December 19, 2018
It’s A Lot More Valuable to Users Than Owners May Realize
How valuable is Facebook to its users? According to new research co-authored by Matthew Rousu, dean of Susquehanna University’s Sigmund Weis School of Business, the social media platform is a lot more valuable to its users than its owners may realize.
Using a series of auctions in which people were actually paid to close their accounts for as little as one day or as long as one year, Rousu and colleagues from Tufts University, Kenyon College and Michigan State University found that Facebook users required an average of more than $1,000 to deactivate their accounts for one year. The study appeared recently in PLOS ONE, a journal published by the Public Library of Science, based in San Francisco, Calif.
“What started as a college social site has evolved into a global network that billions of people use to keep in touch with friends and family or stay abreast of developing news stories,” Rousu said. “It’s easy to imagine the value users place on Facebook has grown, too. We wanted to try to put a dollar amount on that value.”
Facebook is among the social media websites that provide access at no cost, so the auctions created by the research team posed the question in reverse: What amount of money would you require to give up your Facebook account for some fixed period, ranging from one day to one year?
In total, the researchers ran three auctions, including two samples of college students, a community sample and an online sample. Winners were paid upon proof that their membership was deactivated for the agreed-upon period. Users required no less than $1,139 among the community group and as much as $2,076 among the student group to deactivate their Facebook accounts for one year.
This contrasts sharply with the company’s market capitalization. Based on a current conservative market valuation of $420 billion, and about 2.2 billion users, the market value of Facebook would be approximately $200 per user, or less than one-fourth of the annual average value of Facebook access from any of the auction samples.
“It’s probably unsurprising that a social media platform would be valued more by a student demographic,” Rousu said. “But our results also show that the Facebook social media platform is highly valued to users across all demographics, more so than the company’s market valuation would suggest.”
This work was funded by internal grants from Kenyon College and Michigan State University.
News of the study’s findings has been reported on across the country and globally, including by the Boston Globe, BBC World News, ABC News and Business Standard, a leading business publication in India.