Facebook is the most popular and used form of social media. With almost around 2.7 billion people using Facebook currently, it connects people and innumerable businesses as well. It is no doubt that Facebook’s revenue is generated through advertisements. Yet, the revenue model of Facebook keeps changing.
This is due to the heavy competition nowadays with other social media platforms rising. Ever wonder even though with so much competition, how does Facebook manage to stay on the top when it comes to generating revenue? Let’s talk about the revenue model of Facebook in a while.
But first, Let’s learn a few things about it so as to understand more clearly the revenue model of Facebook.
FACTS ABOUT FACEBOOK
- Facebook has almost 2.8 billion monthly active users and 1.8 billion daily active users. This surely is a very huge number.
- Facebook has four core applications, or say products, under it. They are Whatsapp, Instagram, Messenger, and the Facebook app itself. These are the only key components comprising the revenue model of Facebook. When we talk about Facebook and its stats, all of these apps are included in that by default.
- It has the largest reach. That means almost 60.6% of active internet users are using Facebook and its other applications. The numbers, as I say, have only risen.
- In the year 2020, Facebook generated a revenue of $17.66 billion through the advertisements revenue alone in just the first quarter of the year. This was a huge asset to the revenue model of Facebook.
- Geographically, Facebook’s most generated revenue is brought by the US and Canada followed by Europe and Asia and then the rest of the world.
- Facebook has more than 80 million small businesses running through the Facebook pages. The Facebook pages allow you to start your business, give your contact details and descriptions of the product you’re selling. This allows you to reach more and more people, even globally.
Now that you know a few important facts about Facebook, It would certainly have made you curious so as to how does it make so much money? How interesting would it be to know the secrets behind the revenue model of Facebook, right? C’mon, let’s have a look at it.
1. Targetted Advertisements :
User-targeted advertisements are the main and the best part of the revenue model of Facebook. Almost 98% of the total revenue generated by Facebook is through Facebook Ads.
This primarily happens by displaying product advertisements on different platforms like Facebook, Instagram, Messenger, and any other third-party applications.
For this to work efficiently, Facebook collects the data of its users. It uses this user data to provide the users themselves with the ads that are specifically targeted by the marketers. For eg., If a marketer targets an age group of say,18-25 years, Facebook uses its user data to find people of that age and presents its ads accordingly. Such users are turned into potential customers.
With more than a billion daily active users, Facebook easily helps its marketers to reach their potential audience.
Facebook has created a separate section for the marketers or advertisers, called Facebook Marketplace. This place is used by the marketers to directly sell their services such as clothing, shoes, jewelry, etc. This made it easy for both the customers and the marketers. The customers can directly search for whatever they want which is directly sold by the marketers. This is a great addition to the revenue model of Facebook.
2. Revenue through Payments:
Have you ever paid while playing games on Facebook like Candy Crush, Farmville, Criminal Case, Angry Birds, etc.? These purchases through the games that you play are also included in the revenue model of Facebook. It might be used as a virtual currency for you in the game, but it also adds up to the revenue.
Apart from that, Facebook has personal payments app named Facebook Pay. It just like other payment apps like Amazon pay, Paytm, etc. It is not yet widely used all over the world but, surely does add up to the revenue generated by Facebook.
These methods of payment might not hold a huge part in the revenue model of Facebook, but do carry a certain share.
3.Affiliate Marketing :
Facebook also uses different methods of affiliate marketing for generating its revenue. The method is somewhat related to Facebook advertising.
This means it collaborates with different companies or gets paid by them to promote its services. For eg, say production houses pay Facebook to present their ads for movies, tv shows, games, etc. Many electronic companies like Apple, Samsung collaborate with Facebook to promote their newly launched products.
This is different from Facebook ads as marketers there are trying to expand their businesses, let the customers make purchases, etc. and Facebook earns through these ads. Through affiliate marketing, Facebook is already paid by the companies and is more likely to promote their services.
4. Five pillars of Facebook:
The five main pillars of the revenue model of Facebook include:
- Facebook App: It is used worldwide to connect with people. People share their thoughts, photos, videos, or advertisements however they wish to. The Newsfeed displays stories and ads which are personalized for each person through the user data collected by it.
- Instagram: It is a community application where people can share their stories through photos, videos, and direct messages. The platform is now growing towards e-commerce through Instagram pages just like Facebook.
- Whatsapp: It is a secure and private one-on-one instant messaging app. Facebook bought the company in 2014 for $19 billion. Most probably, there is going to be a revenue model of Facebook wherein it will charge the advertisers to connect with the Whatsapp customers.
- Messenger: It is also an instant messaging application that can be operated through a Facebook account or your phone number. Whatsapp only uses your phone number.
- Oculus: Oculus is a brand for Virtual reality(VR) and it generates its sales through selling different VR products. Facebook bought Oculus VR in the year 2014 stepping a foot into the VR technology and market.
By now, with all of this information, you may have got an idea so as to how does the most used social platform makes so much money from? But, the main secret behind the revenue model of Facebook is You and other people like you who wish to connect with other people. You make the purchases, you use the applications, the ads are made for you. It comes and goes through the audience!