Business Model Of Facebook – How Facebook Makes Money

The Facebook business model is an attention-based multisided model which is an American online social media and social networking service. Considered amongst the top four technology companies alongside Google, Amazon, and Apple, Facebook is headquartered at Hacker Way (aka 1601 Willow Road) Menlo Park, California, U.S.

Founded in 2004 by Mark Zuckerberg, Facebook is a Social Networking and Social Media Company which is based on Social Networking, Marketing, Advertising. As of March 2021, Facebook has 2.85 billion users.

Facebook’s Business Model Canvas

When it comes to the social media platforms these days, then Facebook is the top-rated one as a successful business model. With over 2 billion monthly active users, it can be said that Facebook is one of the most popular companies for sure.

The total revenue generated by Facebook in the year 2018 was about 55.84 Billion dollars in total. So, the popularity of Facebook cannot be questioned by anyone for sure. Not just that but it is also known to us that the second most popular social media site, which is Instagram is also a part of Facebook.

But how does Facebook aim to get that much popularity with the people? How does it manage to be on top and collect that much business revenue with the best results?

Well, it is all thanks to the businesses model of Facebook and the strategy that is used by the Facebook Company for sure. We all know that the biggest competitor of the Facebook Company is Google Plus, and it doesn’t even come close to the popularity and revenue that Facebook has at the time.

The purpose of the Facebook Business Model

Facebook aims at providing people with the ability to build a sturdy community out of their homes. It helps in connecting different parts of the world and bringing people closer to each other.

The sole purpose of using Facebook is to maintain the connection with family and friends from all over the world. It also allows people to get an idea of the happenings in other parts of the globe. It also lets people share their emotions and express their vision on the matters that they find valuable.

Key Partners of Facebook

The partners involved in the successful channelization of the Facebook business model are-

• Users and VIPs
• Brands, Content Creators, Influencers & 3rd party sites
• Sellers and Advertisers
• Service partners
• Fact check partners
• Tech partners
• Developers
• Legislator and Lobbying partners

Let us now have a look at the products and services that Facebook Business Model comprises-

Products of Facebook

Different products that are available to the Facebook users and help this social network in optimizing its advertising revenue are-

• Facebook
• Instagram
• WhatsApp
• Oculus
• Facebook Marketplace
• Facebook Media
• Facebook Messenger
• Facebook Ads
• Facebook Watch
• Facebook Games
• Facebook Local
• Facebook Business

Services Provided by Facebook

The business model which is used by Facebook is pretty much diversified, and there is a pretty ambitious strategy that is used by the company for sure. To know more and more about the business model of the Facebook Company, one has to have an idea of the important services which are provided by the company.

As mentioned above, Facebook is a company that owns several other companies and eCommerce stores on the Internet. Applications such as Instagram and WhatsApp are also a part of the Facebook Company.

So, we can say without a doubt that many different services are provided by the company of Facebook for users, small businesses, or big brands. Let us have a look at the key services that Facebook offers-

1. Facebook Site

One of the most important things that people get to see in the Facebook Company is the social media site for sure. With the help of Facebook, people can connect with more and more people in the best way. That is one of the most important things that people always remember about the company.

Not just that but the businesses these days are also using the platform of Facebook to promote their businesses and have the best results as well.

Apart from that, Facebook recently launched the amazing version of Facebook Lite, which doesn’t consume that much data and is a popular choice for people these days.

The Facebook site offers the advantages of running ads that also play a key role in the revenue generation for the Facebook Business Model. So it is basically one of the biggest forms of a revenue-generating model that the company has to date.

2. Facebook Messenger

 

The Facebook website has recently separated from the interface and then managed to launch an individual new chat application which is known as the Messenger application.

This is a mobile messaging platform and application that the users can use to make sure that they can send the best messages, chats, stickers, emojis, and other important forms of media to others in the best way.

There is also an integrated payments system in the Messenger section of the Messenger app for people who are from the USA.

3. Workplace

Most people who are familiar with the Facebook Company will know that there is a particular in-house site for social networking that people and companies can use to connect with the people who work in the company in the best way.

The workplace profile of a person will be completely different from the profile that the person has on Facebook because there are different details provided in the Workplace profile.

The companies are charged a fee for making the Workplace profile for the employees. This is also a very important method of revenue generation for the company of Facebook.

