over 9 years on 2008-06-01

QUANTIFY THE 'VALUE' OF 'FREE WEB 2.0 SERVICES'


several months ago i conducted a brief unscientific survey to quantify the 'value' of 'free web 2.0 services'.  i got an n of 115, and while it would be a stretch to consider the results scientifically 'significant' the answers were interesting.  the survey was based on one central question:

consider waking up one morning and finding that each of the following services, in turn, has decided to charge you and only you for access... the service is not requiring your friends to pay, just you. holding all else constant, how much would you be willing to pay each service in ($ usd / year) before abandoning your use of the product? consider each service completely separately... in each scenario the listed service is the only one who has required you to pay (e.g. msn has decided to charge you and no one else, none of the other services in the world have changed at all)     

why?

i was primarily interested in the question on the premise that, in a broad sense, there is little difference between charging users for a service and indirectly taxing them by degrading the experience with advertisements.  certain cultural proclivities of given populations and barriers to payment may make one model more appropriate than another (or at least distort the 1:1 relationship between the models), but there should be a high level of correlation between proclivity to 'pay' directly for a service and proclivity to pay by way of consuming advertisements.

the theory was that because one could argue that the amount that users are willing to pay * the number of users is a rough proxy for the theoretical max revenue that a company/online brand could generate...  or, put differently, the question serves as a way to value online services.

that said, people are notoriously terrible at estimating fictitious costs/proclivity to pay, and many many population factors can distort the absolute numbers in a small survey.  so in conducting the survey i was un-interested in the absolute dollar amounts.  rather, what was worth examining was the amount people said they would pay for a given service relative to other services.  so, for example, while the fact that 'tom' said he would pay $100 a year for facebook is uninformative, it is quite interesting to know that he would pay 33% more for facebook than myspace.

of important further note is that the question was phrased in the hypothetical world that the surveyed individual alone was being charged.  charging for access to a social service, like myspace, would potentially significantly impact the dynamics of the service based on the individual's prediction of whether others will pay for it, so isolating it to the world in which only a single individual is charged is a critical feature.

methodology:

this survey was conducted with survey monkey and distributed through my blog, my twitter feed, as well as those of friends.  the population is necessarily skewed by the nature of those audiences.  all answers were self reported.  someone was considered a valid 'user' of a given service if they self reported themselves as such and suggested a positive dollar amount greater than 1 cent that they would pay for continued access.

a few anomalies to point out:

1.  myspace users seem very under-represented in the survey
2.  myspace and yahoo mail users reported exceedingly low mobile service bills

select interesting findings:

1.  google search is far and away the most valuable service.  people are willing to spend, on average, 16% of their mobile access bill for google search where no other free online service broke 3.5% (gmail being the second most valued service).

2.  that said, among those who use both google search and yahoo search, people were only willing to pay 6% for google search.  that is an enormous delta, which suggests either something about the population that uses both - or that people who don't use yahoo over-estimate how good google is.

3.  facebook users report that they would pay 1.85% of their mobile access bill for the service on average.

4.  in all instances except one, when a user self reported use of two related services (both facebook and myspace, google maps and yahoo maps, gmail and yahoo mail, etc...) they were willing to pay less for each service.  the exception was that users of both yahoo mail and gmail were willing to pay slightly more for yahoo mail than those who just used yahoo mail.

5.  full graphics and results are attached in the excel sheet.  there are lots of other fun unscientific findings, like women spend more on mobile then men, etc.

conclusion:

nothing is extremely surprising in the survey, but it will be interesting to continue to work with the same questions and track changes over time.  as of right now, this survey suggests that google search is far and away the most valuable online property on a per-person basis, followed distantly by gmail.  facebook is, by this methodology, worth about as much as google maps on a per-person basis.

i apologize it took me this long to get this information out.  i have been discussing it for months now, and have had trouble finding the time to report back the results.


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