What do sites that many people use to share their vacation pictures, make snarky comments, or let everyone know what they are doing every minute of the day in under a 140 characters mean for the economy? That is a question many individuals have. Aside for the very large IPO last week, what is the real economic value of Facebook or Twitter or the myriad of other social medial sites?
According to a University of Maryland study, Facebook and other social media sites have spawned the “App Economy” which has created between 182,000 and 235,000 jobs and has added between $12.19 billion and $15.71 billion in wages and salaries. A study funded by Facebook finds that in Europe, Facebook added a similar number of jobs (approximately 232,000).
Now one may wonder if Words with Friends and Farmville really add to the nation’s economic activity. While the enjoyment of playing social network games may not add a specific dollar amount to the economy, the development of such applications supports numerous jobs. Moreover, the use of Twitter and other location-based social media such as foursquare also support numerous development jobs and add value to the economy.
While all of these new application jobs are a benefit to the economy, I think the value of social media is how it is transforming the way we use the web and the way businesses use the web. In the first phase of the internet, portals such as AOL and Yahoo! made the internet the place to go to find information, albeit slowly. When Google indexed this information, then we were cooking with gas. However, the web experience remained an individual experience. With the maturity of social media, the web has become a platform for social interaction. Social change empowers individuals who share common likes and dislikes to join together.
The success of Facebook and other social media platforms illustrate the potential for profitability of an open internet and a good idea. The fact is that for every like or dislike we post, every tweet we tweet and every time we check in, we are providing immensely valuable information to firms. The rise in location-specific coupons is driven by this information. According to Richard Florida, the geography of the professional use of social media is concentrated in metro areas in the U.S. that are richer, more technologically advanced, have higher levels of education, higher levels of the creative class, and are more open to diversity of all sorts.