There are many metrics and data available that quantify the use of digital goods and services. We know, for example, how many billions songs are downloaded and how much revenue that garners. We can tell how many articles there are on Wikipedia and how many hours people spend on Facebook.

 

To date, there are primarily three ways to quantify the impact digitization is having: We can look at the contribution of the transactions to the GDP; we can look at an IT company’s stock values, or we can track consumer spending and prices as indicators of consumer surplus created.

 

 

But none of these approaches measure the real value of digital services when the services are free, according to our latest research at MIT’s Center for Digital Business. For example, a money-only model may be missing 95% of the value consumers derive online. Finding that new metric is the focus of my team’s latest research. Free goods and services on the Internet have exploded in the past decade, and the average American now spends more than 32 hours a month online.

 

Once they have an Internet connection, they don't spend money to use Wikipedia, Facebook or Youtube, so the value of these services isn't properly reflected in the GDP statistics.

This gap is a problem we have been grappling with for some time, including in a Sloan Management Review article a few years ago.

 

At the recent annual meeting we offered a possible solution to the measurement problem: Consumers pay with time, not just money, and where they choose to spend their limited time and attention online is a form of voting. Increasingly, the digital economy is the 'attention economy.' Our research is calculating a demand curve for time and estimating how much consumers implicitly value free goods based on use of their time, not on dollars, spent on the Internet.

 

One preliminary finding shows that free goods added the equivalent of $139 billion in value to the economy in 2010-- more than 1% of the GDP and equal to $647 per person. The findings may have an impact of calculations such as the GDP and other economic metrics.


chart.JPG



Filter Blog

By author: By date:
By tag: