How valuable is Facebook to its users?
With millions of users spending a little under an hour on average on Facebook and Instagram every day, it is a wonder that the company can sustain the massive profits it does on advertisement revenue alone while continuing to keep the platforms free.
But exactly how valuable is Facebook to its users and how you do measure its worth when the service is free.
“Social media, and the internet more broadly, have changed the way we live and the way we keep in touch with friends and family, but it’s hard to find evidence that the internet has made us richer or more productive at work,” said Jay Corrigan, a first author of the study. “We know people must derive tremendous value from Facebook or they wouldn’t spend millions of hours on the site every day. The challenge is how to put a dollar value on a service people don’t pay for.”
Rather than look at the company and figure out the price of Facebook’s products in terms of value to its users, the researchers took a different approach and asked users how much it would cost to deactivate their accounts.
The study was published in the journal PLOS ONE, and the results show that people would require over $1,000 as incentive to deactivate their Facebook for a year.
The researchers set up three auctions and paid people to close their accounts for one day, one week, and one year. College students, a larger community-based sample, and a group of online participants took part in different auctions.
For the first auction, 122 college students were asked to bid on deactivating their Facebook. On average, the students said would it take $4.17 to deactivate their account for one day, $13.89 for three days, $37 for a week.
The researchers then used these totals to calculate the yearly costs which were around $1,511 to $1,908 per year.
For the second auction, 133 students along with 138 community members were asked to bid on deactivating Facebook. After calculating the yearly costs, the researchers found that the average price would be $2,076 for the students and $1,139 for the community members.
In the third auction, which took place online, 931 adults had an average bid of $1,921 to deactivate their Facebook.
At the end of the auctions, winners were paid if they could provide proof that their account had been deactivated for the required amount of time.
“Auction participants faced real financial consequences, so had an incentive to seriously consider what compensation they would want to close their accounts for a set period of time and to bid truthfully,” said Sean B. Cash, a corresponding author for the study. “Students placed a higher value on Facebook than community members. A number of participants refused to bid at all, suggesting that deactivating Facebook for a year was not a welcome possibility.”
The researchers compared their auction results with the actual market value of Facebook which works out be around $190 per user.
“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,” wrote the authors,” wrote the authors in the study.