The Attention Economy

The Value of Information

Information is an experience good that consumers must experience before valuing it. Think about the last newspaper article or a YouTube video you consumed. Then try to think how much you would have paid for that content beforehand, just by looking at the title or thumbnail. I’m sure most of you would have no clue! This is interesting because, for most other goods like an apple or a bottle of water, we have an idea about how much it would cost us before we consume it. What makes information different is that information is often not standardized like an apple or a bottle of water, and the value we attach to information largely depends on what we experience out of it. For example, a $20 movie you watch could either be expensive if it is boring or be cheap if it is fascinating. To sell an experience good to a consumer, the producer can use various techniques such as free samples and promotional pricing. One of the most important aspects involved in selling information is branding and reputation. This is necessary to convey the availability of high-quality information to consumers (Shapiro & Varian, 2010). The Wall Street Journal is a good example of this. The Wall Street Journal invests in building a reputation for accuracy, timeliness, and relevance (Shapiro & Varian, 2010). Doing so, you know that the Wall Street Journal article for tomorrow would be just as good as the previous issues.

The Information Economy?

Think about the information on the Internet that you paid for last month. For me, it was the Wall Street Journal and a Kindle book. How does that compare to the amount of information you needed to pay $0 for? Online platforms such as Facebook, Twitter, and YouTube offer us tons of information, yet we pay nothing for it. The production of information on the Internet has a high fixed cost, low marginal cost model, meaning that the cost of reproducing and copying is close to zero (Shapiro & Varian, 2010). The low marginal cost, combined with the presence of free platforms to consume and produce information has contributed to a positive feedback loop where the Internet has increasingly become an attractive place for people to produce and consume information. Now, we are living in a world where information is “not only abundant, but overflowing” (Goldhaber,1997). Unlike an apple or a bottle of water, information is not a scarce resource anymore on the Internet. This implies that putting a price on information based on the production cost simply does not work (Shapiro & Varian, 2010). This largely contrasts with other forms of content production and can be said it is a relatively new model of information. Books, for example, are not free because it costs money in the production stage and the reproduction stage. The shift from paper to digital has brought a radical change to the value of information.

The Value of Attention

If the unit price of information is $0 as Shapiro and Varian suggest, why is the production of information growing? Basic economics suggests that if there is a market for information with standard supply and demand, the supply of information would shrink as the price decreases. The surprising answer is that such a market for information does not exist in the first place! Goldhaber (1997) claims that rather than information, attention is the natural economy of cyberspace because, unlike information, attention is a scarce resource. The attention economy is zero-sum, and the total amount of attention per capita does not change over time. This explains why information is still being produced when the price consumers pay is $0. Information producers profit from consumers’ attention, which has monetary value because getting attention means getting some control over the consumers’ thoughts and behaviors (Goldhaber,1997). I have brought up an apple and a bottle of water a couple of times in this blog post so far, raising the significance of apples and bottles of water in your mind compared to other goods and possibly nudging you the consumption of these two goods. As can be seen, attention has tangible value because it can gather attention and promote the consumption of a certain good, service, or idea. Put simply, the attention economy business is largely an advertisement-based business where producers can sell the user’s attention to advertisers or other buyers as a product (Bhargava & Velasquez, 2020).

The Attention Economy

The attention economy has existed before the Internet. Commercials, advertisements, and sponsorships have been primary revenue sources for broadcast TV, radio, and newspapers (Shapiro & Varian, 2010). However, with the development of information technology, social media platforms are now a key component in the attention economy. In fact, the most valuable and influential advertisement-based businesses are companies such as Facebook and Twitter (Bhargava & Velasquez, 2020). This can be attributed to how the Internet allows for one-to-one marketing or customized advertisements that are better targeted for an individual consumer. By gathering information about the consumer’s demographics, likings, and behavior online, the advertiser can speak to a group of people that it wants to target (Bhargava & Velasquez, 2020). In the attention economy, the services we consume online, including Gmail, YouTube, and Facebook, are free because they are offered to us in exchange for our attention and our personal information. The collection of personal information is what generates money and thus drives content production. As long as this system exists, the production of information will not likely slow down.

Money Flow or Money Flaw?

Goldhaber (1997) envisions a world where money will be obsolete, and attention is the currency used in cyberspace. Attention, he claims, is suited for cyberspace because it does not require encryption, passwords, firewalls, nor complex transactions, unlike money. Similarly, Nelson-Field (2020) claims that money is not optimal for the attention economy because of distractions that reduce the level of attention we pay to advertisements. Since our capacity to process information is limited, our minds take mental shortcuts when making decisions. This includes avoiding information and sticking to habitual behavior (Nelson-Field, 2020). This suggests that determining the price of an online advertisement is a futile task and has the possibility of being over-valued based simply on the number of ad views. Attention is not only valuable to promote the purchase of certain goods and services, but also to social media platforms, political campaigns, and other organizations that possibly do not want money from users, but instead want users’ attention or time (Norman Group, 2021). This adds to the difficulty of attaching monetary value to the value of advertisements in the attention economy. Nelson-Field (2020) highlights the importance of having an accurate and standardized way to measure much attention is being paid to an advertisement. One way of doing so is through creating a universally accepted standard on qCPMs, or quality cost per thousand views. Overall, assessing the value of attention is a complex task because unlike information, which can be measured in bits, bytes, and baud rates, attention is invisible.

