How Much Would It Take for Users to Abandon Facebook?

The current public lashing that Facebook Inc. (NASDAQ: FB) is taking may be well-deserved according to some critics, tech pundits and high-profile users who have said that they are quitting the service. But these people represent a tiny fraction of the social media giant’s 2.2 billion global users. Why aren’t more of them dumping their Facebook and Instagram accounts?

One reason, according to a new study, might be because Facebook’s value to its users is substantial. The study published Tuesday in the peer-reviewed journal PLOS ONE found that an average Facebook user wants to be paid more than $1,000 to suspend a personal account for a year. Think of that this way: a Facebook account is nearly 10 times more valuable than a subscription to Amazon Prime ($120 per year) or Netflix ($96 per year for the basic plan).

Does Facebook’s price (a user’s personal information) underestimate its value to that same user? The researchers used “willingness-to-accept” (WTA) auctions to determine how much compensation each of the 1,258 participants would require in exchange for not using Facebook for a given period. The participants’ bids represented the minimum dollar amount each would be willing to accept.

The study included three different WTA auctions, each involving a different group of participants. In the first, college students bid to deactivate their Facebook accounts for periods of one hour, one day, three days and seven days. The researchers found that the net WTA amount for three and seven days was higher than three or seven times the one-day WTA amount. They concluded: “This suggests that, on average, the daily welfare lost from not having to access increases as the deactivation period increases.”

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In the second auction two groups of participants, one comprised of college students and the other of adults recruited from an online pool, were asked how much compensation they would require to close their Facebook accounts for a full year. The researchers eliminated 40 of the 133 student responses: 41 for declining to bid and two for bidding more than $50,000. Of those remaining, the average bid to suspend their Facebook account was $2,076 and the median bid was $200. In the community sample, 23 bids were eliminated (21 no-bids and two more than $50,000), and of the remaining 115 responses, the average bid was $1,139 and the median was $100. The 21 winning bids received cash payments equal to their bids and the researchers watched them deactivate their Facebook accounts.

A total of 931 participants in the third auction were recruited from Amazon’s Mechanical Turk. The auction was similar to the second auction study but adapted for online administration. The average bid to deactivate a Facebook account for a full year was $1,921 and the median was $100.

Here’s a graph of the mean bid amounts from the study:

The researchers conclude that the average value to Facebook of an individual user is around $250 (2.2 billion users and a market cap of $542 billion in May 2018) while to a user, Facebook is worth more than $1,000: “This reinforces the idea that the vast majority of benefits of new inventions go not to the inventors but to the users. Further, our results provide evidence that online services can provide tremendous value to society even if their contribution to GDP is minimal.”

For Facebook, the business issues are whether its subscriber base has reached a plateau and whether it can make up for deserters with new accounts, especially among young users. The political issues could be more damaging by restricting what personal data it can collect from its users and how it can use that data.

Visit the PLOS ONE website to get the full report and more details on methodology and results.

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