Are Facebook Inc (FB)’s Claims of Economic Benefit True/False?

Based on a survey conducted by Deloitte & Touche on its behalf, Facebook Inc (NASDAQ:FB) declared that in the past year it had been responsible for creating an economic impact worth $227 million on a global scale. The social networking site also claimed to have created as many as 4.5 million job opportunities the world over in 2014, not to mention accounting for one-sixth of aggregate global sales of smartphones.

These claims were validated through the observations that every business boasted of having a page on Facebook’s website, viability of this platform for serving as an effective marketing tool and its ability to foster small business. What was a little difficult to gauge was acquiring an estimate of sales of gadgets that might have occurred owing to its popularity. Sheryl Sandberg, Chief Operating Officer of Facebook Inc (NASDAQ:FB), went on to point out its importance through the following comment –

“We know Facebook is one of the main drivers of why people buy phones, particularly in the developing world. People will walk into phone stores and say ‘I want Facebook.’ People actually confuse Facebook and the internet in some places.”

Facebook (FB)

Unfortunately for Facebook Inc (NASDAQ:FB), these claims are not being supported by economists, some of whom feel that they are exaggerated. Roger Noll, an economist with Stanford responded to the news in the following manner –

“The results are meaningless. Facebook is an effect, not a cause, of the growth of Internet access and use.”

Another economist, Tyler Cowen, who teaches at George Mason University, described these figures as a case of ‘bad reasoning’ and felt that both claims, namely economic impact and creation of jobs, were too high to be realistic.

That said, in a latest move, the social networking site has tied up with Alibaba Group Holding Limited (NYSE:BABA) to woo smartphone users in India. Having realized the encouraging growth figures that Indian markets represent, both Facebook Inc (NASDAQ:FB) and Alibaba intend to capitalize on it through structured and collaborated expansion.

This article has been written by Vinita Basu.

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