How Instagram And Facebook Make Money
Summary
TLDRFacebook, with its family of apps, reaches over two billion users daily, generating $55.8 billion in 2018 revenue, primarily from targeted ads. Despite privacy concerns and scandals, its user base continues to grow. The company uses vast user data to personalize ads, influencing consumer behavior and even political outcomes. However, with increased regulation and user awareness, Facebook is adapting its strategies, including a new 'Clear History' feature to address privacy issues.
Takeaways
- ๐ Facebook and its apps reach over two billion users daily, which is more than a quarter of the world's population.
- ๐ Despite privacy concerns, Facebook's revenue grew 37% from 2017 to 2018, reaching $55.8 billion, with advertising being the main revenue source.
- ๐ผ Advertising accounts for approximately 99% of Facebook's revenue, highlighting its reliance on this income stream.
- ๐ฏ Facebook offers highly targeted ads, allowing advertisers to reach specific audiences, which is more efficient than traditional advertising methods.
- ๐ The company's advertising strategy has contributed to the decline of television and print advertising as digital advertising is set to surpass traditional methods.
- ๐ Facebook gathers extensive user data to create detailed advertising profiles, which helps advertisers reach potential customers more effectively.
- ๐ฑ Facebook can track user behavior across its family of apps and even on other websites through the Facebook Pixel.
- ๐ซ There have been controversies and legal issues related to Facebook's ad targeting practices, including discrimination and misuse of data.
- ๐ Users have limited options to avoid personalized ads, and even deleting Facebook may not remove the data the company has collected.
- ๐ Factors like increased regulation, social media concerns, and new features like 'Clear History' could potentially impact Facebook's advertising business in the future.
Q & A
How many people use Facebook, Instagram, WhatsApp, or Messenger daily?
-More than two billion people use Facebook, Instagram, WhatsApp, or Messenger daily.
What percentage of the world's population uses Facebook's apps?
-The usage represents more than a quarter of the world's population.
How much was Facebook's total revenue in 2018?
-Facebook's total revenue for 2018 was $55.8 billion.
What percentage of Facebook's revenue comes from advertising?
-Approximately 99% of Facebook's revenue came from advertising in 2018.
How many advertisers are there on Facebook?
-There are about 7 million advertisers on Facebook.
What type of ads does Facebook use to target its users?
-Facebook uses sophisticated and targeted ads that allow advertisers to select the kind of audience they want to reach.
How does Facebook ensure advertisers that their ads will be seen by the right audience?
-Facebook provides a near guarantee to advertisers that their ads will be seen by people likely to buy their products, ensuring that they won't waste time or money.
What is the role of Sheryl Sandberg in Facebook's advertising strategy?
-Sheryl Sandberg's experience with advertisers on Google influenced Facebook's targeted advertising approach, utilizing Facebook data that users voluntarily provide.
How does Facebook gather information to target ads?
-Facebook gathers information from user activities on its apps, including likes, groups joined, events RSVPs, and location shares.
What is the Facebook Pixel and how does it contribute to ad targeting?
-The Facebook Pixel is a piece of code that can be placed on other websites to track user activity and gather data for ad targeting.
What kind of information can advertisers target with Facebook ads?
-Advertisers can target ads based on user interests, phone type, political leaning, ethnicity, and even income level.
What has been Facebook's response to criticism regarding its ad targeting practices?
-Facebook has pledged to reform its system to prevent discrimination in ad targeting and has been working on features like 'Clear History' to give users more control over their data.
How does Facebook's new vision for a privacy-focused platform impact targeted advertising?
-Facebook's new vision for a privacy-focused platform raises questions about how targeted advertising will work if users are encouraged to post privately.
What is the impact of Facebook's 'Clear History' feature on its advertising business?
-The 'Clear History' feature allows users to delete the data Facebook has on them, which could reduce the precision of ad targeting and potentially affect the company's advertising revenue.
Outlines
๐ Facebook's Advertising Dominance
Facebook's massive user base, exceeding two billion people across its platforms, generates significant revenue, primarily through advertising. Despite privacy concerns and public backlash, the company's revenue grew by 37% in 2018 to $55.8 billion, with 99% coming from ads. The ads are highly targeted, leveraging user data to ensure relevance and effectiveness. Facebook's advertising model has led to a decline in traditional media advertising as digital ads are predicted to surpass them for the first time. The company's ability to target ads is so precise that it can assure advertisers their ads will be seen by the right audience, such as high school students seeing prom dress ads and not retirees. However, Facebook has faced criticism for its ad targeting practices, including showing insensitive ads to certain groups and facilitating discrimination in housing ads.
