2) This shouldn't be surprising as it tells us most people don't care that much, and a few people 'really do' - which is normal for most goods.
3) Since we're dealing with network externalizations, wherein the value goes up when more people use it (the value of FB is the network, less so the features) - then a lower price makes more sense. If all those people who bid $100 or less (say 2/3 of the population) quit FB tommorow, than those in the $1K range who 'really like FB' would probably leave as well, because their friends would not be there.
This gives us a hint that in product wherein the consumer surplus is not very evenly distributed - and there are strong network effects ... that the optimal price should be low.
4) Getting paid to leave is simply a different metric than having to get out your wallet to pay for something. Surely the authors know this but I didn't see it mentioned. 'WTP != WTL' i.e. willingness to pay is not the same as willingness to leave.
(I'm not actually going to do this, but it's a fun thought experiment.)
And an obscene amount would take the $50 and create a new account (or simply not reveal their real account).
I agree it'd be a fun experiment, though. And I see no reason to keep it hypothetical. I'd be particularly interested in seeing how much is raised (which I suspect would be relatively little).
This was my first thought - a dollar is worth wildly different amounts to different people. If I'm struggling to put food on the table and fuel in my car, then a dollar is pretty important. If I'm sitting in my mansion sipping fine wine and contemplating what to do with the afternoon, a thousand dollars may be inconsequential.
The median wage in the US is $31k , or about $15 an hour.
The average facebook user spends 50 minutes on the site a day , or 300 hours a year. That's a $4500 a year that they are already spending on facebook.
Glad someone mentioned this. It would be a very different situation if you switched Facebook over to a subscription model, and it'd be a different outcome still if you had people bid to be the only one still able to use Facebook in the auction.
I honestly think this is actually a really bad metric to choose, even if it's better than nothing. I, for instance, barely use Facebook, but would require a decent chunk to bother to deactivate it, just because I'm really insensitive to extra money compared to the general population. I would, on the other hand, probably not pay much to keep it because that requires extra work. Still better than nothing, but hopefully someone can top this.
Comparable: Many people pay $1000 a year for cable TV. They may complain about but they fork over the money.
Companions: You might spend $1000 a year for internet access (either wired or wireless) which you might use to access Facebook. You might spend $1000 a year for a phone that you access Facebook on.
I've found that companions are a good way to estimate "Willingness to Pay" quickly. For instance if somebody spent $50,000 on a software license you can probably sell them a $50,000 server to go with it.
They are definitely related.
FB creates some kind of value - some goes to them in terms of profit, some goes to the user in consumer surplus.
As FB shows more ads, the consumer surplus goes down.
Obviously corps are the one paying, but value to consumers does matter.
They also left out those who wouldn't leave for any amount of money, ostensibly, which is tricky because they probably valued it tremendously.
The silicon valley user-currency ponzi scheme is just for show, and to be able to afford a home
Facebook derives a lot of value from its users but it isnt solely proportional, it is a multinational with many revenue streams
It’s easier to spend money that wasn’t in your wallet in the first place. It’s when you start taking it out of the wallet that people react.
If facebook costed everybody $1000/year, I would definitely stop using it, because the network would be immediately broken since everybody would know everybody with any sense would stop using it.
If facebook only costed only me $1000/year, I would know the network was still intact, and I would consider it.
Then everybody else would have to decide if the rest of the network still provides value to them, so a few more would disappear. At some point you'd reach an equilibrium where either a small portion of the original network is happy with what they still have for the money, or the whole network collapses.
It doesn't feel like people would quit because of the expectation that "everybody with any sense would stop using it". You could already say that now about FB, and you could definitely say it for many other products. Yet they are still used.
This question (can Facebook charge people to use its service?) is fundamentally vastly different from the one in the article, which basically is: can someone kill Facebook by buying enough people out of using it?
It would be a slam dunk lawsuit.
You can still offer discounts (airline tickets, Adobe, etc.) or negotiate pricing (cars, etc.) legally.
But, it is illegal to isolate someone and charge them more without justification as in OC's example.
So yes, Facebook charging a single person $1k/year is a true hypothetical. It couldn't happen legally in the US.
If Costco charges $1k for a bagel and gives it away to everyone for free except insists on you paying, that's a problem. You're not allowed to isolate discounts based on race, gender, etc. So Costco would have to have a pretty creative reason for making you pay and no one else. It wouldn't hold up in court and it would be price discrimination.
If it costs everyone $1000, there will be many many many people who cannot afford that.
If it costs only me $1000, I'd stop using it because... well I already stopped using it so I did it for free actually.
