The Attention Economy: Measuring the Value of Free Digital Services on the Internet

Abstract

Over the past decade, there has been an explosion of digital services on the Internet, from Google and Wikipedia to Facebook and YouTube. However, the value of these innovations is difficult to quantify, because consumers pay nothing to use them. We develop a new framework to measure the value of free services using the insight that even when people do not pay cash, they must still pay “attention,” or time. Using our model, we estimate the increase in consumer surplus created by free internet services to be over $100 billion per year in the U.S. alone. Our analysis implies that most of welfare gain from digital services on the Internet would be overlooked by traditional approaches that rely only on the direct expenditures of money. Considering the time spent on consumption, as we do, makes it possible to assess the full value of these digital innovations.

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