A few weeks ago I had some suspected credit card fraud. My bank canceled my my old card and sent me a new one, but I’ve been too busy to go into all my various online accounts and update my payment information. As a result, I’ve begun listening to ads on Spotify for the first time since I signed up for the service. Like many Spotify users, I presume, I am now trying to determine whether the frequency and quality of the ads are sufficiently annoying to pay the $10 a month to avoid them.
I don’t know the exact amount of time per month that I listen to Spotify, but Spotify surely does. Nor do I know the percentage of that time that is spent listening to ads, but it seems to be around a 30-second for every 12 minutes of programming. Let’s say, on average, I listen to Spotify one hour per day and 3% of that time is spent listening to ads. Each month I’d listen to 30 hours of Spotify and about an hour of that time would be spent listening to ads. This begs two interesting questions: 1) Is it worth $10 to me to reclaim an hour of my attention each month from advertisers? 2) Can Spotify charge advertisers $10 for an hour of my attention? In other words, is each minute of my attention worth 16.6 cents?
Calculating the value of attention minutes is an old practice of the advertising industry, but never before could it be measured with such precision. Back in 2011, before either YouTube or Twitter had a business model in place (that is, before they had ads), Kevin Kelly published an analysis of the cost of attention hour per type of media.
He cites a 2009 presentation by Google’s then-Chief Economist, Hal Varian, which concluded that a broadcast TV network is paid by advertisers about 20 cents for an hour of a viewer’s attention. I’m not sure how much Spotify gets for an hour of my attention, but I’m certain that it’s more than 20 cents. Intuitively, we assume that our attention offline is worth more than our attention online, but both Kevin Kelly and, more recently Matthew Gentzkow, have found that advertisers are willing to pay more for our attention online than in offline media like magazines, books, TV, and print newspapers.
It’s obvious why advertisers are willing to pay a premium to advertise online: they can target specific audiences much more effectively than ads shown on broadcast or print media. Again, using Spotify as an example: when I first signed up, I was forced to register via Facebook. Since much of my Facebook profile info is public, Spotify knows where I live, where I work, my job title, and the number of Facebook friends I have. By analyzing this information, they can deduce roughly how much I earn per year and how influential I am based on my network of friends. Not all attention is equal; 30 seconds of Barack Obama’s attention is worth much more than 30 seconds of my own. Spotify can use the information they collect from Facebook to provide advertisers with demographic information about the value of their users’ attention. (One can even envision a future scenario in which advertisers gain access to their users’ dietary and health information via Apple’s forthcoming iWatch and popular smartphone dieting apps like Calorie Counter. I know that my attention is twice as valuable — in terms of information processing — after my morning cup of coffee.)