“Facebook enabled $227 billion of economic impact and 4.5 million jobs globally,” states a report by Deloitte entitled Facebook’s Global Economic Impact. Did it really? I’m not convinced. Note that the report is very specific in its choice of words, it doesn’t say “generated $227 billion of economic activity” but “enabled $227 billion of economic impact” in 2014.
Then there’s the fact that the second page of the report consists of a full page disclaimer (although Deloitte headlines it as ‘Important Notice’) which contains this passage: “the scope of our work has been limited by the time, information and explanations made available to us. The information contained in the Report has been obtained from Facebook Inc. and third party sources that are clearly referenced in the appropriate sections of the Report. Deloitte has neither sought to corroborate this information nor to review its overall reasonableness”.
It adds that “no responsibility or liability” will be accepted by Deloitte or Facebook “as to the accuracy, completeness or correctness of the information contained in this document”.
Those of us of a more sceptical bent might wonder how an $8 billion company can be responsible for so much economic impact, especially as the report categorically states that the “economic impact and jobs figures presented in this study exclude activity estimated to have been displaced”. According to the report, the marketing effect of Facebook enabled $148 billion of economic impact and 2.3 million jobs globally. Now, I don’t doubt it has proven to be a useful marketing platform for many businesses but I find it hard to believe that the figure of $148 billion does not include any marketing activity that has been displaced by Facebook.
Similarly, the report seems to assume a very large impact on Facebook’s behalf when it describes the platform effects, that is “the economic impact from third party products and services built atop of the Facebook platform”. The Facebook developer platform may well allow developers of iPhone, Android and other platforms to build, grow and monetise theirs apps within Facebook but they can also do those things outside it. And while it may be true that “over 80% and 90% of top grossing apps in the United States on iOS and Android respectively are integrated with Facebook” that doesn’t mean Facebook is their primary source of revenue.
“Bad reasoning”
Similarly, in terms of ‘connectivity effects’, which are claimed to enable $50 billion of economic activity, the report claims they “create economic impact through Facebook-motivated Internet use and purchases of devices”. Again, it’s not clear what value, if any, can be assigned purely to Facebook for people using and buying mobile devices.
Some economists have taken issue with the report. Stanford economist Roger Noll told The Wall Street Journal: “Facebook is an effect, not a cause, of the growth of Internet access and use.”
Noll’s comments were echoed by Tyler Cowen, professor of economics at George Mason University, who called the study’s calculations “bad reasoning”, adding: “The value of smartphones is that they help you read Facebook – in addition to other benefits – not vice versa.”
The problem is that the report attempts to assign a ‘Facebook value’ to the global economy but, to all intents and purposes, it can’t be accurately measured. No wonder the findings of the report, including the executive summary, ‘enable’ 11 pages of content while the Appendix (which explains the context of the report with sections on the methodology overview, multipliers, value added ratios and labour productivities and econometric analysis) ‘enables’ 16 pages of content.
It would be as if you or I tried to assign a euro value to ourselves if a friend decided to download an album after hearing a track from it played on our phone. How would we measure it? Would our friend have bought it without us? Or would he or she have still bought it after hearing it somewhere else, seeing it on youtube or reading about it? Could we still assign ourselves a value for our friend’s purchase despite the existence of those other options? If so, how much? And if it was an iPhone we were using, should Apple be able to assign itself some of that value too? Perhaps someone should prepare a report. We could give it the title: Friends enabled $xxxbn economic impact and xm jobs globally.
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