While imagining an ideal business, a common picture that most of us draw in our minds is of a company selling a product for some cash. It is the way most businesses work, right? Well, it is true for most businesses, but not all. Consider Facebook as an example. Despite being one of the richest business corporations out there, no primary product that they sell is visible to the people from the outset.
How is Facebook Making Money?
We all are aware that the main products of Facebook, the social network and the messenger, do not charge any money to its users for using it. So, how does Facebook make money even after offering its biggest products for free? Let us understand the Facebook money making methods.
People often keep wondering how Facebook makes money from likes, and fail to see the larger picture and notice how it is making its revenue through ads. Advertisement is the biggest Facebook income source. Whichever page you choose to visit on FB, there is an advertisement waiting for you.
Top companies like that of Forbes, Amazon, and Nestle advertise their products with the help of Facebook. So, one can understand how powerful the FB advertisements are if companies as big as these invest in it. In the first quarter of 2019 alone, the company made $15.1 billion. It means that Facebook income per day is more than $167 million.
Although many companies are into advertising, but they do not earn as much as Facebook. So how Facebook makes money in this much amount?
The reason for huge Facebook income through advertising lies in its massive number of users. Despite the recent scandals of lack of data privacy, the social media giant continues to grow and now has as many as 2.4 Billion monthly active users on the network.
Ads targeted to people on their mobile and computer screens is much more effective than the television ads that people watch. People are more attentive to advertisements on personal devices and businesses all over the world pay a hefty sum of money to feature on the site.
Source of Huge Database
More the users, more the data generated. With billions of users under its belt, Facebook has a huge source of data that it shares with the third-party. Now, it is crucial to understand here that FB does not exclusively share user chats or intrudes your privacy. Instead, it segregates users based on demographics, qualifications, and more filters like that to share the segregated groups’ interests and how they indulge with different ads. No individual data are shared on FB, but the behavior of groups is.
With so much competition around, companies readily pay to understand the behavior of people who are their potential customers and this is how Facebook makes money from users. If you look at it from a business perspective, although you are a user of FB, it is you who is serving as its product to the third-parties by generating the data that they need.
In-App Purchases on Facebook
In-App purchases are also a growing part of Facebook money making system. People use the site to play offered games and often make purchases to buy game tokens and unlock some features. The gaming community on FB is not small by any measure and is yet another way how Facebook makes money.
Even the lightest of games like that of Candy Crush and Farmville have millions of users playing them already. A small percentage of people making transactions through such games help generate some Facebook income. 70% of the transaction made on an in-app purchase is given to the developers by charging the 30% money on every transaction made is how Facebook earns money.
With the advancement in technology and an increase in the number of powerful mobile devices, sooner or later, you may see even better titles on Facebook to make games even a bigger part of Facebook Business Model. FB has also introduced paying mobile phone bills with its app in some countries.
WorkPlace by FB
Facebook intends to create a network of people not only in personal space but also in offices. WorkPlace is one such tool that helps people in the offices connect. The basic features of WorkPlace involve group and personal chats like any other messenger but with minimal and less distracting design. One can share documents through this app too.
It does not cost to sign up here and use the basic features of the WorkPlace application. So, how does Facebook make money with its WorkPlace?
WorkPlace has its set of features that only the companies opting for its premium version get to use. The premium version offers unlimited photos and video storage along with APIs and integration with G-Suite and other major business platforms.
Companies interested in using WorkPlace to its advantage buy its premium features, which how Facebook earns money through this project. WorkPlace may not be adding a lot of income to Facebook income per day, but it is a business that may make it big in the coming years.
Profits from Oculus VR
Virtual reality is in its growing stage and how does Facebook earn money with it? The company launches its very own set of VR devices. The gaming industry is can generate a lot of profit for the company, and FB is trying hard to make its mark in there with devices like Oculus Rift, Oculus Go, and Oculus Quest.
Facebook acquired the company Oculus VR for a whopping $2 billion. It has plans to make VR big, and a part of the Facebook business model. But it hasn’t been the biggest contributor to Facebook money making system.
Despite the failure of many companies in the VR world, FB still has been persistent in making Oculus VR popular. In fact, it is only Facebook that has been able to perform relatively well amongst the competition in this department. VR has its share in generating a part of Facebook income.
How Does Facebook Make Money from WhatsApp and Instagram?
Most of the readers would be aware of Facebook purchasing Instagram and WhatsApp in the year 2012 and 2014 respectively. While both the services didn’t have a revenue model before joining the family of Facebook, they are now worth billions.
Instagram advertisement to the targeted users is another way how Facebook makes money. Even the site of Instagram has a whole lot of data generated through the pictures and videos shared on the platform which helps companies understand the user behavior of people who are also their potential customers.
The question that arises now is that if WhatsApp doesn’t have advertisements then why did Facebook purchase their business? How does FB make money from WhatsApp?
Well, to go by the recent build-ups and reports, Facebook will soon be using advertisements in WhatsApp stories in the coming years. Millions of users are already active daily on WhatsApp, and like Facebook and Instagram, the data generated by them is worth a lot of money. The developers have also been testing WhatsApp payment methods in countries like India to help Facebook earn money.
Will Facebook Change Its Earning Strategies after Recent Scandals?
It is evident that advertisements are a major way of how Facebook earns money. It will be interesting to see if the company sticks by ads or come up with clever methods to generate revenue in the coming years. For now, Facebook seems to be doing as well as it always has been doing for years despite the antitrust hiccup it faced. The company remains on top of its business with the value of its stocks going up every day. You may want to get yourself a guide to buy Facebook stock soon, for who knows how much worth it may be in the coming times.