Realist, not conformist analysis of the latest financial, business and political news

The Correct Facebook Question – How Much Would You Pay For It?

There’s much screaming, as we know, about how Facebook takes our oh so valuable information – that we just give it for free! – and then makes fortunes from it. It’s not really quite true of course, it makes money by selling advertising, the data we hand over simply refining who advertises what to whom. But, OK, let’s think this through a little. Imagine a Facebook which didn’t suck our data in order to improve the advertisers’ experience. What would it cost?

In its 2017 annual financial report, Facebook said, “We generate substantially all of our revenue from selling advertising placements to marketers.” Indeed, $39.94 billion of Facebook’s $40.65 billion in total revenue — 98 percent — came from ads.

Facebook reported 2.13 billion monthly active users at the end of last year. Thus an annual subscription fee that matches Facebook’s average ad revenue per user would be $18.75.

Would you pay $18.75 for an ad-free version of Facebook? Some people might,

That’s one possible answer. It’s wrong, for many wouldn’t and therefore the costs of running the site would be spread over fewer people. But it’s a useful one. The revenue from our data can be said to be that, if that’s the way we want to think of it. Deduct the costs of running Facebook from that – say, just to guess at some number, 50% – and we’ve a value of our data of $10 or so a year.

This is the highly valuable resource which people are insisting Facebook is stealing from us? The stuff that Jaron Lanier and Yvgeny Morozov insist we must be paid for? Seriously?

It’s trivia, isn’t it? Just not something to be running an international campaign about.

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bloke in spain
bloke in spain
3 years ago

Don’t quite follow you logic, there. If one goes buy an article from a shop for $20, the nominal value to the shopper is that $20.* Not the retailers mark-up of $10. The market price the buyer pays doesn’t take into consideration the costs of the seller. Of no interest. So the value of the data is the cost of Facebook + profit.

Yes, of course, the buyer does value the utility of the item higher than the $20 bill in his pocket, or the $20 stays in his pocket.

3 years ago
Reply to  bloke in spain

That’s right. “Deduct the costs of running Facebook…say, 50%” is needless complication, how much of that imaginary revenue stream Facebook paid its investors or paid the electric company. We give out our personal data, and give up aspects of our privacy, to avoid paying $18.75 annually (or more) for something we want. Therefore, that is the value of the thing we gave up.

Bloke on M4
Bloke on M4
3 years ago

The other option (and some apps do this) is to have a paid, ad-free version as well as a free, ad-supported version. But just paid? No, that isn’t going to fly and the likes of Lanier are dickheads because the fact is, that’s what we once had. People tried that. No-one wants it. It’s also why this Cambridge Analytica story isn’t sticking. No-one gives a crap about the stuff they post on Facebook. They deliberately don’t post their bank details and S&M meetups. It’s also why Facebook has tried doing money making things and none of them have worked. Facebook… Read more »

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