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1) The $1000 is misleading because although it's an average, the median is considerably lower, around $100 in that case. 2) This shouldn't be surprising as it

1) The $1000 is misleading because although it's an average, the median is considerably lower, around $100 in that case. 2) This shouldn't be surprising as it tells us most people don't care that much, and a few people 'really do' - which is normal for most goods. 3) Since we're dealing with network externalizations, wherein the value goes up when more people use it (the value of FB is the network, less so the features) - then a lower price makes more sense. If all those people who bid $100 or less (say 2/3 of the population) quit FB tommorow, than those in the $1K range who 'really like FB' would probably leave as well, because their friends would not be there. This gives us a hint that in product wherein the consumer surplus is not very evenly distributed - and there are strong network effects ... that the optimal price should be low. 4) Getting paid to leave is simply a different metric than having to get out your wallet to pay for something. Surely the authors know this but I didn't see it mentioned. 'WTP != WTL' i.e. willingness to pay is not the same as willingness to leave.

kmonad 8y ago
At 100$ median valuation, wouldn't that mean that facebook's value is inflated (the article states ~250$ per user)?
- sonnyblarney 8y ago
  No, because the average value is what we'd use in that calculation, not the median. They also left out those who wouldn't leave for any amount of money, ostensibly, which is tricky because they probably valued it tremendously.
- gammateam 8y ago
  No it wouldnt mean that The silicon valley user-currency ponzi scheme is just for show, and to be able to afford a home Facebook derives a lot of value from its users but it isnt solely proportional, it is a multinational with many revenue streams
- yellowstuff 8y ago
  Facebook is valued by the stock market mainly by the profit it's expected to generate in the long run. (Other concerns move the stock price around in the short term, but for most large companies most of the time the stock price will be a good reflection on the consensus view on long term profits.) The value users get from Facebook is almost totally unrelated to profits generated, and therefore to the stock price.
  - sonnyblarney 8y ago
    "The value users get from Facebook is almost totally unrelated to profits generated, and therefore to the stock price." They are definitely related. FB creates some kind of value - some goes to them in terms of profit, some goes to the user in consumer surplus. As FB shows more ads, the consumer surplus goes down. Obviously corps are the one paying, but value to consumers does matter.
- jtolmar 8y ago
  Facebook's value as a company is related to the total value of its users, not its total value to its users.
- nicky0 8y ago
  No because Facebook's valuation is based on its value to its advertisers, not its users.
taneq 8y ago
> 1) The $1000 is misleading because although it's an average, the median is considerably lower, around $100 in that case. This was my first thought - a dollar is worth wildly different amounts to different people. If I'm struggling to put food on the table and fuel in my car, then a dollar is pretty important. If I'm sitting in my mansion sipping fine wine and contemplating what to do with the afternoon, a thousand dollars may be inconsequential.
- alanlamm 8y ago
  Or, concretely, if I’m sitting in my midwestern liberal arts college...
- pcthrowaway 8y ago
  Even to people who are struggling to make ends meet, there is likely some monetary value to using facebook, as many community service organizations now organize charitable events through facebook, and facebook groups are excellent resources for local information (local deals, budget-friendly groceries, giveaways). I suspect you'd still be hard-pressed to get many such people off of facebook for a year for less than $500
josecastillo 8y ago
I half want to make a Kickstarter called "Let's Kill Facebook" that promises to give people $50 of the total proceeds to delete their Facebook account. I'd venture a surprising number of people who really care about killing Facebook would back it, and a surprising number of people who don't care that much about Facebook would take the $50. If it went viral enough to make an impact on people's networks, #3 would take care of the rest. (I'm not actually going to do this, but it's a fun thought experiment.)
- runeks 8y ago
  > I'd venture a surprising number of people who really care about killing Facebook would back it, and a surprising number of people who don't care that much about Facebook would take the $50. And an obscene amount would take the $50 and create a new account (or simply not reveal their real account). I agree it'd be a fun experiment, though. And I see no reason to keep it hypothetical. I'd be particularly interested in seeing how much is raised (which I suspect would be relatively little).
isostatic 8y ago
> 1) The $1000 is misleading because although it's an average, the median is considerably lower, around $100 in that case. The median wage in the US is $31k [1], or about $15 an hour. The average facebook user spends 50 minutes on the site a day [2], or 300 hours a year. That's a $4500 a year that they are already spending on facebook. [1] https://www.ssa.gov/OACT/COLA/central.html https://www.ssa.gov/OACT/COLA/central.html [2] https://www.nytimes.com/2016/05/06/business/facebook-bends-the-rules-of-audience-engagement-to-its-advantage.html https://www.nytimes.com/2016/05/06/business/facebook-bends-t...
- drngdds 8y ago
  Only if they would otherwise spend that time working, which seems unlikely.
PaulHoule 8y ago
I thought it was crazy at first then I thought about comparables and companions and it doesn't seem so bad. Comparable: Many people pay $1000 a year for cable TV. They may complain about but they fork over the money. Companions: You might spend $1000 a year for internet access (either wired or wireless) which you might use to access Facebook. You might spend $1000 a year for a phone that you access Facebook on. I've found that companions are a good way to estimate "Willingness to Pay" quickly. For instance if somebody spent $50,000 on a software license you can probably sell them a $50,000 server to go with it.
null000 8y ago
> 4) Getting paid to leave is simply a different metric than having to get out your wallet to pay for something. Surely the authors know this but I didn't see it mentioned. 'WTP != WTL' Glad someone mentioned this. It would be a very different situation if you switched Facebook over to a subscription model, and it'd be a different outcome still if you had people bid to be the only one still able to use Facebook in the auction. I honestly think this is actually a really bad metric to choose, even if it's better than nothing. I, for instance, barely use Facebook, but would require a decent chunk to bother to deactivate it, just because I'm really insensitive to extra money compared to the general population. I would, on the other hand, probably not pay much to keep it because that requires extra work. Still better than nothing, but hopefully someone can top this.