๐ก๏ธ The Challenges and Future of Facebook's Ad Business
Facebook faces challenges in its advertising business due to privacy concerns, data breaches, and lawsuits. Users are becoming more aware of the data they share and the impact of social media on their lives. Despite this, Facebook continues to grow, with Instagram Stories alone boasting over 500 million daily active users. Facebook is shifting its advertising strategy to focus on Stories, a format that is expected to generate substantial revenue. The company has also pledged to reform its advertising system to prevent discrimination and is rolling out a 'Clear History' feature to allow users more control over their data. However, these changes may affect Facebook's ability to target ads precisely. The future of Facebook's advertising business is uncertain, with new challenges arising from regulatory concerns and a potential shift towards privacy-focused platforms.
Mindmap
Keywords
๐กFacebook
๐กAdvertising Revenue
๐กUser Data
๐กTargeted Ads
๐กPrivacy Scandals
๐กFacebook Pixel
๐กDigital Advertising
๐กDiscrimination
๐กCambridge Analytica
๐กStories
๐กClear History
Highlights
Over two billion people use Facebook, Instagram, WhatsApp, or Messenger daily.
Facebook's user base represents more than a quarter of the world's population.
Despite privacy scandals, Facebook's growth continues.
Facebook's total revenue for 2018 was $55.8 billion, a 37% increase from 2017.
Facebook primarily generates revenue through advertising.
About 99% of Facebook's revenue came from advertising in 2018.
There are approximately 7 million advertisers on Facebook.
Facebook uses sophisticated, targeted ads rather than traditional ads.
Advertisers can select the audience they want to reach with precision.
Facebook provides a near guarantee that advertisers won't waste their time or money.
Digital advertising is projected to surpass traditional advertising for the first time.
Facebook gathers user data to create detailed advertising profiles.
Facebook Pixel allows the company to collect data from other websites visited by users.
Advertisers can target users based on interests, phone type, political leaning, ethnicity, and income level.
Facebook has faced criticism for its ad targeting practices, including showing insensitive ads.
The Cambridge Analytica scandal involved the misuse of data from 87 million Facebook users.
Users can adjust the ad categories Facebook has determined they are interested in.
Facebook's new advertising strategy focuses on its 'Stories' feature.
Despite data breaches and lawsuits, Facebook continues to attract advertisers.
Facebook's new 'Clear History' feature will allow users to remove their data from the platform.
Mark Zuckerberg announced a vision for a privacy-focused platform, raising questions about targeted advertising.
Facebook had to remove 1.5 million copies of a violent video after a mass shooter broadcasted an attack.
Despite controversies, Facebook's user engagement remains high.
Transcripts
Every day, more than two billion people use Facebook, Instagram, WhatsApp or Messenger.
That's more than a quarter of the world's population.
And despite a rising number of privacy scandals and public backlash,
Facebook is still growing.
Total revenue for 2018 was $55.8 billion,
up 37% from 2017.
But with all of those users paying nothing to use these apps, how does
Facebook make money?
Is the company selling your personal information to companies, politicians
and even foreign governments?
It's actually much simpler than that.
How do you sustain a business model in which users don't pay for your service?
Senator, we run ads.
Throughout its entire history, Facebook has relied on advertising for
revenue here and there.
The company has experimented with other types of revenue, such as hardware
with its Oculus VR headsets and its new Portal speakers.
But really all of that is chump change compared to the revenue that it
generates from advertising.
About 99% of Facebook revenue came from advertising in 2018.
There are about 7 million advertisers on Facebook and the ads that you see
aren't like a traditional TV commercial or newspaper ad that looks the same to everyone.
Facebook and its entire family of apps use a type of ad that's much more
sophisticated and much more valuable.
When they first started out these were simple display ads on the company's
website. But since then, they have evolved into very targeted ads where an
advertiser can pick the kind of audience that they want to reach.
I believe that started happening after Sheryl Sandberg joined the company
and from her experience with advertisers on Google were looking for.
And she could provide that to them.
And probably more than that using the Facebook data that everyone
volunteers. Facebook ads are targeted, which means each ad that you see
was specifically for you.
Companies only want to pay to show ads to people that are likely to buy
its products.
Facebook provides advertisers with a near guarantee that they won't waste
their time or money, an assurance that a prom dress ad will be seen by a
high school student and not a retiree, or that an ad from a new burger
joint will be seen by a meat eater and not a vegan.
As a result of this targeting, corporations can save money in the long run
and drive more sales for advertisers who simply want to reach as many people as possible.
There's no better way to spend money than Facebook.
The other reason that advertisers use Facebook is because of the targeting
that the company offers.
The company has a ton of data on its users and that's very valuable to
advertisers, especially those who maybe on a budget and want to make sure
that they're reaching users who could realistically turn into customers.
This has led television and print advertising to decline.
This year, it is estimated that digital advertising will surpass
traditional advertising for the first time, capturing more than half of
all ad dollars spent.
But how does Facebook know exactly who you are and what you're interested
in? Many paranoid users have alleged the tech giant is listening in on
your conversations through the mic on your phone.
