How Does Facebook Make Money?
Facebook’s market value is now around $245 billion - which is a rather substantial amount of moolah. With Mark Zuckerberg now listed as number 4 on Forbes’s list of the Richest in Tech, the Social Media giant is still going from strength to strength. But how does Facebook make money?
Facebook’s revenue comes primarily from advertising on both mobile and non-mobile platforms - what sets it apart is it’s ability to cross both platforms and exceed expected results. In their third quarter financial results in October 28th 2014, they reported an increase of total revenues up 59% from 2013 third quarter; from $2.02 billion to $3.20 billion. Of this, a reported $2.96 billions was advertising revenue.
Facebook claims that increases in News Feed advertisement is and has been pivotal to driving their ad revenue growth - and the price of these actually grew by 173% throughout 2014. To say that mobile ads are integral to Facebook’s success is quite possibly an understatement as last year 65% of total advertising revenue was from mobile alone. This comes as no surprise - Facebook have proved themselves worthy of reading trends as in December 2014 they reported an average 745 million daily active mobile users.
The vast majority of Facebook’s advertising revenue comes from self-service ads. Large companies and small businesses alike can use online tools to set up their own campaign. What makes these campaigns so appealing is the targeting capabilities; specifying such things as age, gender, location, profile keywords and networks ensures that ads are reaching the right people. Facebook are always innovating their products so it’s highly likely that different paths and strategies will soon be available for large and small companies.
Some notable companies have used Facebook as a preferred, targeted advertising channel for their own means. McDonalds used Facebook to be the first location-based check-in Marketer in 2010. Groupon have used Facebook to drive email signups and advertise daily deals. Ford have commented on the platform, saying that they believe that when somebody ‘likes’ you on Facebook they are more likely to advocated the brand.
Where do users come in?
Facebook has always been ad supported and, as this is their primary source of revenue, will always be. Rumours that Facebook will soon be charging users for their profile are, rather unsurprisingly, untrue. Although users do not pay a penny for their profiles, driving usage is imperative to Facebook’s remit. This is down to the fact that having such a high proportion of users means that ads are able to reach the right people which will make a bigger impression and receive the right amount of clicks. This is why advertisers are willing to up their ad spend for the Social Media giant - the sheer reach is unsurpassable by other advertising means.