Are consumers really willing to pay 2600 dollars for Web services?

Summary: How much net profit do consumers get from the Internet? (Tencent Science and technology map) according to foreign well-known media, "The Economist" reported that the Internet has changed our way of life in all aspects, and the economic value of various services on the Internet is difficult

How much net profit do consumers get from the Internet? (Tencent Technology matching map)

According to a well-known foreign media, the Economist, it is no doubt that the Internet has changed our way of life in all aspects, while the economic value of the services on the Internet is difficult to calculate. Some researchers have tried to calculate the net profit from the Internet by different channels. The results of the calculation show that the net profit of consumers from the internet is huge, but these results are still controversial.

The following is an overview of the article:

Judy Morica (Judy Mollica) 's two-year-old daughter was diagnosed with cancer in 1992, and Judy spends a lot of time hoping to find information about her daughter's condition in a library near the hospital. When she sees an unfamiliar term, she stops to the other part of the library looking for information about the term. Such a situation, in her words, is "marching in the dark." In 2005, Judy's daughter recovered from her illness but had another cancer. But unlike last time, Judy was able to stay with her daughter, because she was able to read articles online, to quickly find medical terminology on Wikipedia, and to find new information based on relevant links. She can now talk to her daughter's attending doctor like a trainee. She says Wikipedia not only saves her time, but also allows her to gain more control over her daughter's treatment. "The services that Wikipedia offers me cannot be measured in terms of money. ”

The internet has changed people's lifestyles in many ways, but it may be difficult to measure the economic benefits of the Internet because most of the services offered by the Internet cannot be priced. It's easy to figure out how much the Wikipedia has done to the encyclopedia publishers, but it's hard to figure out how much profit Wikipedia has made for users like Judy. This question is actually a basic gratitude in economics. GDP measures the value of currency trading rather than the happiness of the people. If someone is willing to pay 50 dollars for the latest version of the Harry Potter novel, but deal with 20 dollars, the difference of 30 dollars is called "consumer surplus", that is, the net profit of consumers. Online activities that can be reflected in GDP – such as Google's ad revenue – actually account for only a fraction of all online activity, and rarely include services that bring consumer surplus to Google users. A tricky question is how to calculate the consumer surplus that the Internet brings?

Shane Greenstein, a professor at Northwestern University, and professor Ryan Chene Greenspan of the University of Rochester (Ryan McDevitt) calculated the consumer surplus of broadband access by creating a demand curve (of course, This part also includes consumer surplus generated by Internet service, because Internet service is the main reason for users to access broadband. In 1999, the cost of broadband dollars was $20 trillion, and by 2006 broadband was widely spread, reducing broadband costs to $17 trillion. Even if lower prices attract more users to broadband, consumers can still enjoy 3 of dollars of consumer surplus each year. The authors believe that by 2006, broadband has generated 39 billion of billions of dollars in revenue for telecoms companies, with consumer surplus of 5 billion to 7 billion dollars a year. Based on the percentage of Wikipedia's share of the web, Mr Greenspan thinks Wikipedia's consumers are left with 500 million dollars.

Even such numbers are likely to underestimate the economic benefits of the Internet. The two authors calculate the results based on the 1999 and 2006 of the Internet's significance to people's lives equivalent. But the emergence of new services, such as Google and Facebook, has made the Internet more far-reaching in the 2006 than in the 1999. So the consumer surplus will be even bigger.

More importantly, when consumers are deciding how much to pay for the internet, they may not be able to fully access the value of free internet services. Another approach is to ask consumers directly how much they are willing to pay for online services. A joint survey by McKinsey, a European IAB and consulting firm, in 6 countries, asked 3,360 consumers how much they would pay for 16 of the options, and that 16 of all revenue from online services came from advertising. On average, a family is generally willing to pay € 38 (about 50 dollars) per service each month, but these services are now free. In addition to the cost of advertising intrusion and privacy violations, McKinsey reckons that the free, ad-supported Web services contribute a total of 32 billion euros of consumer surplus in the United States, up from 69 billion euros in Europe. E-Mail contributed 16% of the consumer surplus in the United States and Europe, with search engines accounting for 15% and social networks to 11%.

Another way to extrapolate consumer surplus is to calculate how much time the Internet has saved for users. In a part of a Google-sponsored survey, Chen Yan Chen, of Michigan State University, and Grace Young, investigated a team of researchers. They will ask the team about tricky questions from the web, such as whether the use of butter or margarine will affect the shape of the cookie during the making of cookies. In general, the people who participate in the survey spend 7 minutes to answer these questions by using a search engine, while using the University of Michigan Library will cost them 22 minutes. Hall Varian Varian, Google's chief economist, calculates that Google will save users 3.75 minutes a day. Assuming an hourly value of USD 22 (measured in American average wages), he believes that the search business will generate a net profit of 500 dollars a year for users, contributing 65 billion to 150 billion dollars in consumer surplus for each country.

But another way to compute this is by calculating the value of the user's time spent on the network. Eric Brunorfson Erik Brynjolfsson of MIT and Wu Zhuxi (Joo Oh) showed that during the period from 2002 to 2011, Americans spent more than 3 hours a week on the Internet from 5.8 hours a day. As long as consumers believe that the time spent on the internet is more valuable than the time spent on other things, the two academics say, the trend reflects the growing consumer surplus generated by the Internet. They believe that in 2011, the internet brought the consumer surplus of 564 billion U.S. dollars, each user can obtain 2600 U.S. dollars net profit. If this consumer surplus is counted into GDP, the annual economic growth rate should increase by another 0.39% per cent since 2002.

These numbers are impressive, but they are also controversial. Are consumers really willing to pay 2600 dollars for Web services? Are there so many other free relaxation activities, such as watching TV or playing with children? And the Internet has some value-reducing services: productivity is reduced as users continue to log on to Twitter; Communication between humans is also gradually replaced by e-mail. Judy says the people waiting in the hospital waiting room often talk to each other and share their stories. "But now, everyone is looking at their cell phones, texting or e-mailing. ”