4. Marketplace

This is yet another service that is provided by Facebook, and it is known as the Marketplace. The particular working model that it has will be quite similar to the one that eBay has, but then there is an integration of the messenger as well.

So, the Marketplace service becomes a service for social networking. However, the payments are not made on the platform of Facebook for sure because the Marketplace application is an individual one.

5. Moments

Moments is one of the best competitors that one can find to the amazing Google Photos that we have. This is one of the best platforms of the Facebook Company that people can use to sync their photos up with the Cloud.

There is no doubt that this is a particular Cloud Storage that can be used as an album for storing photos in the best way. These photos are like the ones that are taken on the same day for sure, and there is simply not a single speck of doubt that one will be able to view it in the best way with the help of the amazing application for sure.

6. Instagram

 

Everyone has heard of Instagram as it is one of the most popular social networking sites for people these days. It is the second most popular and loved social media site after the very own Facebook. The site can be used for sharing videos, images, sending messages, sharing stories, and so much more.

The users can use this amazing platform to share every single memory that they want to share with people these days. So, there is simply not a single speck of doubt that it is one of the most important revenue-generating models for the company for sure.

7. WhatsApp

WhatsApp is another one of the amazing instant messaging applications that are owned by the Facebook Company, and it provides the services of messaging to the people who need it.

With the help of the platform WhatsApp, the users will be able to send each other instant messages, photos, videos, stickers, and so much more.

With the help of this platform, people will be able to share so many amazing things with others, and that is one of the main reasons why it is so popular amongst people all over the world for sure.

8. Audience Network

This is a very good competitor to the Google AdSense that people have these days. There is no doubt that the platform of Facebook is filled to the brim with different and new advertisers all over.

The new and profound strategy of the Facebook Company is to make sure that it can share the different websites and mobile application developers with those who need it.

With the help of Facebook Audience Network or FAN, this can be achieved in the best way without any trouble whatsoever.

So, with the help of these services and products, Facebook not only widens its reach but also gets data from the widest audience bases around the world.

Principles of Facebook’s Business Model

According to Facebook, their principle is their ground for standing sturdy. It is the only belief they deeply uphold, and they make tradeoffs for pursuing.

1. Providing a voice to people

Facebook understands the need for voicing the decisions people take. Thus, they provide the platform where people can say, post, like, and share anything they find relatable. People can also defend the rights of an individual even if there are disagreements.

2. Building networks and communities within the platform

Facebook allows its users belonging to different corners of the world to establish a connection with each other. When the attachment lasts for a longer span, it helps in bringing people closer to each other, forming a community.

3. Provides equal services to all the users

The platform serves with uniform features to all its users. They upgrade to new technology from time to time. This way, people can access the latest version. Facebook’s business model includes advertisements. Thus, the services are free to use.

4. Provides privacy protection and keeping people safe

Facebook aims at promoting the extraordinary qualities of people when they are together. They also check on the privacy policy and keep them protected. This way, they also prevent any harm that may occur to an individual.

5. Provides ample opportunities to develop the economy

The platform provides the users with various tools that may help them boost their business. It also focuses on creating job opportunities. This way, they contribute to developing and strengthening the economy.

5 Pillars of Facebook Business Model

In its annual report for 2017, Facebook discussed the 5 pillars upon which the company is based and they are-

1. Facebook enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers. There are a number of different ways to engage with people on Facebook, the most important of which is News Feed which displays an algorithmically ranked series of stories and advertisements individualized for each person.

2. Instagram is a community for sharing visual stories through photos, videos, and direct messages. Instagram is also a place for people to stay connected with the interests and communities that they care about.

3. Messenger is a messaging application that makes it easy for people to connect with other people, groups, and businesses across a variety of platforms and devices.

4. WhatsApp is a fast, simple, and reliable messaging application that is used by people around the world to connect securely and privately.

5. Oculus virtual reality technology and content platform power products that allow people to enter a completely immersive and interactive environment to train, learn, play games, consume content and connect with others.

The Assets and Resources of Facebook

The primary asset of any given platform is the networks it upholds. Every social platform needs to build a sturdy connection (system) and nurture it from time to time. Here is a piece of detailed information about the same.

