How valuable is Facebook to its users and how can its value be measured when access is free?
A Michigan State University researcher teamed with three economists to answer those questions by assessing Facebook’s value to its users in contrast to its market value or its contribution to gross domestic product.
Saleem Alhabash, associate professor of advertising and public relations, and colleagues from Tufts University, Kenyon College and Susquehanna University, conducted a study using a series of auctions – in which people were paid to close their accounts for as little as one day or as long as one year.
The researchers found that Facebook users would require an average of more than $1,000 to deactivate their account for one year. The study is published in PLOS ONE.
“In light of recent discussion and scandals surrounding privacy of personal data on Facebook, our findings point to the paradoxical relationship we, as users, have with Facebook as a platform among other social and digital media services,” Alhabash said. “The use of Facebook has become automatic, ritualized and habitual, making it extremely hard to give up. And this is why, in my opinion, Facebook users place, on average, a larger value on their presence on this free service.”
Facebook is among the social media websites that provide access at no cost, so the auctions created by the research team posed the question in reverse: What amount of money would you require to give up your Facebook account for some fixed period of time, ranging from one day to one year?
The work began as independent efforts by two teams: Alhabash and Sean Cash at at Tufts University; and Jay Corrigan at Kenyon College with Matthew Rousu of Susquehanna University. The auctions had slightly different designs and advantages.
In total, the researchers ran three actual auctions, including two samples of college students, a community sample and an online sample. Winners were paid upon proof that their membership was deactivated for the set period of time. Auction details as follows.
- Auction one: 122 students at a Midwestern college. The average bid for deactivating Facebook for one day was $4.17; for three days, $13.89; and for one week, $37. To calculate a one-year estimate, the researchers annualized these data, which showed a range of $1,511 to $1,908.
- Auction two: 133 students and 138 adults from a large Midwestern university/town. The average bid to deactivate Facebook for one year in the student group was $2,076 while the average bid in the community group was $1,139.
- Auction three: 931 adults (mean age: 33) within the United States obtained using the Amazon Mechanical Turk open marketplace. The average bid to deactivate for one year in this sample was $1,921.
The study contrasts the company’s market capitalization with the value placed on it by its users. For example, based on a market valuation of approximately $400 billion, and about 2.2 billion users, the market value of Facebook would be approximately $180 per user, or less than one-fourth of the annual average value of Facebook access from any of the auction samples.
It should be noted, according to the research, that the convenience samples, somewhat skewed toward students, are not necessarily representative of all Facebook users. But there was consistency in price valuation by users across the samples and across different timeframes.
The work was funded by internal grants from MSU and Kenyon College.