Second case, being the only one out (i.e. the black sheep) means you might consider paying for it to not stand out.
Source: I smoke, and about half the people I know do too.
They lost their privacy without thinking about it, but giving up Facebook would require a conscious act. So now they're thinking about loss, and that causes feelings.
The second problem is I read the entire paper and as per problem #1 above, because its an extreme power law distribution, in "Auction 2 results" the average bid to give up FB was an insane $2076 but the SD is over eight thousand dollars and the 50% median was a mere $200.
The third problem is, I admit I don't use FB, but my understanding from my wife is if you disable your account for a day, you're really measuring the cost of time-shifting a days worth of content forward a day. They were not really measuring giving up FB for a day in the shorter samples (see discussion of Auction 1 results) they were measuring the cost of chronologically messing up the UI for one day, or something like that in concept. Its like arguing if I bought the new edition of "Refactoring" using amazon prime the 2 day delivery was worth $40 or whatever the book cost whereas in reality I don't really care about the shipping cost on 2-day vs media mail shipping, kinda.
The forth killer problem is the market is too weak and thin. Lots of brain power goes into evaluating the correct price for one share of GE or CAT or IBM. As such the price has a certain meaning and validation and use in the real world. No brain power goes into calculating the price of viewing a sunset or temporarily deactivating a FB account and as such a measurement merely measures random numbers and can't be used in the real world for any purpose, comparative or otherwise. In theory a widely popular and intensely studied marketplace of the cost of viewing a sunset or deactivating a FB account COULD exist, but since it doesn't, its just kinda a measure of random numbers mixed with how much money I feel I should get for a days minor annoyance, like a wifi or mobile phone outage. Some numbers from Auction 1 Results are creepily similar to "how much of a credit should I get for an internet outage", or "What is a fair per-diem reimbursement for a cheap company", not a specifically FB related cost.
If I'm reading the same data they are, the median price is $730. Which means if you offered everybody $730 half of them would quit. A few of those people would be really happy because all they wanted was $100.
If you were a deranged billionaire and you decided to burn Facebook, you might be able to get half of them to quit at an average of $400 apiece.
But even that doesn't make sense because people are people. If my neighbor already got a check for $900 what are you doing giving me this check for $450? I want $900, same as him. Practically, you'd just have to cut checks for $730 and offer everyone the same amount, which means $1000 isn't a real number either. Because I'm sure as hell not gonna take $450 if my buddy knows the guy who got $5000. So it's $1000 checks and you get 65% of people to quit.
This was not an investigation into "how much do you need to pay people to quit" (if it was, their methodology would have been _highly_ flawed).
10 cigarettes a day * 30 days / 20 cigarettes in a pack = 15
15 packs a month * $6 per pack = $90 per month
$1000 a year / 12 months in a year= $83
Keeping in mind that each individual cigarette doesn't even have any event listeners hooked up to it to gather usage data...
Yeah, I'd take that bet.
Both scenarios are hypothetical, as no one is being actually paid to quit Facebook. So, why not make the hypothetical scenario: "Using Facebook now costs $X per month; how high does X need to be before you quit?"
They actually paid people to deactivate their Facebook accounts.
Seems to me that there's an application of this idea to early stage startups.
Given that airline overbookings use the same scheme to decide who flies and who gets paid and bumped to a certain, yet hazy-on-details future flight, perhaps this study simply tests humans' secret bidding strategies much more so than it tests the value people place on Facebook's utility.
One way to continue along this line of research would be to make people bid on giving up a much larger selection of social media services, with the exception of one, which would be their choice. They'd have to name their choice to keep. A second auction would then encourage them to name their price to give up that last one as well.
You can show that bidding higher or lower than this amount is dominated by bidding the true amount. If you bid higher than your true amount, this can only hurt you: You won't get any more money to stop using Facebook, because if you win, you get the second-lowest bidder's bid amount. It only makes a difference if you increase your bid too far, and lose the auction.
If you bid lower than your true amount, you might win when you otherwise would not have won... but you underbid! You're not getting enough money to compensate you for the loss of Facebook.
Now, I could imagine that there might be a systemic bias towards overbidding, because people aren't good at valuing their cost of foregoing Facebook.
Anyone bidding higher than their minimum price doesn't fully understand the second-price auction. Probably lots of people don't understand it, which could lead to inflated bids. (but that doesn't mean you, knowing better, should inflate your own bid!)
If their are multiple identical items and multiple bidders then bidding the true amount can become sub optimal.
