It’s always best to treat a business’ or industry group’s claims of economic benefits with a grain of salt and the survey released yesterday by Deloitte on measuring Facebook’s effects on the global economy is a good example.
Facebook’s Global Economic Impact looks at what the social media service added to the world’s economy and finds the company created 4.5m jobs and $227 billion of value in 2014 outside of its own operations.
Deloitte’s analysis breaks down Facebook’s effects into three general categories; platform effects, connectivity effects and market effects.
In coming to their figures, Deloitte’s researchers further broke the numbers down into the direct revenues of businesses using Facebook, the indirect impact upon suppliers and the ‘induced effect’ of employee spending patterns.
The basic formula, although the methodology gets quite complex in extrapolating the value added, is described in this illustration.
The main areas of contention are the employment multiplier effect, which Deloitte marks at 3.1 in Brazil down to 2.1 in the UK with the United States coming in at 2.7, and the valuation of individual Facebook actions.
For example here is the description of how companies’ page engagement is valued;
Sales from Page engagement are estimated as
a product of the total sales of businesses with
Pages and the sales uplift estimated due to their engagement on Pages (see section A3 for how elasticities are estimated by econometric methods). The total sales of the businesses that have a Facebook Page are estimated using the revenues of the private sector in the economy based on national statistics. Survey evidence is then used on the percentage of businesses with a Page in the US and the UK.For the rest of the world, the value of a liking action of a Page is estimated using relative GDP per capita of each country to the UK and USA to reflect the local economic conditions.
The gross revenue supported by Pages is then the product of the number of Pages liked and the value of a liking action of a Page.
The key here is the word estimated, there’s no doubt it’s in the interests of Facebook, the marketing agencies and the staff employed to manage social media to overstate this effect; it’s an arbitrary at best measure.
Marketing is claimed to be the most valuable aspect of Facebook, accounting for about two thirds of the service’s claimed economic value with a $148 billion contribution. Deloitte defines marketing effects as “the impact from businesses’ use of Facebook marketing tools to drive online and offline sales, and to increase awareness of their brand.”
Again this is subject to a number of arbitrary definitions and guesstimates which take us into the tricky area on measuring social media’s Return On Investment.
The reason why the numbers don’t pass the smell test is because of the sheer size; in Australia for instance the company’s effects are valued at $5.7 billion and employment generated at 63,000 workers. If we fully apply the 2.6 multiplier Deloitte attributes to the country this would suggest over 17,000 Australian workers are directly employed full time in running Facebook related tasks.
While it’s hard not to be sceptical of Deloitte’s numbers, it certainly is true that social media platforms have opened new roles for administrators, developers and other staff. We just need to be a touch cautious of overstating the benefits.
For businesses, probably the best lesson from Deloitte’s survey is to measure the genuine effects of social media on a business there have to be properly thought out measures and objectives. Guesstimates are not good enough.