A team of researchers released a paper recently (here) that tries to quantify how much different digital services are worth to their users. For example, here's the relative value of nine different services:
Google search was the top service, beating out even meeting your friends in person. TikTok, oddly, has a low value despite its huge popularity. It may be popular, but apparently its users could do without it pretty easily.
Next the researchers put a dollar value on each service. They did this by asking people randomly if they'd accept a certain amount to stop using Facebook for a month. Then they took the average "willing to accept" value, multiplied by 12 to get an annual figure, and adjusted each service for its value relative to Facebook. Finally they added up all ten services (the ones above plus Snapchat). Here's how it came out in various countries:
There are a couple of obvious ways you can interpret this:
- It's bullshit. There's no way the average person values these services at $5,000 or so. That's close to 10% of their income!
- This is the consumer welfare generated by these services, not the amount people would actually pay for them. It suggests that we're understating GDP by not including online services at the full value of their consumer welfare.
I don't know which is the better interpretation. Maybe both. These numbers do seem awfully high, though.
NOTE: All of this data is based on a survey done in Facebook, so these are estimates of value by Facebook users. That's certainly different than estimates of value for the whole population.
One datapoint: I've been disappointed enough in all of the free search engines to start paying. I've been using Kagi for a couple months, and consider it worth $100/year.
I don't use Kagi, though I'm considering it. It costs $5 or $10 a month, so maybe $120 a year. Where does that $5K+ estimate for the value of Google Search come from? It sounds like something a hand waving consultant came up with so they'd get the contract for phase 2. (Disclosure, I've been a hand waving consultant.)
I completely believe that the average American values internet services at $5k/yr.
I place a much higher value on them than that.
But for the average person, who buys things (and avoids buying other things) on the internet, probably saves much more than $5k/yr over what they would have spent without access.
Want to replace you ancient car's blower motor and you aren't mechanically inclined? There is an internet video for that.
Want to find the black paint with the lowest reflectivity in the visible and near infrared, and you don't want to spend a fortune on textured surfaces? Krylon 1602 is your ticket. The reflectance curves are right there, along with a local distributor that can get it to you tomorrow.
Do that every day and it adds up.
But people don't do this every day. Sure, I'd pay $10 to access a vetted(!) car maintenance video that is going to save me a $300 mechanic bill. But that's a once every couple of years thing.
Search is valuable, but Google search isn't particularly more valuable than others. Hell, Wikipedia isn't on the list and I use that more than anything on the list except youtube.
You could already do those things.
Chilton had excellent, modestly priced books on how to take apart, repair, and - this is important - put back together any part or system of any motor vehicle.You could find them at your library or buy one at a bookstore for what would be less than $20 today. So Google might be saving you $20 plus some schlepping around.
For paint, you'd go to a store or outlet, look up what you wanted in the catalog and buy it at the desk. You could get advice from people working and shopping there, just like a Reddit. You could often do this by phone. Then you'd drop by to pick up the paint. Alternatively, they would mail you the spec sheets or even a catalog. Many of those old catalogs were valuable reference works.
Assuming you make $50 an hour, Google is probably saving you a few hundred dollars a year.
I place a very high value on wikipedia and donate accordingly. Well, not really: I value it at considerably more than the $120/yr I donate.
"... These numbers do seem awfully high, though."
Well, I am paying like $1000 a year for home internet and I have a low end plan. And your figures don't even mention cell phones. What does the average person pay for cell phones and their service plans?
What does “Relative Disutility” mean?
So much stupid in that study. The amount of money someone will take to give something up is much higher than the amount they would pay for something due to the quirks in our psychology. On top of that you can't multiply the monthly number times 12 to determine how much someone would want a year. Also people are almost certainly considering the payments separately and assuming that they can replace some usage of one with a different service which means that you can't just add the payments to get a total. Finally Google, Facebook, and Instagram are significant sources of leads/income for a lot of small businesses. If I were asked to answer this question, I would factor in that my wife's pottery sales would go down by quite a bit if people were not seeing her stuff on Instagram and Facebook.
There is a market based way to estimate the economic benefit of these services: Count the dollars earned from advertising for each service. If you look at Xwitter you can see how advertising revenue goes down when the service loses value. Thank you, Elon for running the eXperiment!
That's not the value of the service to the user, though. That's the value of the user to the customer (advertiser).
The survey most definitely should have been done by asking people how much they would be willing to pay for the service(s) if they had to. This is especially relevant now that YouTube is pushing users to remove ad blockers or pay for Premium if they don't want to see ads.
Plenty of people pay $200 a month, ie ~$2500 a year for cable TV.
You telling me you don't think Internet services provide twice the value of cable TV?
Of course if payment were ACTUALLY involved, this would sort into marketing tiers, just like TV does, so that for $500 a year you could ad-saturated broadcast internet, and at $5000 a year you ad-free HBO-internet.
"They did this by asking people randomly if they'd accept a certain amount to stop using Facebook for a month"
I would accept $10 to stop eating ice cream for a month. But that second month would need $15, and after a few months it would need to be $100. Deferred gratification earns interest.
Or alternatively, after a few months I would lose my taste for ice cream, and not require any payment to stop eating it.
So the premise is flawed.
Since when is "meeting friends in person" digital?