This is exactly what the study is designed to measure. If this was indeed true, exactly how much money are users's willing to pay to keep Facebook even when they have other free alternatives available? If that amount is greater than zero that tells you that Facebook is valuable to those people beyond the cost they are currently paying for it.
" because dozens of comparable offerings exists at low or no cost that can take over subsets of the functionality in people's lives."
No, the value is in the network, not the 'feature'.
You can't go 'somewhere else' because 'nobody is there'.
This is not like Craigslist so much, the network externalizations for FB are everything.
The only way to break it would be to follow the same type of path FB did: Harvard -> Ivy League -> College -> USA -> World -> all ages.
A network could start say among some specific group wherein it was possible to achieve a critical mass, and move on from there.
So say you started where there was a specific need, like bands in LA trying to get the word out to gigs, among those that like to go to such things. And then it spread to other cities for music scene gigs, then for other kinds of entertainment, then more broadly into a social network. And you could call it 'myspace'. :)
It's not like people genuinely use Facebook to discover brand new individuals (as opposed to bands or groups), whereas they'd frequently do that on Instagram, Twitter, or Tumblr. And for interests and activities like music discovery, live music, celebrity fandom, neighborhood activities, and classifieds, other viable alternatives do exist, even if they aren't packaged alongside a rolodex of all the people you went to college with, or your vacation photos, or some isometric farming simulator you used to play 8 years ago.
In those terms - there is no substitute for FB.
As far as your view of how people view relationships - the reason I don't buy it, is because of the simple fact: most people are not quitting FB. Keeping their account costs little, and enables those 'weak' relationships. So they will stay. And FB has the critical mass.
There is no substitute, at least in 2018. Really the only choice is turning it off which I think will happen, gradually.
The Hackerati like to bemoan that most people don't value their privacy and will happily give it up to Facebook and Google, even suggesting that such people don't understand what they are giving up.
But maybe people do value their privacy and do understand what they are giving up - it's just that Facebook and Google offer something that is even more valuable than their privacy.
Even in the extreme case like HOAs that enforce lawn height requirements. Yes it's a little insane but it's what keeps the neighborhood valuable and your property value appreciating.
The average person is pretty darn rational. Who wouldn't trade away liberty if they're better off having done so?
maybe "driving with rules", but driving literally kills via exhaust fumes. if you own a tesla, you've already dumped so much pollution into the air...
"it's what keeps the neighborhood valuable and your property value appreciating"
some people don't care about this stuff. they realise their time on this earth is too short to spend it on "lawn height requirements".
"The average person is pretty darn rational."
Humans aren't rational. At all. Reason is a rare tool. Case in point: the current advertising complex.
Hey, do they pay that retroactively? I'd like to get
But that's quite an assumption unless both questions are asked in the same study to the same group.
If you would pay me each month to not listen to music on youtube, while being at work, it would be far more than I would pay to keep using it. It would be a damn shame if I couldn't do that anymore, but I would never pay the same amount to keep using it.
A) I pay you $x per year not to listen to music on youtube.
B) I give you $x per year. Simoultaneously, Youtube starts charging $x per year to listen to music.
Is there much of a difference between them?
I wouldn't spend money on a replacement social network if you paid me not to use facebook, but I certainly would put that money towards something else I found fun and entertaining.
This is supposed to be a tool to estimate the value, not to get everyone to stop using Facebook: how much do we need to pay a given user to stop using Facebook, provided that nobody else stops using Facebook?
If we put a thermometer on every cubic millimeter of an object, we will probably significantly affect its temperature; but we don't do that; we use one small thermometer against a much larger object, so the transfer of heat between the two has a negligible effect on the temperature.
But neither berbec nor kazinator said, or even seemed to imply, that ….
I wish that were true, but if everyone stopped using Facebook they could still build shadow profiles for everyone, as they do for people that do not have accounts, and they could just sell this data out.
Facebook's value is derived entirely from the information generated from its user base.
Network effects are premised on the value of the network increasing in value as more users join. By definition then, the value of the network drops as people drop off.
While the speed of adoption might always be > speed of deletion, there is certainly an auto-catalytic effect to people deleting FB, or not using/posting to FB as much.
That's pretty funny.
So I wonder what the average opioid addict would want in exchange for a year of daily withdrawal? Or even tobacco addicts. I've read that, in Germany after WWII, some people just about starved to death, because they'd traded too much food for tobacco.
Not because of the ice cream's value in my life, more because it's an unsolicited offer to sell my rights away. I have little reasons to sell, and I might want ice cream within a year, so you better pony up the cash to make it worth my time and inconvenience. However, it really doesn't mean anything about the value of ice cream.
Most people don't think in those terms.
Also, you're not giving up 'rights' you're willingly not doing something. You don't have a 'right' to Facebook anyhow.
I think what you might be getting with ice cram is the 'optionality' value.
Sure, you ate ice cream 20 times last year, but this year, maybe you're at your kids b-day party and want to eat with them! Or take a toor of some Irish Cream place with great ice cream. There's a big variability and unknown distribution of value, with a long tail in there that has to be accounted for. Often by instinct :)
>One hundred twenty-two Facebook users on the campus of a Midwestern liberal arts college took part in Study 1
>A third sample was recruited online through Amazon’s Mechanical Turk (MTurk), an “open online marketplace for getting work done by others,” where workers complete Human Intelligence Tasks (HITs) .
Thus the study sample populations were college students and people on Amazon Mechanical Turk who do Human Intelligence Tasks. I would guess that the Amazon Mechanical Turk also had a high number of college students. Based on the samples, I think that you can conclude that college students really like Facebook. How that actually translates into the general population is a different story.
Good god, you scientists can't tell the difference between value created ("provided") and value captured??
Put it a different way: how much would you have to pay people for them to miss announcements of important local events, miss photos and personal notes from their closest friends and family… of course, it's going to be a high amount. But those things all existed pre-Facebook. Facebook has just CAPTURED the value.
People used to mail photos to one another or send letters. With digital technology, that's emails. Facebook doesn't get credit for the switch to the internet and digital formats.
By design, Facebook pushes people to share photos only on Facebook and forget to email others.
Want a test? What's your hypothesis for the following:
"How much would I have to pay you to cancel your Facebook account if I made sure that your closer family and friends and other communities you care about all sent updates to you by email instead?"
But that’s beside the point. There’s something you’re missing about the local newspaper analogy: it’s that Facebook works great for communicating and sharing within groups of similar size to “people in my small town community who give a shit about my daughter’s birthday”.
Let me tell you a personal story: My sister is one of those people who just throws stuff up on FB like anyone else. People not on FB miss it. A couple years ago, someone inspired her to send a personal email to close family just sharing updates about what's happening with her and inviting others to reply the same way. It immediately felt more personal and meaningful and brought out different context and closer relationships compared to anything that happens on Facebook. It died away after a little bit because we failed to keep up a routine… but I predict that if your cousin sent you vacation pictures not in a just "email everyone" sense but in actually thinking of YOU, it would actually feel good and bring you together in a more meaningful way… but I don't know you or your cousin, of course.
> Personally I’d hate it if my cousin sent me her vacation pictures by email,
That's kind of the point. People didn't hate this before Facebook. Now it's become the only socially acceptable medium of communication for many occasions.
It’s well known that people demand disproportionately larger compensation for giving something up than they would pay to gain said thing.
The FMV of FaceBook access is zero, as evidenced by Facebook being routinely available for free.
US tax law does not anticipate routinely taxing inchoate transfers of value caused by operating things which distribute value broadly. For example, while assigning the copyright to Harry Potter would likely be a taxable event, holding a concert in public is not, even if the concert is of sufficient quality level to charge for it. The general phrase for this is “de minimis non curat lex”; specific instantiations of this of particular note are intrafamilial payments for cleaning one’s room, which is de jure absolutely a taxable event and which de facto would result in the IRS Commissioner being asked to explain himself to Congress if it were ever enforced.
Additionally, if the IRS used people’s subjective self-assessments to value things on one side of the ledger, they’d have to do it on another side of the ledger, leading to people having the attack “be a utility monster ” available against tax administration.
 Utility monsters have implausivly large but perhaps “legitimate” weightings for things. The existence of them is problematic for systems which do cost/benefits analyses and allow agents unconstrained choice of their utility function.
by that logic, then breathing in clean air is gonna have to get taxed as clean air has a value that's none-zero, despite that people are paying zero for it currently.
It is generally impossible to guess the value of something. what is the value of a bottle of water in to the average person versus the value to a someone lost in the desert?
That means you could pay its users $100-200 to leave for a year, and it would lose about half its users immediately. But after the first half of users leave, it's probably worth a lot less to the remaining users than before the first bunch left.
Even if 90% of their users are willing to pay some price to use it, charging that price might lose them most or all of their users. I think that's super interesting.
With Facebook users, it can't be ignored that, in not all but many cases, we are talking about behavior that ranges from slightly compulsive to downright addicted.
The cost might be unreasonably high to get them to stop, but it might be possible.
