In the digital age, services like social media platforms and search engines are often perceived as free. However, these services come with hidden costs that have significant implications for both individuals and the broader economy.
While users don’t pay a monetary fee to access platforms like Facebook or Google, the true cost is in the form of data collection and monetization. This data includes browsing habits, preferences, location information and more. Companies collect and analyze this information to create detailed user profiles, which are then used to deliver targeted advertisements. This model has proven to be highly profitable. For instance, advertising revenue for Alphabet Inc., Google’s parent company, contributed to 75.1% of the total revenue at USD 72,461.0 mn in 2024.
The impact of digital freebies on GDP is complex, with these services contributing to economic growth by providing platforms for businesses to reach customers and for individuals to access information and services. For instance, businesses can leverage social media to market their products and services, potentially increasing their sales and contributing to GDP growth. Traditional GDP metrics use production and consumption of goods and services involving direct monetary transactions. However, “free” digital services aren’t included in GDP calculations since no money is exchanged. This exclusion can result in an undervaluation of both economic activity and consumer well-being.
The data-driven advertising model can influence market dynamics. Businesses may allocate substantial portions of their budgets to digital advertising to reach targeted audiences. This shift can affect various sectors differently, leading to changes in employment patterns and resource allocation across the economy.
Many users remain unaware of the extent to which their data is collected and utilized. This lack of transparency raises privacy concerns, especially when data is shared with third parties or used in ways consumers did not anticipate. A 2024 report by the Federal Trade Commission highlighted that several social media and video streaming companies use extensive consumer-surveillance strategies to monetize user data, often without adequate privacy controls.
Policymakers need to consider updating economic metrics to capture the value of digital services accurately. Implementing robust data protection regulations can help safeguard consumer privacy and ensure that individuals have control over their personal information. In Kenya, the 2019 Data Protection Act Requires organizations to obtain consent before collecting, using or sharing personal data. Raising awareness of data practices helps consumers make informed choices about the services they use. While digital freebies offer convenience and benefits, it is important to recognize and address their true costs to individuals and the economy.