This isn't true, although Facebook has filed patents that suggest it could
eventually pick up audio signals from your TV to give you better ads.
It's also filed a patent that can interpret the expression on a user's
face as they read their news feed.
The company claims it will not use these patents, but clearly it continues
to focus on ways to gather even more data on its users.
At the moment, it can gather almost as much information just by what you
do on its family of apps.
Of course, you input basic info like age, location and education on your
profile, but you're also liking pages, joining groups, RSVP to events and
sharing your location.
Facebook is able to package all this information and actually harvest it to
try to figure out what kind of person you are and perhaps what you are most interested in.
Or better yet, what you are looking to find and then sell that information
to advertisers who are trying to find you.
Facebook can also get data on you from other websites that you visit
through what's known as the Facebook Pixel.
Based on this kaleidoscope of details, Facebook forms an advertising
profile for each user, putting them into certain groups that advertisers
can pick and choose from when buying ads on Facebook.
Corporations can target ads based on your interests, what type of phone
you have, your political leaning ethnicity and even income level.
And with enough information, these ads can blend into your feed so well
that you might not even recognize it as an ad.
But all of these details are still just Facebook's best guess.
Not an exact science.
The company has found itself in hot water on more than one occasion for
heavy handedness in its ad targeting tools.
Pregnant women who have had miscarriages have criticized the company for
continuing the show them baby product ads.
A ProPublica investigation found that Facebook had several anti-Semitic
advertising categories, including Jew-hater.
The Trump administration recently charged Facebook with discrimination in
its advertising practices for housing, which until recently allowed
employers and landlords to limit audiences based on race, ethnicity or
gender. The company has pledged to reform its system to prevent this type of discrimination.
Just as ads can influence consumers to buy products, they can also
influence voting behavior.
In the Cambridge Analytics scandal, 87 million Facebook users had their
data stolen to help influence the 2016 U.S. presidential election.
We didn't take a broad enough view of our responsibility, and that was a big mistake.
So what can you do if you don't want Facebook to show you personalized, targeted ads?
If you're trying to avoid ads on Facebook, that's pretty much impossible.
But there are a few things that you can do to make it harder for Facebook to target you.
Users can adjust the categories that Facebook has determined you're
interested in by going into your settings.
But it's nearly impossible to opt out altogether.
Even if you delete Facebook, which has become increasingly popular, the
company still has your data if you use Instagram, WhatsApp or Messenger.
Instagram just past 500 million daily active users on stories, a feature
that is found on every app in the Facebook family that allows user
generated photos and videos to take over your entire phone screen.
Recently, Facebook has started to change its advertising strategy by
placing an emphasis on its stories product.
Facebook is starting to sell ads to advertisers and brands in this same
format. It is hoping to ramp that up in a way that will eventually
generate more revenue than the advertising that they get from news feeds.
In its latest earnings call, the company announced that two million
advertisers are using stories to reach customers.
So despite data breaches and lawsuits, Facebook continues to lure
advertisers. And while user growth has slowed, it is still growing.
But there are things that could affect the outlook for Facebook's
advertising business.
Many people have become concerned about too much use of social media.
Salesforce CEO Marc Benioff recently compared using Facebook to having a nicotine addiction.
Apple introduced Screen Time to help users crack down on how much time
they're spending on social media and their phones.
We are very concerned about regulation.
The EU has put into place some pretty onerous regulations for companies
that are doing business on the internet, and I don't think it's beyond
imagining that that could occur in other places, especially the United States.
Another factor that Facebook has talked about hurting its advertising
revenue is of its own making.
This is a new feature called Clear History that the company said is going
to roll out to users in 2019.
Clear history essentially gives users the ability to scrub the data that
Facebook has on them.
The less data that Facebook has hurts the ability of the company to target
ads to you with precision.
Mark Zuckerberg recently announced a new vision for the company where he
outlined building a privacy-focused messaging and social networking
platform, raising questions for investors on how targeted advertising
products will work if users aren't posting publicly.
Three weeks after that announcement, a mass shooter used Facebook Live to
broadcast his attack on two mosques in New Zealand.
Facebook had to remove 1.5
million copies of the video off its platform.
In spite of all of these events that seem like it would affect Facebook
business, it keeps growing.
I don't think it looks like anybody who actually uses his platform cares in
the least about what they're disclosing to Facebook because they keep doing it.
That's the crazy thing.
They just keep doing it.
Browse More Related Video
How WhatsApp earns Money? | Secret Business Model of WhatsApp | Dhruv Rathee
The History of Facebook / history of facebook #historyoffacebookdocumentary
Duolingo: How the Free App Rakes in $500M Each Year | WSJ The Economics Of
Should You Invest in RDDT?
Telegram Will Never Be The Same
iPhone iรงin deฤiลim vakti | Android gibi mi oluyor ?
5.0 / 5 (0 votes)