kmonad 8y ago

At 100$ median valuation, wouldn't that mean that facebook's value is inflated (the article states ~250$ per user)?

sonnyblarney 8y ago
No, because the average value is what we'd use in that calculation, not the median. They also left out those who wouldn't leave for any amount of money, ostensibly, which is tricky because they probably valued it tremendously.
gammateam 8y ago
No it wouldnt mean that The silicon valley user-currency ponzi scheme is just for show, and to be able to afford a home Facebook derives a lot of value from its users but it isnt solely proportional, it is a multinational with many revenue streams
yellowstuff 8y ago
Facebook is valued by the stock market mainly by the profit it's expected to generate in the long run. (Other concerns move the stock price around in the short term, but for most large companies most of the time the stock price will be a good reflection on the consensus view on long term profits.) The value users get from Facebook is almost totally unrelated to profits generated, and therefore to the stock price.
- sonnyblarney 8y ago
  "The value users get from Facebook is almost totally unrelated to profits generated, and therefore to the stock price." They are definitely related. FB creates some kind of value - some goes to them in terms of profit, some goes to the user in consumer surplus. As FB shows more ads, the consumer surplus goes down. Obviously corps are the one paying, but value to consumers does matter.
jtolmar 8y ago
Facebook's value as a company is related to the total value of its users, not its total value to its users.
nicky0 8y ago
No because Facebook's valuation is based on its value to its advertisers, not its users.

taneq 8y ago

> 1) The $1000 is misleading because although it's an average, the median is considerably lower, around $100 in that case. This was my first thought - a dollar is worth wildly different amounts to different people. If I'm struggling to put food on the table and fuel in my car, then a dollar is pretty important. If I'm sitting in my mansion sipping fine wine and contemplating what to do with the afternoon, a thousand dollars may be inconsequential.

alanlamm 8y ago
Or, concretely, if I’m sitting in my midwestern liberal arts college...
pcthrowaway 8y ago
Even to people who are struggling to make ends meet, there is likely some monetary value to using facebook, as many community service organizations now organize charitable events through facebook, and facebook groups are excellent resources for local information (local deals, budget-friendly groceries, giveaways). I suspect you'd still be hard-pressed to get many such people off of facebook for a year for less than $500

josecastillo 8y ago

I half want to make a Kickstarter called "Let's Kill Facebook" that promises to give people $50 of the total proceeds to delete their Facebook account. I'd venture a surprising number of people who really care about killing Facebook would back it, and a surprising number of people who don't care that much about Facebook would take the $50. If it went viral enough to make an impact on people's networks, #3 would take care of the rest. (I'm not actually going to do this, but it's a fun thought experiment.)

runeks 8y ago
> I'd venture a surprising number of people who really care about killing Facebook would back it, and a surprising number of people who don't care that much about Facebook would take the $50. And an obscene amount would take the $50 and create a new account (or simply not reveal their real account). I agree it'd be a fun experiment, though. And I see no reason to keep it hypothetical. I'd be particularly interested in seeing how much is raised (which I suspect would be relatively little).

isostatic 8y ago

> 1) The $1000 is misleading because although it's an average, the median is considerably lower, around $100 in that case. The median wage in the US is $31k [1], or about $15 an hour. The average facebook user spends 50 minutes on the site a day [2], or 300 hours a year. That's a $4500 a year that they are already spending on facebook. [1] https://www.ssa.gov/OACT/COLA/central.html https://www.ssa.gov/OACT/COLA/central.html [2] https://www.nytimes.com/2016/05/06/business/facebook-bends-the-rules-of-audience-engagement-to-its-advantage.html https://www.nytimes.com/2016/05/06/business/facebook-bends-t...

drngdds 8y ago
Only if they would otherwise spend that time working, which seems unlikely.

PaulHoule 8y ago

I thought it was crazy at first then I thought about comparables and companions and it doesn't seem so bad. Comparable: Many people pay $1000 a year for cable TV. They may complain about but they fork over the money. Companions: You might spend $1000 a year for internet access (either wired or wireless) which you might use to access Facebook. You might spend $1000 a year for a phone that you access Facebook on. I've found that companions are a good way to estimate "Willingness to Pay" quickly. For instance if somebody spent $50,000 on a software license you can probably sell them a $50,000 server to go with it.

null000 8y ago

> 4) Getting paid to leave is simply a different metric than having to get out your wallet to pay for something. Surely the authors know this but I didn't see it mentioned. 'WTP != WTL' Glad someone mentioned this. It would be a very different situation if you switched Facebook over to a subscription model, and it'd be a different outcome still if you had people bid to be the only one still able to use Facebook in the auction. I honestly think this is actually a really bad metric to choose, even if it's better than nothing. I, for instance, barely use Facebook, but would require a decent chunk to bother to deactivate it, just because I'm really insensitive to extra money compared to the general population. I would, on the other hand, probably not pay much to keep it because that requires extra work. Still better than nothing, but hopefully someone can top this.