5 ms·

The Consumer Web is Deflationary

46 points by byrneseyeview 15y ago

msluyter 15y ago
I believe Tyler Cohen's "The Great Stagnation" arrives at a similar conclusion, but I'd like to see hard numbers. In regard to entertainment, it'd be interesting to see a nomalized total $/hr comparison of various activities. For example, compare a standard movie in a theater to playing Dragon Age. That'd be roughly $15/hr (adding popcorn) vs. (120 hrs game play / ~60$ for the game) ~$.50/hr. That seems impressive, but .50/hr is still much higher than the 0$/hr that free broadcast television offers. I'd be curious to know how all these different types of media consumption shake out in the long run.
- byrneseyeview 15y ago
  That's a really good question. I have no idea what the ad revenue per hour of TV watched would look like, but Quora might know: http://www.quora.com/What-are-some-typical-ad-revenues-per-person-per-hour-of-television-watched-for-different-categories-of-shows http://www.quora.com/What-are-some-typical-ad-revenues-per-p... (Edit: I came up with a very rough estimate of $.20 of ad revenue per person-hour of TV time. I have no idea how accurate that might be.)
  - gwern 15y ago
    That seems to be the same number Kevin Kelly provides for TV: http://www.kk.org/thetechnium/archives/2011/03/your_attention.php http://www.kk.org/thetechnium/archives/2011/03/your_attentio...
  - nobody_nowhere 15y ago
    Very interesting. How many ad impressions do you generate during an hour of web browsing? 100? 500? That's $0.10 - $0.50 of revenue at a $1CPM.
- meric 15y ago
  If you buy a console just to play dragon age... 460/120 = 3.83. A console with 3 games: 580/360 = 1.61. Edit: edited out stupid "on par with movie" comment.
patio11 15y ago
I think just about everything in this article is accurate, but that it ultimately doesn't matter, because the particular class of goods that are subject to this is rounding error on an economic sector which, if you compared it to e.g. fixed income securities, would resemble a pimple on the nose of a particular emperor depicted on one coin of the vast horde that a dragon sleeps on. Here's an interesting experiment for you: guess what portion of the US economy is video games, movies, music, and consumer Internet services put together. Now graph that against "Of the last 20 people you talked to, how many are white men between the ages of 12 and 24?" I think that graph shows a markedly upward slope. I also think that it does not asymptotically approach the right answer. You could do a spiritually similar experiment with, e.g., cosmetics/beauty aids, wedding services, etc and young ladies. Or healthcare, if you're looking for a gigantic underestimation.
- byrneseyeview 15y ago
  It's a small fraction of the real economy, but a large and growing fraction of waking hours. It's hard to measure the consumer surplus created by high-quality entertainment, but it's clearly enormous if people are willing to devote multiple hours per day to TV (or, if they're in the demographic you mentioned, games and the Internet). If that activity is <.25% of GDP and ~5% of waking hours, it might imply that our measurements are out of whack, not that it's insignificant. Plus! The rise of online dating might cut into the cosmetics market, by reducing the necessary baseline of attractiveness. If people meet their mates when they're standing in line at the grocery store, looking good in the grocery store has a direct, positive impact on lifetime happiness. If people meet their mates on OKCupid, it's okay not to care too much about personal appearance at other times.
- pnathan 15y ago
  It would be informative to see a pie chart of the US economy, broken down by sector. Unfortunately, I'm at work, and don't have the disposable time to concoct such an interesting diagram...
- deleted 15y ago
  [deleted]
- 15y ago
praptak 15y ago
It seems that it sucks if your retirement portfolio consists of the industries being undercut and you need things like medical care. AirNurse, CrowdDoctor & 99medicines are unlikely to drive med prices down.
- ippisl 15y ago
  There are disruptive innovations in healthcare. You can use medical tourism and save a lot. There are other. But disruptive innovations are usually pretty slow. they take a decade or more. Just invest carefully.
T_S_ 15y ago
I agree with most of the article. However the author suggests that the net reduces the ability for sellers to price discriminate. I think it helps both sides, and the outcome is in doubt. On the one hand it enables faster and broader flow of price information, but on the other hand it reduces the anonymity of the buyer. I think what we will see is an arms race between buyers sharing information and sellers creating all sorts of ways to individually vary the discount they need to offer.
- ippisl 15y ago
  In order to vary the discount without making customers angry you have to change the product , not only the price. For many products , that's pretty difficult to do.
  - T_S_ 15y ago
    Maybe, but then again, loyalty cards with tiered rewards do that. Making customers do work to signal their price point does it (e.g. coupon clipping). Bundling can do it too. Essentially, sellers have to add complexity to keep the discrimination going. Meanwhile consumers have little supercomputers to help undo the complexity. Hence the arms race analogy.
nhaehnle 15y ago
The interesting thing about this is that pretty much every point in the article can be read as: the internet changes consumer markets to be more like the idealized markets in economics textbooks. Just a random observation, but it might be something for serious economists to look into.
richcollins 15y ago
cheap social status is an oxymoron (social status is zero sum) unless the status is perceived instead of real.
- abstractbill 15y ago
  I'm not sure that's true. Any time you ask what someone's social status is, you have to qualify that question to within a particular group. If you expand the group to "everyone on the planet", I think you're talking about fame, which seems different to social status.
- lcargill99 15y ago
  I have a significant bias from reading "Overcoming Bias" by Robin Hanson. His "math" is to attribute to status-seeking anything where there's a ... demand curve that doesn't make sense. It's all relative. So "cheap social status" might be substituting working on open source instead of accruing your first billion. It's cheap-er, but still not cheap.
abstractbill 15y ago
The web offers cheap social status That is a very interesting observation. I wonder if it will make most people happier in the long term.
- ippisl 15y ago
  From a 2008 European study of 18000 people: "people that are connected to the Internet are considerably more satisfied with their lives.” http://www.virtualhappiness.org/2008/02/wellbeing-and-internet-access/ http://www.virtualhappiness.org/2008/02/wellbeing-and-intern...
lcargill99 15y ago
It would be completely and totally awesome if all status were relegated to the Web. I would estimate the probability of that at at around 0.1%. People who were denied status on the Web would try to find some other means.

