No, Facebook Didn’t ‘Create’ 4.5M Jobs. But Its Impact Can’t Be Understated.

Radhika Sivadi

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Facebook, according to a study by Deloitte, is a company responsible for creating $227 billion in worldwide economic impact and 4.5 million jobs. Pretty big numbers.

But, since statisticians rival politicians and cheating husbands (not mutually exclusive) in their capacity to lie, it is worth taking these figures with a healthy grain of salt.

First, the biggest caveat: The green-eyeshade-wearing analysts at Deloitte didn’t magically come up with this study. Facebook commissioned it, meaning it paid for it. There is a prima facie conflict in that regard, and, to its credit, Deloitte makes it clear where its paycheck was signed in the report’s very first sentence. 

What’s more, Deloitte also is upfront in saying that it relied largely on data Facebook itself provided, with a side helping of independent numbers to give some perspective. But given that Facebook paid for the report and provided most of the important information, it’s a sure bet that, if the results weren’t favorable to Facebook, this study never would have seen the light of day.

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Now onto the numbers themselves. Deloitte looked at three areas of Facebook’s worldwide impact: marketing effects, platform effects and connectivity effects. Marketing effects are the benefits for businesses that use Facebook as an advertising tool. This was the company’s biggest home run, with Deloitte estimating $148 billion in economic impact and 2.3 million jobs created. That’s not surprising to see, given Facebook’s reach. Just ask all those people who dumped ice water on their heads for charity last year. It is a powerful network, with an engaged audience. Advertisers love that.

Then come the platform effects. These are essentially all the apps and games that can be created within Facebook’s platform. Think of these as those annoying friends who are still inviting you to play Candy Crush and insist on telling you what level they reached, making you wonder what they do at work all day. Here, Deloitte estimates Facebook has been responsible for a worldwide economic impact of $29 billion, plus 660,000 jobs.

Lastly, there are the connectivity effects. This is the infrastructure needed for Facebook to be used, like broadband improvements and new devices. Worldwide, Deloitte says this has $50 billion in economic impact and about 1.6 million jobs.

That’s a lot of jobs to be created just because of a little ol’ social network, but before you give the company a thumb’s up, we have to take away some of the punch bowl from the party.

Job creation, from an economic standpoint, isn’t a game of hard-and-fast numbers. For instance, in the connectivity category, Facebook is given direct credit for the expansion of the Internet infrastructure in the Asia-Pacific region. That growth may have happened whether Facebook existed or we were all still talking to Tom on MySpace. Or, it could have happened because of the need to communicate more effectively for other economic reasons. Emerging markets have been emerging before social media, and will continue to do so.

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More importantly, Facebook is being given credit for creating jobs but not facing the blame for the jobs it eliminates. For example, Facebook’s rise has created a shift in how advertisers spend their media dollars. Digital ad spending is supposed to grow 13 percent this year, according to research firm Strategy Analytics. But print advertising is estimated to decline 7.9 percent in 2015. Broad-based media firms then, are likely to see print publications continue to shrink, while digital properties thrive. If the uptick in hiring supported by digital growth (and credited by Deloitte to Facebook) doesn’t outpace the job cuts on the print side, there will be a net loss of jobs. By the formulae used by Deloitte, Facebook is not held responsible for this net job destruction.

So, Facebook is not creating 4.5 million jobs. But you cannot in any way deny that it is a huge engine for job growth worldwide, and it deserves credit for that. In fact, forget Facebook for a second. What Deloitte uncovered, as imperfect as its Common Core math might be, is a pretty good accounting of the benefits of innovation and entrepreneurship.

Many companies are Facebook, just on a smaller scale. When someone creates an app, and it is successful, it leads to people being hired. Startups typically go from a handful of founders to a team of, say, 15. But that’s just direct hiring. Those 15 people need to eat, so the local diner may hire a cook or waiter. They need to travel, so Uber may have to add a driver in their area. The need for new office space leads to new jobs in real estate and interior design. That’s how the entrepreneurial ecosystem works.

Are some jobs hurt by that growth, too? Sure. The app that was built might be better than an existing one from a rival company. That rival might have to shut down, and all those employees may find themselves out of work. But the entrepreneurial ecosystem allows those folks to go out on their own and create anew. 

Facebook, to its credit, has strengthened that ecosystem. It has helped other businesses thrive. A restaurant with 2,000 likes has a way to reach its most loyal audience with deals, without having to take a local newspaper ad. Yes, that newspaper might be out of business as a result, but that other local business is stronger than ever. That’s life in the free markets, which guarantees equal opportunity, not equal outcome.

But, while cheering Facebook, you also have to give a shout out to the entrepreuners around the world themselves. People with the brains to innovate, and the economic freedom to turn those dreams into businesses, are the true heroes of the business world. It is a symbiotic relationship, where Facebook’s growth – and thus its ability to pump the world with economic value – is dependent on the drive of others to build companies, services and products that thrive on its platform.

And, if the system works as it should, someday one these entrepreneurs might even create a network that makes Facebook economically irrelevant. Facebook might not like that, but it would only have itself to blame. And it would only have itself to credit, as well.

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Radhika Sivadi