Many of us are very attached to the multitude of free services available online whether it be search engines, social media platforms, accessing video streaming, or using email. A trio of economists sought to figure out just how much money it would take for users to give up some of these services.
Erik Brynjolfsson, Felix Eggers, and Avinash Gannamaneni surveyed respondents in order to figure out what level of monetary compensation it would take for them to accept losing access to an internet service.
Digital goods such as use of Facebook, Google Maps, and Gmail are typically offered to the consumer at no financial cost to them. The researchers attempted to assess the value of these digital goods by asking consumers to make a simple choice: either retain access to the service or give up access in exchange for monetary compensation. Each respondent was only asked one question and the dollar amount of compensation varied among the respondents using an online experiment known as Single Binary Discrete Choice (SBDC).
The experiment targeted US residents who were 18 years or older by selecting eligible respondents that answered a survey about social media use. The study ultimately collected responses from 2,885 participants about trading access for compensation in the eight most widely used apps and website categories: Email, Search Engines, Maps, E-commerce, Video, Music, Social Media, and Instant Messaging.
The study found that giving up search engine access required the highest compensation with a median willingness-to-accept (WTA) of $17,530. Email ranked second with $8,414 and digital map services ranked third with $3,648.
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The researchers hypothesized that these three services ranked highest due to a lack of substitute services. For example, if you need driving directions and can’t use an online mapping app, what do you use? Find a paper map, ask someone along the way for directions? What about the added value of traffic information or rerouting due to an accident or blockage?
In terms of the perceived value of mapping services, the economist also concluded that income had a positive impact on the valuation of mapping services. Consumers in the age range of 35-44 years valued maps the most, creating an inverse u-shaped value chart.
The study:
Brynjolfsson, E., Eggers, F., & Gannamaneni, A. (2018). Using massive online choice experiments to measure changes in well-being (No. w24514). National Bureau of Economic Research.
