Skip to ContentSkip to Navigation
About us FEB Research / FEB FEB Research News
Header image Faculty of Economics and Business

It takes $50 a month to convince people to give up Facebook

Date:26 April 2018
Photo: Pillar Pedreira/Agência Senado
Photo: Pillar Pedreira/Agência Senado

How much do people value Facebook? By about $50 a month, according to a recent study of 2885 people by economists at the University of Groningen and the Massachusetts Institute of Technology. Users value Google searches at $17,530 a year, email at $8,414, and maps at $3,648.

"Economists use Gross Domestic Product to measure economic progress. But these statistics do not include the many online products that have become ubiquitous and are offered to users for free, such as Facebook, Wikipedia, Google and YouTube," said Felix Eggers, assistant professor at the Faculty of Economics and Business of the University of Groningen and one of the study authors.

"Our study aims to measure how much value people perceive from free products like Facebook." This measure of consumer welfare could then be used to supplement national accounts like GDP in order to express economic progress and wellbeing.

Cambridge Analytica effect

The study was a "discrete choice experiment". It asked participants to choose between keeping access to Facebook or foregoing it for one month for a certain amount of money. Respondents were told that one in every 200 would be picked to follow through with their choice, and their online status on Facebook would be monitored for a month by the researchers. Participants were Facebook users living in the United States aged 18 or over. 

In June-July 2016, the study received 1497 responses. It received 1388 in June-July 2017. The 2016 study found that 50% of respondents would agree to give up using Facebook for one month in return for about $50 or more. In 2017 the result was about $40 a month.

"It will be interesting to see this year's results, and whether the value of Facebook drops after the Cambridge Analytica case," Eggers said.

"There are currently discussions about whether or not Facebook should offer a paid, premium service, and what that should cost. People might pick up on our $50 a month result, but it's important to stress that we didn't measure willingness to pay money, but willingness to take money to give it up, which typically leads to higher valuations."

Feeling better without Facebook

The study found that the more time a consumer spends on Facebook, the least likely they were to agree to give up access. Female users and older users were more likely to want to keep Facebook. The more friends each consumer had, the more money they needed to convince them to give it up. Users of an alternative, substitute social media site, such as Instagram, were more likely to agree to give up Facebook.

Eggers has observed that, when study subjects do give up Facebook as part of the experiment, they often report an increase in their wellbeing.

"Especially for Facebook, the feedback we get is that most people felt better not using it. It's sort of an addiction, and if you give people an incentive not to use it anymore, they focus on getting the news from real news outlets rather than from Facebook, for example," Eggers said.

Search engines are valued most

In addition, Eggers and his co-authors Erik Brynjolfsson and Avinash Gannamaneni from the Massachusetts Institute of Technology also surveyed consumers about the value of Google, YouTube, online shopping and instant messaging through online surveys. Respondents were asked to indicate whether they would prefer to keep access to the respective service, or give it up for one year for a certain amount of money.  

The most valued service was search engines, with respondents giving a median of $17,530 as the price at which they would give up Internet searches for one year. This was followed by email ($8,414), and digital maps ($3,648). Video streaming such as YouTube and Netflix was valued at $1,173 a year. Online shopping was valued at $842, social media at $322, music at $168, and instant messaging at $155.

The research is part of an effort to supplement Gross Domestic Product measures. GDP measures the monetary value of the purchases of all final goods by households, businesses and government and is typically used to express economic progress. However, goods that have a price of zero are not captured. These include Google, Facebook, YouTube, and Wikipedia. Though such services have become ubiquitous in our daily lives, their value is not captured by GDP because users do not pay for them. The authors therefore argue that GDP is in need of updating.

The revenues earned by such services by advertising and other means are represented, but reflect only a fraction of their 'social returns', according to prior research. This study attempts to estimate what monetary value users place on such services, in order to understand what GDP may be missing out on as a measure.

The results are contained in a working paper available online here.