How much is the value of your preferred free app? Google, Instagram, and other popular services generate trillions in previously uncounted value, new research finds

Would you charge $5 or $10 for someone to cease using Facebook for a month? One hundred dollars? Erik Brynjolfsson and his colleagues asked around 40,000 Facebook users across 13 different nations that exact question.

How much is the value of your preferred free app?

Less than one-fifth of respondents said they would refrain for five dollars, whereas more than three-fourths said they would for $100.

These results came from an experiment aimed at illuminating the worth of digital goods, or the multitude of virtual commodities that have permeated every aspect of modern life, such as messaging applications, e-commerce websites, and video streaming platforms.

In spite of their advantages, the majority of digital goods are given away for free. This means that, with very few exceptions, the price individuals pay for goods and services is the basis for calculating the gross domestic output, which mostly ignores them.

The GDP has well-established limits; it disregards the importance of other things, such as clean air, antibiotics, and doing your own laundry.

Brynjolfsson is one of the people who argue that since the average American spends over 24 hours a week online, a new, more comprehensive set of measures is required.

Brynjolfsson, a fellow of the Stanford Institute for Economic Policy Research, head of the Stanford Digital Economy Lab, and professor (by courtesy) at the Stanford Graduate School of Business, asserts that “you can’t manage what you can’t measure.”

“As policymakers, executives, and citizens, you will make poor decisions if you do not understand where value is being created in the economy.”

How much is the value of your preferred free app?

 

The experiment assessed the worth of Facebook and nine other digital goods, including YouTube, Amazon Shopping, Instagram, WhatsApp, Snapchat, TikTok, Google Search, and Google Maps.

The results are published in a working paper published by the National Bureau of Economic Research.

According on how willing they were to give up using these sites for a month, Brynjolfsson and his coauthors—among them Stanford postdoctoral scholar Jae Joon Lee—ranked the relative advantage that users received from these sites.

Google Maps and YouTube

Google Maps and YouTube were the next most popular apps, behind Google Search (which people liked even more than seeing friends in person). Facebook was in the center of the list of most desired services, followed by Twitter and Snapchat.

The researchers extrapolated the monetary value of other items based on their findings on the amount of money people would accept to cease using Facebook. Facebook, Instagram, and WhatsApp’s parent firm Meta collaborated with the study’s conduct; the latter had no influence over the study’s released findings.

How much is the value of your preferred free app?

 

According to the study’s findings, just these ten digital items generated more than $2.5 trillion in value yearly, or about 6% of the GDP of the 13 nations that were examined.

“The impact was remarkably large,” Brynjolfsson remarks. It demonstrates to me that valuing digital goods is more than simply a theoretical exercise because it affects billions of people’s lives directly.

 

A New Way to Gauge GDP

 

Additionally, the study discovered that lower-income individuals in each of the nations with smaller GDPs—Mexico, Romania, and others—derived proportionately greater value from digital commodities than did their richer counterparts.

“That kind of surprised me at first, but then I realized that if you don’t have a lot of money, it makes sense to consume and benefit more from free goods,” Brynjolfsson adds. “Therefore, a significant implication is that digital goods typically lessen inequality both within and between nations.”

Brynjolfsson

Brynjolfsson and associates assessed the worth of a number of digital items, such as Facebook and smartphone cameras, in past studies.

The most recent study included a considerably larger sample of participants from a wider geographic area and covered a larger basket of products.

Subsequently, his group at the Stanford Digital Economy Lab will carry out an extensive analysis to calculate the worth of more than eight hundred items, including traditional goods and services like toothpaste, automobiles, and medical care, in addition to digital goods. According to Brynjolfsson, “even with something like toothpaste, the consumer value may be very different from the price you pay.”