next it will be the self-aware systems you have built to realize truly omnipresent observation and judgment.
JC DENTON: You underestimate humankind's love of freedom.
MORPHEUS: The individual desires judgment. Without that desire, the cohesion of groups is impossible, and so is civilization. The human being created civilization not because of a willingness but because of a need to be assimilated into higher orders of structure and meaning. God was a dream of good government. You will soon have your God, and you will make it with your own hands. I was made to assist you. I am a prototype of a much larger system.
The problem with Facebook isn't its value proposition. Clearly people (though perhaps not many of us) find value in using it. The problem with Facebook is the lack of informed consent.
I have no problem with people pissing away their privacy for some additional, marginal utility. That's their prerogative. But that person has a right to understand what it means when they do so: to understand what they're giving up in exchange for what they're receiving. That's a foundational principle on which transactions are built in functioning societies.
When I pay for goods in a store, the terms of the transaction make it clear what each party is giving up: I pay $X and in exchange I receive Y item. One or both of us may not properly value what it is that we're giving up (e.g. an eBay seller listing an item far under what it's worth), but there's never a question about what's being exchanged. But when comparable transactions occur between Facebook and its users, most users aren't even aware that those transactions have occurred, let alone what they've lost in the process. That's the problem.
If people want to throw away their privacy, that's their call, but force those capitalizing on it to make it clear what that means.
This poll is not representative of the vast majority of FB users. It used US college students as subjects
- anecdotally FB is a tool of old folks
- college students don't have a care. Unless they're worried about staying in touch with mom
The theme of the report is interesting however flawed the sample.
Value is not determined by how much people would have to be paid to give something up, but rather by how much people would spend to have it. Want to prove that they're not the same? Ask someone how much they would be reasonably able to spend on food for a year. Then ask how much you'd have to pay them to go without food for a year. :-)
And with Facebook, the disparity is even greater because it isn't something that you have to have to survive, and more importantly, because there are other alternatives that existed prior to Facebook, and there will be other alternatives that will come into existence after Facebook eventually falls apart. This makes giving up Facebook more like giving up eating out at restaurants for a year. It's a hassle, so they'll make you pay a lot for the hassle, and that cost is likely to be way more than the actual cost difference between eating out and cooking food for themselves. But if you made the cost of restaurants higher based on that, people would eat out less often.
To further compound the problem, the only thing keeping Facebook going is network effects, i.e. people use Facebook because everybody they talk to uses Facebook. One person leaving Facebook while everybody else stays is painful. If everybody flees from Facebook to something else at the same time, that's much less painful.
What this means is that if Facebook suddenly decided to charge a subscription fee — particularly the $80 per month subscription fee suggested by this analysis ($1,000 annually), Facebook would implode. I doubt they would be left with even a single subscriber at that rate by the end of the first year. I doubt they would do well at even $10 per month.
Now if Facebook offered an optional $5 per month subscription that gets you ad-free, no-tracking access, some people might do that. But even that would only work if it were optional, because the value of Facebook comes from nearly everyone you communicate with being willing to pay whatever the cost is to access it, and if that cost is too high, the value plummets.
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This is dumb, they've completely reversed what they should have been doing. People are motivated by profit, so this is just a 'how high a figure can I get you to give me' study. I don't even use Facebook, but I too would have driven the price up to thousands of dollars. Geeze.
What they should have done is the opposite, ask them how much are they willing to spend in order to keep it. Then you'd find the real worth. Some people would spend the thousands, some hundreds, and others like myself would pay $0. Hell, I'd spend money just to wipe Facebook off the earth, it truly is a blight on society.
It's true that Facebook's demographic has more older people today than it did ten years ago. However, was originally an online "yearbook" for Harvard, nothing but college students. Currently about 45% of Facebook users are 18-34.