While time spent on online leisure activities is growing, it is difficult to measure the corresponding benefit derived by consumers. This can cause an underestimation in the Internet’s economic value.
The Institute for Prospective Technological Studies (“IPTS”) estimates the value of consumers’ leisure time spent online for the five largest economies in the European Union: Germany, the United Kingdom, France, Italy and Spain. Since almost 75% of total time spent online by Internet users in these countries is consumed by leisure activities such as social networking, watching videos and playing online games, failing to take into account the value of these free services could lead to a large underestimation of the Internet’s economic value.
The first set of results of the study show that internet users with higher incomes spend less time online. Furthermore, in almost all countries, women gain less pleasure from online leisure than men. Similarly, Internet users aged above 50 derive less pleasure from being online than their younger counterparts. In Spain, this threshold is lower, at ages 30 years and above. Single users derive more benefit from going online, as compared to users who are married or live with a partner.
The next set of results relate to calculating consumer surplus from leisure online as a percentage of income that could be achieved if an individual dedicated all their waking hours to work (termed “full income”). One measure of consumer surplus finds such a surplus to lie between 2.2% of full income in France and 5.3% in Spain. This is equivalent to the consumer receiving between EUR 2,082 in France and EUR 4,125 in Spain to achieve the same benefit from time spent online. A slight variation of this measure finds consumer surplus between 0.6% of full income in France and just above 1% in Spain. This is equivalent to compensation of EUR 584 in France and EUR 785 in Spain, or alternatively, between EUR 3.8 to 4.8 per hour spent online.
To gain further insight into the welfare gain from time spent online, estimates of consumer surplus are compared to related economic indicators. For example, a comparison of consumer surplus from one hour spent online with the average hourly wage (or average opportunity cost of time spent online) shows consumer surplus is close to or higher than the average hourly earnings in most countries. An alternative measure suggests a much lower value is derived from being online: between 23% and 40% of average hourly earnings. In a different estimation, consumer surplus as a percentage of GDP is found to be between 4.7% in Italy and 10.7% in Spain according to one measure of consumer surplus, and between 1.1% in Italy and 2.2% in the UK according to another.
Ultimately the IPTS concludes that spending time online is an important leisure activity. The value consumers derive from the internet goes largely ignored owing to the fact that it is largely free to consume and hence difficult to measure.