Economists Call Bull On Facebook's Impressive Economic Impact Figures
Stanford economist Roger Noll argues that the report confuses cause and effect: Facebook isn't responsible for the ongoing surge of internet use, but more people use Facebook as internet usage grows.
"Facebook is an effect, not a cause, of the growth of Internet access and use," Noll told the WSJ.
George Mason University professor Tyler Cowen agreed. The social network "likely has significant economic impact," he told the WSJ, but that the numbers are inflated. "The value of smartphones is that they help you read Facebook - in addition to other benefits - not vice versa."
In other words, more people are buying smartphones so they gain access to all things on the internet, not just Facebook.
Facebook COO Sheryl Sandberg stands by the report, which claims the tech giant's influence is responsible for 16% of smartphone sales. We "know Facebook is one of the main drivers of why people buy phones, particularly in the developing world," she said to the WSJ. "People actually confuse Facebook and the internet in some places."
Here's an illustration of the data released by Deloitte:
The US alone saw $100 billion in economic impact, the report says. "The purchase of mobile devices and connectivity services motivated by Facebook" added $50 billion.
Some of the figures were calculated by assigning an undisclosed economic value to a Facebook "Like." These were then multiplied by the number of Likes to calculate the gross revenues from Pages. Similarly the number of Facebook events, multiplied by the average number of attendees and average spend per event, was used to calculate the revenues generated by Facebook events. (Deloitte claims 20% of that is "new" activity generated by Facebook's existence, though it's not clear how that percentage was reached.)
Meanwhile, they assert that 16% of smartphone sales are driven by Facebook on the basis of the social network's popularity.
Economist Roger Noll may think the results are "meaningless," but the criticism is unlikely to perturb Sandberg, who is due to speak at the World Economic Forum in Davos this week. She's expected to use the report for the basis of her remarks. "People believe that technology creates jobs in the tech sector and destroys jobs everywhere else," she told Reuters. "This report shows that's not true."
Here's a breakdown of those questionable figures:
