Do you want to know how Facebook makes money? What is the core business of this popular social media website which is completely free to use? Well, most of you think it will be by advertisement, but what is the exact mechanism? Who is paying Facebook? And will be last long. With over $450 billion market capitalization Facebook is a Godzilla of Social Media sites. But managing such a big company requires a ton of manpower and to support that manpower requires a ton of money. So how everything does works? Well, we will debunk this and find out how Facebook makes money?
More than 80% of Facebook revenue is from, including mobile advertising, which is growing robustly. Facebook mobile advertising contributes to almost half of the advertising revenue. Around 10 to 15% of income comes from game publishers and applications associated with Facebook like Candy Crush. Facebook has generated more than $ 40 billion in 2017, from which more than 80% comes from digital advertising.
The Facebook business model is similar to Google but in a different way. With over 1.4 billion people worldwide Facebook turns into the fastest mode of sharing information. It has now become a necessity, on Facebook, it is easier to find out about your family, find an old classmate, etc. Facebook solves the problem of maintaining contact but in a virtual world.
Now you will have a clear idea of how does Facebook makes money? If you want to know more then just check out the list of top advertisers on Facebook and you will be shocked.
Type of Advertisement offered by Facebook
No doubt Facebook is massive today there are various types of advertisement Facebook offers to build giant revenue pool. Among them the most common one you will are:
- Ads in the Sidebar
- Sponsored Stories
- Sponsored Messages
- Video Ads
Whenever on Facebook you spend time watching videos, funny cat videos, crazy videos, etc anything shared by your friends, you will start seeing ads on your newsfeed and the sidebar. This is one of the ways Facebook earns money. This can be counted as the first form of income where Facebook makes money by selling these ads. This means some companies want to promote their product and reach the audience so they pay to FB. Ample of time users will find it interesting and click on it, this is where Facebook is paid instantly. This ad space is accounted for 70% of Facebook’s total revenue.
The second big source of income comes from games and apps. Like Candy Crush or Zynga Poker. When you play on Facebook or buy any in-game items like in Zynga Poker you can buy virtual chips, you are paying certain amounts. A share close to 30% goes to Facebook. This is the second-largest source of income for Facebook. There are many apps on FB that also make money and share their income with the social media platform. It is easier for them to tap millions of users easily compared to finding them on Google.
Facebook Facts you will shock to know
These are some of the most interesting facts that you must know about Facebook which will tell you more about this social media giant.
- When Facebook was started an average user has 130 friends.
- Facebook has over 1.59 billion users.
- Facebook offers a Pirate’s English.
- Around 1 billion Facebook users operate it from mobile.
- 47% of Facebook is accessed from a mobile phone.
- Facebook gets around 500 thousand new users every day.
- Around 30% of users on the internet are on Facebook.
- Facebook Mobile revenue has reached 94percent till Q3 2019.
- The highest amount of users use Facebook between 1 and 3.
- Facebook has more than 80 billion fake profiles.
- Around 300 million photos are uploaded every day.
- Every second 5 new profiles are created.
- There are more women on Facebook compared to Men.
How does your profile contribute to Facebook in making millions of dollars?
When you create your profile, it becomes targeting for Facebook. As a consumer, you offer all the details associated with your locations, date of birth, preferences, hobbies, interest, etc. When you have an account on Facebook, by default you become a customer. If it is free and it knows everything about you. This also includes age, sex, name, first name, interest, etc. These data are recorded and analyzed. With the help of this massive pool of data, it becomes easier for Facebook algorithms to show relevant ads on your wall or the sidebar.
Things do not end here, there is a lot of tracking is also involved. By analyzing user behavior on the social media site, Facebook can offer more accurate results for marketing and commercial purposes. This includes the links you click, the websites you visit, YouTube videos you watch, or the influencers you are following. All these data and info is constantly recorded and analyzed at a data center. The recorded of users carries high value because it tells a lot about you. It gives a clear overview of your interests, your connections on Facebook, habits, etc. Facebook might portray itself as a free social media platform for the world to come in to connect, but in reality, it is a commercial platform for harvesting data.
Such data is used for targeted advertising, etc. As a simple example today if you watch TV all you will see are advertisements, most of the time the ads are similar on the internet as well as on TV. How does the brand know?
Well thanks to Facebook, and above all thanks to your effort in provided detailed information for free. Google on the other side works differently, it works on keywords and search results. For example, several people in New York search for Flight Tickets, most of them in the region will see ads related to best flight tickets, or affordable flight plan, etc.
According to an analysis every Facebook user profile value is around $12. Well, it can be an assumption, but it can also be a reality.
