How Does Facebook Make Money?

Facebook comes under Meta as of 2023. Meta includes a wide range of products and services. The major products include Facebook, WhatsApp, and Instagram. All of us use these applications or have used them once in our lifetime. You can use Facebook, WhatsApp, or Instagram for free. You don’t have to pay any cost to avail of their services. So, how do they make money? How Meta Makes Money? How Does Facebook Make Money? How they are able to provide you with global services of social networking, text-messaging, and photo-sharing for free. Let us understand all this in this article!

How Does Facebook Make Money?

Facebook makes money by “Advertising”. In order to provide its services as a social media platform for free, the main source of revenue is through advertisements. By advertising, it is obvious to be digital advertising in our case. Facebook as a social media platform has around 3 billion users. This is not just a number. Marketers think of this user base as a huge market to present their advertisements. As a product owner, you can use this to market and promote your product. There would be no better online space where these amounts of users from across the globe are available to you. Hence, Facebook knows this on their end. Their user base is a goldmine for marketers and promotions.

Owing to the large user base, Facebook primarily lends its social media platform to various marketers for advertising. This advertising is a paid service that Facebook provides. Any individual, company, or business can use Facebook to promote and advertise their products or services. So, as users, we are not paying anything to Facebook ( at least not directly ). The main source of revenue comes from businesses showing their advertisements to Facebook users ( that are us! ).

So, if you think for a second – real customers for Facebook are the businesses and individuals using the platform for running their ads. We are not direct customers. We are the end-users and consumers of these advertisements.

Let us now understand how Facebook paid ads work.

How Does Facebook Paid Ad Work?

Facebook provides its digital space for advertisers to display their ads. These digital spaces are shown in your feed and stories. You can also see the sponsored label against them which allows you to identify them as advertisements. As an advertiser, you pay a fixed amount for a particular digital space on Facebook. This would be your Facebook ad campaign. The other method that Facebook allows is to auction that digital space among many advertisers. Whoever bids the highest, gets to show their advertisements. This method is also called programmatic advertising. (We will skip it as it is out of scope for this article).

Facebook as a social media platform with around 3 billion users is a great place to promote your products or services. The user base alone cannot help you promote your products. Then what is the other aspect that makes Facebook a great place to advertise? It is the knowledge Facebook holds about its users. Facebook knows many metrics for each user that helps to advertise better. These metrics help you decide your target audience and get a better ROI.

Let’s understand this from an example. If you are a property agent. You want to advertise a new property to users. By using Facebook’s knowledge of users, you would target your ads toward people who are inclined towards properties. You wouldn’t want to show your ad for an 18-year-old. An 18-year-old wouldn’t be holding resources to invest or buy into your properties. Facebook analyses each user’s activity on its platform.

Facebook analyses your complete usage of the platform. It will analyze what content you like or share the most. It will keep a check on what account you follow and how you interact with them. Your activity levels and for what time duration you are active on Facebook is also read. There are many other metrics too that Facebook will analyze. All these metrics help create your profile and a user database. On top of it, Facebook’s tech team runs many machine learning algorithms to predict certain behavioral patterns for users.

As an advertiser, you would want to spread your message to the right target audience. This is where Facebook’s user database helps you achieve your goal.

You can prepare and publish your ads depending on your requirements. You can easily set filters and get your ads in the feed of users in a particular age group, country, interests, and much more.

Owing to such a large database of users and advertising capabilities, this makes the main source of revenue for Facebook.

How To Advertise Using Facebook?

To let advertisers make the most of its platform, Facebook has its own “Ads Manager”. You can use the ads manager to create your ad campaigns, set your budgets, and track your progress in real-time. The ads manager is the first point to start your advertising journey. It can also be used to expand your ads and publish them to different Meta products including Instagram as well.

You can create your own ads. You can choose different ad formats that Facebook allows. You can choose certain predefined ad templates or even create your ad creatives from scratch.

Once the ad is created, you can choose your target audience. You can choose the user’s database and get your ad displayed to the right audience. You can choose the age group, religion, country, and much more in your ad targeting.

You can then start your ad campaigns across Facebook. Once it is started, the ads manager of Facebook will help you track your progress in real-time. You can know if the users are interacting with the ads, how they are viewing them, which ad format is performing the best, what devices are used by the users majorly, and much more. Keeping a track of your ad campaigns can help you change or continue with your current settings.

Bottom Line

Facebook is a great social media platform for us and for advertisers. It provides great advertising capabilities along with ease. Right from creating your own ad to publishing it across Meta platforms is done smoothly using the ads manager by Facebook. It is empowering small to big businesses to reach their target audience in a simple yet effective manner. If you are an advertiser, you can definitely opt for Facebook ads. Facebook generating revenue from ads is a great strategy as it helps them provide you with free social media service and help businesses expand their growth.

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