“Free” Internet Content: Web 1.0, Web 2.0, and the Sources of Economic Growth

Nakamura, Leonard I.; Samuels, Jon; Soloveichik, Rachel

doi:10.21799/frbp.wp.2018.17

Working Paper

“Free” Internet Content: Web 1.0, Web 2.0, and the Sources of Economic Growth

Abstract: The Internet has evolved from Web 1.0, with static web pages and limited interactivity, to Web 2.0, with dynamic content that relies on user engagement. This change increased production costs significantly, but the price charged for Internet content has generally remained the same: zero. Because no transaction records the ?purchase? of this content, its value is not reflected in measured growth and productivity. To capture the contribution of the ?free? Internet, we model the provision of ?free? content as a barter transaction between the content users and the content creators, and we value this transaction at production cost. When we incorporate this implicit transaction into U.S. gross domestic product (GDP), productivity, and household accounts, we find that including ?free? content raises estimates of growth, but not nearly enough to reverse the recent slowdown.

Keywords: Internet; productivity; advertising; marketing; measurement; GDP;

JEL Classification: C82; L81; L82; M3; O3; O4;

https://doi.org/10.21799/frbp.wp.2018.17