Facebook's economic impact: Source: Facebook
Facebook may be seen as a haven of narcissism and a platform that showcases some of the baser emotions of humanity but the social network is apparently a driver of significant global economic activity.
According to a Deloitte report, commissioned by Facebook, the social network enabled global economic impact of $227 billion and 4.6 million jobs around the world in 2014.
In Australia, the economic impact is $6bn, with 62,000 jobs created.
The impressive numbers are powered by the sheer scale of Facebook, which now connects 1.3 billion people globally, and the plethora of marketers and third party app developers that are making the most of the connectivity.
The social network may indeed be a driver of economic growth at a global level but it’s wise to take the numbers with a pinch of salt.
This isn’t the first time Facebook has recruited the likes of Deloitte to spruik the economic benefits it brings on the table. On the eve of its IPO in 2012, Facebook chief marketing officer Sheryl Sandberg pointed to two studies at the World Economic Forum in Davos, Switzerland - one by the University of Maryland’s Business School, that found that the company had created as many as 235,644 US jobs, injecting some $15.71 billion into the US economy, and another by Deloitte that suggested that Facebook had had an economic impact on Europe of $20.2 billion supporting 232,000 jobs.
Sandberg is back at Davos this week, armed with a report that highlights the benefits at a global scale. In some respect, it’s a sign of where Facebook now resides in our collective connected consciousness. The social network is as mainstream as it gets and, according to Deloitte, its appeal as a platform that directly connects businesses with customers stands out as a key driver of economic activity.
The report adds that by serving as a platform for app developers and as driver of demand for connectivity, Facebook is making an inordinate impression on the global economy.
“Our study finds that Facebook enables significant global economic activity by helping to unlock new opportunities through connecting people and businesses, lowering barriers to marketing, and stimulating innovation,” Deloitte’s global managing director (Technology, Media & Telecommunications), Joylon Baker says.
Facebook’s platform effect is undeniable and with more than 30 million small and medium businesses (SMBs) on the network and 1.5 million companies using Facebook’s targeted advertising, it’s hard to underestimate just how much the network knows about its users.
But the numbers touted in the study seem to overestimate the contribution, and then some.
Cause and effect
Stanford economist Roger Noll hasn’t held back in his criticism, telling the Wall Street Journal that Deloitte and Facebook might be over-egging the pudding by assigning far too much value on each Facebook ‘Like’.
Noll is also unimpressed by the connectivity argument, questioning its reasoning.
Do people really buy a smartphone to be on Facebook? The social network would certainly like us to think so, citing a Nielsen report that 1 in 3 of all mobile minutes in Australia is on Facebook platforms.
Even with those metrics, it’s a bit of a stretch and, according to Noll, the Deloitte report confuses cause and effect.
“Facebook is an effect, not a cause, of the growth of Internet access and use,” Noll told the WSJ.
Sheryl Sandberg disagrees, telling the WSJ that when it comes to the developing world Facebook is a key driver of smartphone sales.
“People will walk into phone stores and say ‘I want Facebook.’ People actually confuse Facebook and the internet in some places.”
By that same token, one could assume the same would apply to Google, but Google doesn’t have reports touring its global economic impact.
Putting its neck on the line
Having said that, Facebook’s platform does serve as an avenue for app developers and start-ups to push the boundaries of social media and explore how they can help businesses reach a wider audience .
With more than 13.6 million Australians checking into Facebook every day, building a presence on the platform is pretty much par for the course for most Australian businesses.
However, making the connection with the consumer requires a bit of effort and that in turn allows start-ups like Melbourne-based TigerPistol, which recommends Facebook content posts and paid advertising campaigns to SMBs based on the best outcomes from similar businesses, and Local Measure, which is in the business of deciphering the chatter about brands and businesses on social networks for its customers, to carve out niche business models.
So, there’s economic value created here but it’s probably not as magnified as the Deloitte report contends.
Perhaps a more pertinent question would be why is Facebook willing to put its neck on the line and open itself to criticism?
Is it hubris? Perhaps, but it may well be a pitch from Facebook to shape the debate around where the US tech behemoths fit into the ongoing digital makeover of global business.
It’s also an exercise, flawed as it may be, in showcasing Facebook’s presence as a technology leader and not just another short-lived internet fad.
So the next time you are checking your Facebook account during work hours, just remember you are still contributing to the global economy.