46 points by byrneseyeview 15y ago

I believe Tyler Cohen's "The Great Stagnation" arrives at a similar conclusion, but I'd like to see hard numbers. In regard to entertainment, it'd be interesting to see a nomalized total $/hr comparison of various activities. For example, compare a standard movie in a theater to playing Dragon Age. That'd be roughly $15/hr (adding popcorn) vs. (120 hrs game play / ~60$ for the game) ~$.50/hr. That seems impressive, but .50/hr is still much higher than the 0$/hr that free broadcast television offers. I'd be curious to know how all these different types of media consumption shake out in the long run.

byrneseyeview 15y ago
That's a really good question. I have no idea what the ad revenue per hour of TV watched would look like, but Quora might know: http://www.quora.com/What-are-some-typical-ad-revenues-per-person-per-hour-of-television-watched-for-different-categories-of-shows http://www.quora.com/What-are-some-typical-ad-revenues-per-p... (Edit: I came up with a very rough estimate of $.20 of ad revenue per person-hour of TV time. I have no idea how accurate that might be.)
- gwern 15y ago
  That seems to be the same number Kevin Kelly provides for TV: http://www.kk.org/thetechnium/archives/2011/03/your_attention.php http://www.kk.org/thetechnium/archives/2011/03/your_attentio...
- nobody_nowhere 15y ago
  Very interesting. How many ad impressions do you generate during an hour of web browsing? 100? 500? That's $0.10 - $0.50 of revenue at a $1CPM.
meric 15y ago
If you buy a console just to play dragon age... 460/120 = 3.83. A console with 3 games: 580/360 = 1.61. Edit: edited out stupid "on par with movie" comment.

patio11 15y ago

I think just about everything in this article is accurate, but that it ultimately doesn't matter, because the particular class of goods that are subject to this is rounding error on an economic sector which, if you compared it to e.g. fixed income securities, would resemble a pimple on the nose of a particular emperor depicted on one coin of the vast horde that a dragon sleeps on. Here's an interesting experiment for you: guess what portion of the US economy is video games, movies, music, and consumer Internet services put together. Now graph that against "Of the last 20 people you talked to, how many are white men between the ages of 12 and 24?" I think that graph shows a markedly upward slope. I also think that it does not asymptotically approach the right answer. You could do a spiritually similar experiment with, e.g., cosmetics/beauty aids, wedding services, etc and young ladies. Or healthcare, if you're looking for a gigantic underestimation.

byrneseyeview 15y ago
It's a small fraction of the real economy, but a large and growing fraction of waking hours. It's hard to measure the consumer surplus created by high-quality entertainment, but it's clearly enormous if people are willing to devote multiple hours per day to TV (or, if they're in the demographic you mentioned, games and the Internet). If that activity is <.25% of GDP and ~5% of waking hours, it might imply that our measurements are out of whack, not that it's insignificant. Plus! The rise of online dating might cut into the cosmetics market, by reducing the necessary baseline of attractiveness. If people meet their mates when they're standing in line at the grocery store, looking good in the grocery store has a direct, positive impact on lifetime happiness. If people meet their mates on OKCupid, it's okay not to care too much about personal appearance at other times.
pnathan 15y ago
It would be informative to see a pie chart of the US economy, broken down by sector. Unfortunately, I'm at work, and don't have the disposable time to concoct such an interesting diagram...
deleted 15y ago
[deleted]
15y ago

praptak 15y ago

It seems that it sucks if your retirement portfolio consists of the industries being undercut and you need things like medical care. AirNurse, CrowdDoctor & 99medicines are unlikely to drive med prices down.

ippisl 15y ago
There are disruptive innovations in healthcare. You can use medical tourism and save a lot. There are other. But disruptive innovations are usually pretty slow. they take a decade or more. Just invest carefully.

T_S_ 15y ago

I agree with most of the article. However the author suggests that the net reduces the ability for sellers to price discriminate. I think it helps both sides, and the outcome is in doubt. On the one hand it enables faster and broader flow of price information, but on the other hand it reduces the anonymity of the buyer. I think what we will see is an arms race between buyers sharing information and sellers creating all sorts of ways to individually vary the discount they need to offer.

ippisl 15y ago
In order to vary the discount without making customers angry you have to change the product , not only the price. For many products , that's pretty difficult to do.
- T_S_ 15y ago
  Maybe, but then again, loyalty cards with tiered rewards do that. Making customers do work to signal their price point does it (e.g. coupon clipping). Bundling can do it too. Essentially, sellers have to add complexity to keep the discrimination going. Meanwhile consumers have little supercomputers to help undo the complexity. Hence the arms race analogy.

nhaehnle 15y ago

The interesting thing about this is that pretty much every point in the article can be read as: the internet changes consumer markets to be more like the idealized markets in economics textbooks. Just a random observation, but it might be something for serious economists to look into.

richcollins 15y ago

cheap social status is an oxymoron (social status is zero sum) unless the status is perceived instead of real.

abstractbill 15y ago
I'm not sure that's true. Any time you ask what someone's social status is, you have to qualify that question to within a particular group. If you expand the group to "everyone on the planet", I think you're talking about fame, which seems different to social status.
lcargill99 15y ago
I have a significant bias from reading "Overcoming Bias" by Robin Hanson. His "math" is to attribute to status-seeking anything where there's a ... demand curve that doesn't make sense. It's all relative. So "cheap social status" might be substituting working on open source instead of accruing your first billion. It's cheap-er, but still not cheap.

abstractbill 15y ago

The web offers cheap social status That is a very interesting observation. I wonder if it will make most people happier in the long term.

ippisl 15y ago
From a 2008 European study of 18000 people: "people that are connected to the Internet are considerably more satisfied with their lives.” http://www.virtualhappiness.org/2008/02/wellbeing-and-internet-access/ http://www.virtualhappiness.org/2008/02/wellbeing-and-intern...

lcargill99 15y ago

It would be completely and totally awesome if all status were relegated to the Web. I would estimate the probability of that at at around 0.1%. People who were denied status on the Web would try to find some other means.