Star System

The Internet has made it possible for virtually anyone to attract attention. Imagine how difficult gathering attention would be for you if the only media available were through TVs, newspapers, and radios! Using a star system visualization, Goldhaber (1997) envisions a world where attention is the ultimate currency of cyberspace. Stars can be defined as figures that gather attention from fans, like celebrities, influencers, and CEOs. He pictures the world where transactions between stars and fans occur through attention, and the exchange of goods and materials is a byproduct of this transaction. The primary flow in cyberspace would include “personal advice, suggestions, connections, editing, assistance in self-expression, responses, acclaim, or new software designed especially for your purposes” (Goldhaber,1997). Consider how advertisement works on TikTok, for example. Studies show that for a $1M spent by a marketer on influencer marketing on Tik Tok, the marketer sees a return of $7.2M in sales over the first 90 days on average (Fortune, 2021). Influencers are powerful actors in the attention economy because they attract attention, relate to consumers in a personal way, and influence their thinking and behavior. This sounds utopian, doesn’t it? Everyone has the potential to become an influencer in cyberspace, and we no longer must work a nine to five job (except for gathering attention).

Shortcomings of the Star System

Goldhaber (1997) admits that there are shortcomings to the hypothetical star system world, such as concerns for individuals using notoriety to gather attention, the deprivation of reflecting or thinking deeply because of the high demand of attention required for consumers, and the possibility that we become too engrossed in efforts to capture attention. Inequality between stars and fans is one of the largest concerns. As society moves toward the information economy, it will become increasingly difficult for people to afford to be obscure in society, which can be a concern for privacy and freedom. Also, the amount of attention between the star and fan does not arrive in equal measure (Goldhaber,1997). These shortcomings of the star system are already observable to the world today, to an extent. Franck (2018) compares the craving for attention to the most irresistible of drugs and points out how individuals rank wealth of attention above money in affluent societies. Bhargava & Velasquez (2020) points out that social media is designed to be addicting to consumers because they have the incentive to do so. They argue that social media platforms have the incentive to monopolize the user’s time spent on it because the longer the users spend time on it, the more profit from increased ad views. Specifically, they mention the use of algorithms and design elements based on behavioral psychology to make users spend as much time as possible on their platforms.

Social Media

The shortcomings of the attention economy are mentioned not to say that all social media should be banned. We must not forget about the positive things made possible by it. Lenhart & Owens (2020) claims that in practice, there is “There is very little evidence for tech addiction, and what evidence exists is controversial.” This is evidence against Goldhaber’s fear of the possibility of being engrossed to capture attention and Franck’s comparison of social media to drugs. You might have imagined someone addicted to social media. Maybe it was yourself. However, we must also keep in mind the differential susceptibility phenomenon, which explains that “people have different responses to technology, even on the same platform.” (Lenhart & Owens, 2020) This suggests that the negative externalities of the attention economy are more nuanced in practice. The positive externalities are nuanced too. Similar to how attention levels vary, not all screen time on social media is the same, as it can be “connective, supportive, emotionally enriching, horizon-expanding, and educational, as well as sometimes harmful.” (Lenhart & Owens, 2020) In addition, social media can be used as a release value to manage pressure in their lives and as a community-building tool for marginalized communities. (Lenhart & Owens, 2020) The benefits and costs of social media or the attention economy seem to largely depend on who is using it and in what way.

Conclusion

While the supply of information seems unstoppable, we still have control over what to pay attention to. We can “explore the ways in which our attention is generated, manipulated, valued and degraded… In other words, … pay attention to where we pay attention.” (Warzel, 2021) I think it is easy to forget that our attention is a finite resource, constrained by our amount of free time and cognitive energy. We should be thoughtful about using our attention, just like how we should think about time and money management. To do so, we can think about the opportunity cost of spending time and attention on social media. For the same time and energy spent scrolling through social media, why not read the news or watch a documentary to educate yourself? Why not talk to someone in person, which might be a refreshing, pleasurable experience? It can also be beneficial to keep in mind the importance of our attention as a scarce resource that businesses are trying to extract and profit from. In practice, try to be skeptical and think twice before commenting, liking, or responding to content.

Joshua Kishi

B.A. | College of Literature, Science, and the Arts

University of Michigan Class of 2022