€500 a month for WhatsApp? Study suggests cash values for 'free' digital services
How much would you pay for Facebook or Gmail?
If Facebook wasn't free—excluding, for a moment, the value of the personal data it collects—would you pay for the way it allows you to keep in touch with friends and find out about events?
What about e-mail? Or Google Maps?
If you did pay, how much do you think they'd be worth?
Economists like to measure the wealth of a country by a statistic called Gross Domestic Product, or GDP.
But GDP calculations don't consider the value of so-called "free" digital services, because they're really hard to quantify.
Avi Collis, a PhD candidate at the MIT Sloan School of Management, was part of a research group that came up with an interesting way to try to determine how much the free communication, entertainment and even navigation platforms we use might actually be worth, in dollars and cents. And the results were surprising.
He spoke to Spark host Nora Young about some of their findings, and what they might mean.
So can you give me some of the values that you've established for various digital services?
What's interesting with the digital economy is that there's an explosion of "free" goods online: things like Facebook, Google, Wikipedia. So we want to measure how much value these goods create to consumers. So we did experiments online where we offered our subjects monetary compensation in exchange for giving up access to these services.
What we found is that Facebook is valued at around $40 to $50 dollars a month [in the US], which is pretty high. And then we also did those studies with other products. We found a really high valuation for WhatsApp— almost 500 euros a month in Europe—because everyone seems to use it for their professional and personal lives.
The median consumer values search engines at almost $15,000US a year. The valuations seem striking and it's really high. So these things create a lot of economic value to consumers.
So essentially what you're measuring is people's perception, or a subjective sense of how much these services are worth to them, or how much you have to pay them in order for them to give it up.
Yes, exactly. And we also did experiments with real money, and they actually had to give the services up. So these are not just hypothetical survey questions.
So do you think we should somehow find a way to include all these free goods into GDP, or should we have a different category for this?
We're trying to create a parallel metric, which we call "GDP-B," where the "B" stands for benefits. GDP is a great measure of production and it should remain as a measure of production. But because so far we didn't have a good measure of well-being we were using it as a proxy…. We're trying to stay within the economic framework and trying to put a dollar value on all these different goods which create value to consumers.
This interview has been edited for length and clarity. Click the listen button above to hear the full conversation.