Facebook is responsible for at least 182,000 U.S. jobs worth at least $12.19 billion in wages and benefits, according to a new University of Maryland study. In a paper titled "Facebook App Economy," Il-Horn Hann, Siva Viswanathan and Byungwan Koh of the University of Maryland School of Business attempted to quantify the economic impact of not just app-related employees but also the indirect beneficiaries of their incomes.
The paper is hitting the news during a week filled with Facebook news. The company will hold its f8 developers' conference on Thursday, September 22, and the Facebook platform's integration with a number of other online services will be on full display.
Actually, what might be on display later this week is companies' growing dependence on Facebook. "Now, more than 2.5 million websites have integrated with Facebook, and people on Facebook install 20 million apps every day," the researchers write. Its impact extends beyond just apps built for Facebook but also the ubiquitous "like" button, the Facebook comments plugin, the Activity feed and Facebook Connect, which allows users to log into a site using their Facebook credentials. The platform has spawned an entirely new industry of developer consultants and agencies that build apps for clients.
For their paper, the researchers stuck to calculating the economic impact of Facebook app developers - the app economy. Here' how the researchers reached its conclusion: it performed a linear regression to estimate the total number of employees in the 8,308 US-based app developers, multiplied that number by an "economic multiplier" (to take into account the economic stimulation created by app developers' spending) and estimated an average developer salary of $66,762 (with an extra 43% to account for other benefits) and an indirect employment salary of $58,218 (the $40,712 national average plus 43% for other compensation). The final result is a range of economic benefit of $12.19 billion to $15.71 billion from at least 182,000 jobs. The researches arrived at a range because the researchers took into account three different economic multipliers that could have a similar impact to app development.
So how accurate are these estimates? While these are hardly the back-of-the-envelope calculations of a poorly informed blogger, the researchers' assumptions do lead to a few questions. For example, it doesn't take into account much Facebook-related employment, such as the many PR firms that work for app developers. Are outsourced positions like these employees included in the economic multiplier?
In addition, one wonders if the three economic multipliers are appropriate. For example, the researchers assume - without explanation - the Facebook app economy's economic multiplier should be the same as those of the broadband stimulus program (2.42) or the entire US communications sector (2.52). However, the largest of the three multipliers (3.41) is a US Bureau of Economic Analysis estimate for the impact of "Internet and other information services" in California. Because so many developers are located in California, perhaps that's the most appropriate of the three multipliers. And if that's the case, $12.19 billion might be too low of an estimate.
The researchers may be estimating too low with the salary of indirect employment created by the app economy, too. The researchers use a national average compensation of $58,218 even though app developers tend to be located in high-income states like California and New York. Again, it's possible the researchers' estimates are on the low side.
Overall, the researchers have put together a paper that seems quite logical even though the actual impact of the app economy could be debated <i>ad infinitum</i>. Facebook is definitely driving innovation and attracting investment dollars that may otherwise sit on the sidelines and be put toward less productive efforts.