Tim Worstall over at The Register has been running some numbers to counter Deloitte’s lulzy conclusion that Facebook is worth more than the entire country of Portugal.
Worstall is right to question the pencilnecks over at Detoilet; I’ve been to Portugal, and while I wouldn’t say that it has as much going for it as a Germany or a Canada, it’s a darned sight more valuable than a self-updatingi mobile/web app used specifically and exclusively to rape users and scam advertisers at the same damn time.
So how does Tim even attempt to calculate the incalculable? How does he refine on the retarded? Let’s take a look:
What we want to find is the value that people derive from being able to use Facebook.
One obvious way of doing this is to look at the time people spend on it. We all do place a value on our time, as anyone who has ever seen a slow moving queue knows. So the average US user spending 40 minutes a day assigns some value to the time spent doing so. And there’re 133 million Americans apparently doing that. Now what we need is to give a value to that time.
An interesting premise with which to conduct this armchair analysis, if perhaps not as obvious to the reader as it is to Tim, don’t you think?
Sure, we’re all familiar with the adage that “time is money,” but can this simple cost-benefit equation be reasonably applied to an activity that would otherwise earn no money whatsoever? I mean, this is “Facebooking” we’re talking about here. It’s a replacement activity for watching TV or otherwise frittering hours away however it is that the vast majority of people fritter away their hours. It’s sorta the equivalent of walking malls.
Any value equations built there-on must necessarily miss what value means. The aggregate value of the consumer hours spent in a mall isn’t equal to the value of the mall itself any more than the hours spent watching the stars are equal to the value of the stars. Idem for Facebook.
So Tim isn’t off to much of a start but we’ll let him continue:
A reasonable value to start with is the US average (mean) wage of $24 an hour. We obviously prefer to be on Facebook to working. At the margin that is. Another more reasonable answer is at the minimum wage. This comes from when Joe Stiglitz and Amartya Sen were advising Les Frogs on the Sarkozy Commission. A closely related problem is that there’s a lot of work that’s not monetised: so called “household production”. We would like to have a value for this. It’s a bit of a bodge job but the answer is that it’s undifferentiated labour (ie, people don’t specialise as much as they do in the wider economy) and thus the wage rate for undifferentiated labour should be used to value it: minimum wage.
Minimum. Wage. Right… So which country are we going to use for this calculation then? As we discovered first-hand in Australia last month, minimum wage is not only arbitrary, based on broken reasoning, and ultimately destructive to the flexibility of the labour market, but it really has no place being applied outside of the statal regulatory environment it calls home. Anything as distortionary as the woebegone policy of minimum wage can only be viewed from within its own confines, as was certainly the case, to take a random example, of the Soviet Union policy against “wrecking.” Needless to say, weirdness begets weirdness and as such is best left to its own devices.
Which is to say that, even while decaying global nation states continue to encroach on private freedoms,ii the price of “undifferentiated labour,” if that’s what we’re going to call time on Facebook, should be worth no more than the global average salary, which is ~$18,000 per year. Given that the average person sleeps 7 hours per night, they’re therefore awake for 6,205 hours per year. Assuming that time really is money and that all time with eyes open is worth the equivalent amount of money, (and since “work time” is also “Facebook time,” why not?) this gives us an hourly rate of $2.90.
That’s a little bit better, even if it’s off in a hairbrained direction, but still not quite low enough…
Yes, yes, I know there’re holes in this reasoning. No, we don’t think that anyone would willingly pay $7.25 an hour to play on social media. But it’s also true that people do this a lot, this social media, and thus they must assign a value to the doing of it.
And thus we can reach an “economic value in consumption” for Facebook, for the US, of $232bn to $769bn. Which is, I agree, a bit mad. […]
Another way of putting this is that something that Americans spend 32 billion hours a year on, voluntarily, can’t really have an economic value of only $12bn. It’s just nonsense to value people’s time at under 40 cents an hour.
Tim, nonsense? Nonsense you say??! Hey, if the average Facetard is making more than $18k per year then even $0.40 is waaaay too much!!
Let’s work the equation another way: let’s say that Facebook is, generously here, worth $1 mn. One followed by six zeros. That’s it, that’s all.iii Given that there are 1.35 bn Facebook users globally, each spending an average of 20 minutes per day on the site, that gives us 164.25 bn hours spent on Facebook every year. Now divide $1 mn by 164.25 bn and you get $0.00000609 per hour spent. In more proper terms, 2.65 satoshis per hour.
While that may one day be a pretty penny, in today’s terms, it should put things in perspective: all the hours spent on Facebook are but dust.
As Google+ only reinforces:
decimation: Lol. 0.2-0.3% of all G+ profiles, about 4-6 million users, have made public posts in 2015.
punkman: So they are claiming 2-3 billion users total?
decimation: That’s 2-3 billion signups
mircea_popescu: And yet, in spite of that claim (probably unsubstantiated, as all of these, but certainly more defensible in VC terms than anyone else’s), G+ isn’t worth anything. If there’s a better example as to why the “grow big fast” so-called strategy doiesn’t work, here it is. Google’s own G+ is not worth naything in spite of 3bn users. That watsapp no users claimed as however many seemed to be worth something when FB paid for them is no support of the theory. That G+ isn’t worth anything IS counterproof. Because that’s how proof works : that you didn’t break into any houses all through the day of the 29th doesn’t help you in court. That you did on the 25th, sinks you.
thestringpuller: Well santa clause is allowed to BNEiv on the 25th me thoughts. claus*. Maybe the entire point of G+ is to prove Facebook isn’t worth anything?
mircea_popescu: Nah, he only enters. Yes, actually, in a backwards sort of way it’s exactly that. Google can’t afford to have Zuck pretend like oh, “We’re better than Google”. So if he tries they can go “Heh, we’re FB plus other things”. Strategy.
As if Facebook wasn’t doing enough to hurt the actual poor, it has to choke the rest of us with dust.
Well, if you have Facebook, that is.
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- And therefore, according to the latest Canadian legislation, illegal! Oh man this’ll be a bitch to prosecute though. There’s no way in frozen hell that Canada has the cojones to tackle Silly Valley, even if it’d be a clown fight for the ages! [↩]
- Well, at least the state is trying to encroach on private freedoms. Not like the Internet really gives a shit how loudly it says “Boo!” [↩]
- Time Warner sold MySpace in 2011 for $35 mn after having purchased it for $525 mn two years earlier. $35 mn in 2011 dollars, given that about four trillion of the things have been printed since then and several multiples of that created ex nihilo via fractional reserve, gives us about $1 mn in 2015 bucks, give or take. [↩]
- Break N’ Enter. [↩]