Social media rakes it in, but it is e-mail and search engines we would pine for the most

How much would I have to pay you to give up Facebook? What about e-mail? Or access to search engines? I asked myself these questions during a recent trip to China, where several familiar services are blocked.

The answers to those questions have a lot to teach us about how the economy is doing and how we might regulate these digital services.

A research paper from three economists, Erik Brynjolfsson, Felix Eggers and Avinash Gannamaneni, tried to measure exactly what services such as Facebook are worth to us.

They offered various experimental subjects (adult US residents) the possibility of a cash payment if they quit the social media network for a month, observing which offers were rejected or accepted. Of the site’s users, 20% were willing to quit for as little as a dollar: raise the monthly price to $48 (in 2016) or $38 (in 2017) and half of the Facebook users would happily jump ship.

No robust data are yet available to show us how the Cambridge Analytica scandal has changed our preferences.

Brynjolfsson and his colleagues used a more informal survey to estimate the value for other services.

Their rough-and-ready conclusion is that the typical person would have to be paid about $17,500 a year to do without internet search engines, $8,500 to abandon e-mail and $3,500 to quit using digital maps.

Video streaming through sites such as Netflix and YouTube is worth more than $1,150 a year; e-commerce $850 and social media just more than $300. These numbers vary quite a bit depending on the survey method, but the overall ordering doesn’t change much.

My own experience in China echoed these rankings: it was annoying to lose Google Maps, and it felt essential to replace Gmail and Google search with alternatives (fortunately such alternatives are readily available). There was no alternative to Twitter and Facebook — not unless I fancied rebuilding my social network from scratch — but I did not mourn their loss. Quitting Twitter for a fortnight felt like quitting alcohol for January. I didn’t miss Facebook.

The first lesson from this research is that some of these digital goods have a huge and unmeasured benefit to consumers — “consumer surplus”, in the lingo. This is not entirely news: economist William Nordhaus estimated that during the second half of the 20th century, innovative companies generally managed to capture as profits just 3.7% of the social value they created; the other 96.3% went to others, largely consumers.

For example, penicillin saves lives for pennies. Another example: the indoor toilet. Brynjolfsson, Eggers and Gannamaneni found that indoor toilets were valued much more highly than any internet service. Toilets are not expensive, so they produce a huge consumer surplus.

Still, many digital goods are free — and if internet search really is worth $17,500 a person each year (one-third of the US’s GDP), perhaps unmeasured consumer surplus is larger than in the past.

There is a second important lesson. Access to e-mail seems worth almost 30 times more than access to social media; a good search engine is worth twice as much again. Yet the key suppliers of e-mail and search — Alphabet, Apple and Microsoft — are not worth 50 times more than Facebook, which dominates social media through its own site and its subsidiaries Instagram, Messenger and WhatsApp. If they were, they would be $20-trillion firms.

Thus Facebook is more effective at turning consumer surplus into profit. This is no surprise, since all your friends are on Facebook. The only serious alternative is not to use social media. But it is easy to find an alternative e-mail provider.

We urgently need a way to turn social media into something more like e-mail — a portable profile that can be taken seamlessly from one provider to another, just as we can take our phone numbers with us from network to network.

Various proposals exist: web pioneer Tim Berners-Lee is pushing a system called “Solid”, which enables web users to control their own data and release it to digital services on a need-to-know basis. The Italian MP and techpreneur Stefano Quintarelli is trying to introduce enabling legislation in Italy.

One final lesson emerges from another paper by Susan Athey, Christian Catalini and Catherine Tucker. Athey and her colleagues asked what value Massachusetts Institute of Technology students place on their own private data, and the data of friends. The answer was nothing terribly coherent: students would make very different choices in response to small nudges, and would gladly hand over private data for a pizza.

The value we place on services such as e-mail and search is clear. The value we place on our own privacy is not. The current mess is hardly a surprise. /©

QUITTING TWITTER FOR A FORTNIGHT FELT LIKE QUITTING ALCOHOL FOR JANUARY. I DIDN’T MISS FACEBOOK