Right in the abstract they say:
> ... our results show that the benefits these services provide for their users are large.
...which is absurd.
Gambling should be easy. Casino gambling has an obvious negative value to gamblers because most gamblers lose most of the time. If it costs me $X to pay a gambler to never enter the casino again... I don't see any connection between that cost and the "value of gambling in casinos".
Just a little something to keep in mind, relevant to the discussion.
It made it harder to contact with family ( we use group chat on messenger). I was still able to see things on Facebook so it wasn't even as bad as a full out ban. So many social events and communications are made through the platform. It's tough, even if you don't like the way the company acts, if all your friends and family use it to communicate you pay quite a price to protest it.
My wife also doesn’t have Facebook, for her it’s more of a time suck then privacy reasons. For the most part she hears me talking about privacy, knows it’s something I care a lot about, and is happy to go along with me. However, she recently learned about a couple apps that give you money back. Walmart pay and iboutta. Without a doubt these apps are tracking all sorts of things and building profiles and selling our information. I’m totally against it... but she loves getting the money back. “Oh you know that yogurt we got from Walmart? Turns out Kroger had it on sell for 50 cents off and we got reimbursed $5!” It really makes her happy. I’m thinking to myself that I would have rather spent that $5 and had kept my privacy, but I end up keeping that to myself. It’s something she really enjoys.
On the other side, it does get into a more devious side of privacy issues. You don’t need everyone to give up their privacy rights- you just need a few to give up the privacy of everyone they know.
Another commenter remarks that it would be ok to pay 1k to access fb if there is a promise of value (ie the "network" is still there) but projects that if fb became a paid service, that most users would leave it so the risk of losing utility value from fb would not be anywhere near 1k.
On the other side, this is mostly a thing of convenience and habit. The moment there is another, may be even more convenient platform to keep my contacts, I would drop Facebook for free and without heasitation. The value of Facebook for me is purely in my current friend list.
> [Facebook's] benefits are hard to measure
The Introduction reads like Facebook was the first of its kind and invented the social web. It's kind of like how mainstream media talk about Apple as the inventor of the smartphone and the tabled. It's as if there was no Facebook or Apple, there would never have been any other actor to take that space in the market.
It's like these companies are deities in people's minds. Apple sure has its prophets, but Facebook is probably felt as a more paternalistic and malevolent superego god.
I mean, I would not be surprised to see this kind of narrative in some click-driven blog. But in a peer-reviewed research article?
If this is really how most people think even in academic circles - that it is Facebook or nothing - then there's a huge disconnect and I have grossly underestimated the amount of awareness-spreading needed if we don't want to fully lose the open web.
The difference being that there are alternatives to cars while Facebook has a monopoly on the social graph of many users. I think one could argue that Facebook is a monopoly on online communication for large parts of the social graph right now, especially as they also own WhatsApp and Instagram.
Edit: But we should consider something like Metcalfe's law, as pointed out by berbec
Giving, in this case, a value of $750B (at a P/S ratio of 1)
I imagine if you ran the same study and asked Heroin users or smokers how much you’d have to pay them to stop it would have similar results.
I think the later would quickly approach $0 for most people, especially as competitors rapidly entered the space to take advantage.
I'm curious to know how to figure changes when you include Facebook owned services in addition to the primary Facebook platform.
If your "product" won't participate, especially when it's the relationships between products that are most valuable, your valuation is in trouble.
It was a wasteland for a while but in my opinion has rebounded.
Otherwise...I don't get linkedin either. My gf used to work there and raved about it a lot but I still couldn't figure it out.
Before FB, it was possible to stay in contact with family, friends, etc. Was it as easy? Maybe. Email was perfectly fine. What FB (and everyone else in social too) was make so damn easy to post to the world "here's what I'm doing this exact second. please look at me!" The noise went sky high, and the signal went very faint. Then the algorithms kicked in, and the signal got even harder to find.
Does [increased polarisation of views] increase engagement? [Yes]
Therefore, we can conclude that Facebook does this.
FB is designed for maximum-engagement regardless of whether that is positive or negative for the useds (to use Richard Stallman's pun).
- Dopamine for that excited feeling that many people are liking what you had said or posted, i.e. confirmation bias.
- Serotonin for that lovey feeling of seeing something inspiring/cute/your crush.
- Adrenaline for internet arguments, insults, or conflict.
tl;dr> FB addicts are chasing the same dopamine rush as cocaine and heroin addicts.
It would certainly be more objective than the arbitrary Schedule I/II/III system we have now.