How Facebook makes Money

Facebook is an American online social networking service. It was founded by Mark Zuckerberg, along with a few of his college roommates. Facebook has a worldwide area served except in a few countries where it is banned. There are about 2.7 billion monthly active users and was launched about 16 years ago. Its current market value is $790 billion and is next in line to become a trillion-dollar company. 

By selling advertisement space on its vast social media sites, Facebook Inc. makes money. Websites and smartphone apps that allow users to integrate and engage with friends and family are included in these sites. The company's sites and applications include Facebook, Instagram, and WhatsApp. Facebook is in rivalry with other businesses that market advertisements to other advertisers, as well as businesses that provide a channel to connect on social media. Major business competitors include Apple, YouTube, Google, Amazon, and Tencent Music. 

In the middle of an escalation to move to online shopping sparked by the COVID-19 pandemic, Facebook is witnessing major rising demand. About 99% of Facebook revenues come from advertising. 

How does WhatsApp make money?

It's obvious that Facebook and Instagram make money through advertising, we have seen how that works. But how does WhatsApp make money, I mean essentially it's just a free platform and a better SMS service. It doesn't do any advertising. So what is the source of WhatsApp's revenue?
What does WhatsApp have that it was bought for $19 billion!

The major source of revenue is Target Advertising, with this Facebook changed the entire concept of advertising. The traditional way of advertising is to just put up a board and banners around the market or put up an Ad online where people can follow the link. If about 10,000 people see it, about 1000 would be able to afford the service or product and even less of them will buy the service. 

Now, the concept of Target Advertising is that suppose I want to advertise a product, rather than advertising it to everybody who definitely are not interested I will only advertise this product concisely to those people who may be interested in buying the product. Facebook has a humongous database and knows more about us than we do. Facebook has all the data from when you started using the service to how your interests changed in about a year's gap. Combined with Instagram and WhatsApp it knows everything about us. When you agree to its terms and conditions you give Facebook access to your contacts, photos, videos, location, etc. Now you can imagine that Facebook knows everything about you, what food you like to about your profession, job profile, email, etc. 

With all of this information, Facebook knows your interests, what you want to purchase online and brings only that advertisement to your timeline. If your Instagram account and Facebook account are linked, you will see the products and services on your feed. On top of that, if you visit a website wherein you register yourself through your Facebook account, the company receives that information as well. 

The recent Antitrust Suit

This summer, Facebook was once again forced to protect its image when more than 1,000 organizations and corporations took part in a Facebook advertisement boycott. The aim of the boycott was to persuade the social media giant to do a better job of preventing the dissemination of hate speech on its site. 

On October 6th after a 16-month investigation into tech practises of Apple, Facebook, Amazon and The alphabet. They were presented with a 450-page report on how they influence the US economy and democracy. 

On December 9th, after a year-long investigation, an anti-trust suit was filed against Facebook. The suit alleges that Facebook acquisition strategy is designed to eliminate competition. The suit is also asking the court that Facebook make nothing above $10million, though the case is still pending. 

Facebook Financials

In Q3 2020, Facebook reported a net income of $7.8 billion on $21.5 billion on overall revenue with a net margin profit of 36.5%. Around $9.2 billion came from the US and Canada. Revenue grew 21.6% from the same quarter last year. 


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