Future of Facebook Revenue model!
Progress of Facebook is exceeding expectations and it has become a valuable business platform for many. Despite the smooth operation, every social network faces a series of difficult challenges, like Facebook, which has been termed as Digital Gangster due to its influence over politics. The influence is bad, but the features are best. This where Facebook is a prisoner between good and bad, the number of people using a Smartphone is growing day by day, and keeping a good reputation is challenging. More new users mean more revenue. There is a shift of Facebook business model from the PC to the mobile, something that is going to be much easier for this company. Ads on PC work differently compared to how they work on smartphones. Facebook has gone with native ads that Google cannot go for. Mobile strategy is the next gold mine.
Similar to big failures in the past like MySpace, Orkut, etc Facebook on the other side is trying to add new elements to keep users happy and engaged. Facebook has various advantages over this failed old platform which were massive once, but today they all are disappeared into shadows. FB on the other side incorporates new features, like the world-famous Like button, had made Facebook immensely popularly.
What next it can bring?
Advertising is the only business model working till now, and a lot of brands are still interested only in Facebook. Tech Giants like Microsoft to choose Facebook to promote its products paying over $250million in the year 2008. Isn’t this sound highly profitable, but such is a one-time deal. And as Facebook is expanding it will need more money to stabilize its operation. There can be a change in the future. As it gets bigger, it is also getting valuable. Facebook has become an advertising medium brand want today, and it can be a lot more attractive than television in the future.
Gaming is still on the other side, not fully exploited territory. Google had already tried bringing G+ but failed now Google had jumped into Stadia an online gaming streaming platform that is not having a good response. Facebook on the other side picked social media exclusive games like Candy Crush, simple and engaging giving users a break whenever they needed.
Ecommerce is an emerging model and Facebook has started its Marketplace. Soon there will be ads on it turning to help out sellers to sell the product directly on Facebook. The emergence of models likes Groupon opens up more new ways of earning for Facebook. Tons of such eCommerce sites will like to promote themselves to end-users.
There is no info about any kind of Premium services Facebook is planning to offer. But there can be a feature where Facebook will end up charging. Some kind of subscriptions based service or online storage, or anything that can help Facebook to pull out a billion dollars overnight. Till yet everything is free.
Ample of earned money is used into infrastructure that runs Facebook, there are data centers, thousands of staff to manage them and another bandwidth cost. Facebook also spends well on research and development where it brings out new features for its audience. One of them was a Poke button that did not work well, compared to the Like button that was a revolution in Social Media.
User data is a controversial part to discuss, Mark Zukerberg concluded that data is not sold either used for commercial purpose, but data is data and it is highly valuable. A targeted advertisement is a form of way to use user data for making money, to an extent the data is disclosed and sorted then analyzed to serve ads by putting various Facebook users into different types of categories.
So what’s the final intake?
Facebook has acquired Instagram and WhatsApp, and it is also expanding into gaming here. No doubt Facebook is massive. It is one of the biggest platforms right now, compared to other social media website Facebook is considered as highly profitable. But it is also having fierce competition from Google. One of the biggest searches engine or is to say, the only search engine. Google owns YouTube, which is the biggest video search engine on the web. So how Facebook can tackle both of these competitors and stay on the top.
Facebook is right now relying on an advertisement, it is not created any different way of making revenue or any concrete model where Facebook’s valuation can go higher. But it looks that Facebook has more than enough for its survival for a decade. Facebook simply focuses on offering a platform where people can interact and build up a social relationship. It is in the virtual way of the world getting near to each other, but the way data is used to serve, ads are not convincing. There are chances that once users start getting irritated with unnecessary ads or targeting, they will stop using Facebook.
We had seen in the past decade Facebook is cluttered with tons of spam, which is not easy for the social media giant to tackle. Facebook has been accused of multiple times for influencing people. This is where a lot of legal barriers were imposed and Facebook has been able to save itself. But there are chances that in the future. This site can get banned if it gets against national interest.
Facebook has been accused of breaking privacy and competition law because of which it has been announced as Digital Gangster by members of UK parliaments. This where Facebook can face serious reputation damage because once the law came into the way Facebook cannot do anything.
A lot of people believe Facebook is a risk to democracy, as it is used to share malicious agenda among citizens, disinformation and dark advertisement to influence elections. Mark Zukerberg had been also facing charges of contempt of parliament where he refused to attend three times. This is a serious issue. Now you know how Facebook makes money, the massive social media platform is expanding and trying to reach deeper into the world connecting everyone. But the commercial approach can be damaging to an extent as well the part where Facebook is considered as a platform to influence user’s decisions can put social media into a risky business.