1. Users

The Active Users on Facebook – Daily active users is more than 1.6b. Monthly active users account to more than 2.4b.

The Active users on other platforms by Facebook – The monthly active users on Instagram is more than 1b. The number of active users on messenger is more than 1.3b. The number of active users on Whatsapp is 2b.

The daily active number of people on all platforms is more than 2.3b. The monthly active number of people on all the applications accounts for 2.9b.

2. VIP accounts, businesses, content creators

The VIP accounts and creators draw a large number of followers. They also help in creating engagement of people through their posts and content.

Facebook also has a higher engagement of the audience. Thus, the usage is also more. The average time an individual spends on Facebook alone is forty-one minutes.

3. Assets of content

Everything on Facebook is an asset. Starting from the comments to the likes and emojis and replies and shares, all fall under content. All of these adds to the asset of Facebook.

The assets also include the content that the users share. It is considerate of infographics, pictures, images, videos, links, live-streaming sessions, events, and other resources.

4. The brand itself

Facebook itself is a brand. Many people consider Facebook as the meaning of social media. Some of them think that the platform is the closest relative of social media. In the race of Interbrand brand ranking, Facebook stands at the fourteenth position after falling from the ninth ranking. There are no other social media platforms that hold a rank apart from LinkedIn at ninety-eight. On the other hand, Google is in the second position.

Customer Segments in Facebook

The number of users on different platforms sponsored by Facebook is 2.8+ billion. It is more than a third of the entire population of the globe. The question is not about who can get the addressing of Facebook but it is more about the significant micro area that they can address.

It depicts the data collection that users share with Facebook through various means. It all depends on the likings on Facebook or off the platform. This way, they can have a significant idea about the individual. Facebook also draws information from your profile and the people and places you tag while posting.

The platform can identify the location of the users when the location of the phone is on. Even if the user does not check-in on a place, the information reaches Facebook. Facebook also outline its user by gathering information on whom they follow and the education qualification they provide. It also accumulates data from the applications where people use Facebook account to sign in. It also gathers information from the pages that use Facebook pixel.

Also, the platform draws data from the applications that use Facebook APIs. But as per Facebook, they do not take information from calls and texts, and posts that an individual shares on the platform.

• Facebook segments its users based on geo-demography. The overall female users on Facebook accumulates to seventy-five percent. On the other hand, it is sixty-three percent of males. The age group of twenty-five to twenty-nine have the most active users. It stands at eighty-four percent.
• People who have college degrees accumulate to seventy-four percent. On the other hand, people who have not to attend college stands at sixty-one percent. People who have higher education degrees stand at Seventy-five percent.
• Forty-three percent of total female uses Instagram sponsored by Facebook. On the other hand, there is only thirty-one percent of male users. The age group of eighteen to twenty-nine has the maximum user base of sixty-seven percent.
• It segments business on the grounds of size, reach, vertical, interest served, geography, partnership type, etc.

Who are the Customers in Facebook Business Model

There are three types of customers comprised of the business model Facebook-

1. Users

The regular users how to connect, communicate and interact with other people on Facebook

2. Marketers and Advertisers

Businesses, brands, advertisers, and marketers using Facebook for widening their reach, customer base, and sales

3. Developers

App and Game developers who develop games that users play on Facebook to help Facebook ad Developers make the money

Now, a question comes about the channels through which Facebook functions-

Channels of Business Model Facebook

 

1. Internet or Online Connectivity

Online connectivity is inevitable for the channelization of business through PCs, Tablets, Laptops, Smartphones, etc.

2. Website & Mobile Apps

This way, Facebook widens its user base and reaches more and more target audiences, be it normal users, business owners, celebrities, businesses, influencers, and so on.

3. Developer Tools and APIs of Third Party

There are many Developer Tools and APIs that are created by the third party and help Facebook in channelizing its activities. Access Token Tool, JS SDK Console, API Upgrade Tool, Leads Ads RTU Debug Tool, etc. are some of its examples.

All in all, different channels that are comprised by Facebook include apps, websites, word of mouth, a news feed, notifications, 3rd party websites, APIs, business tools, support, resources, etc.

Facebook Business Model Value Proposition

Different value propositions of this Mark Zuckerberg-owned brand include the free medium of global connectivity, sharing of experiences, ideas, cultures, etc along with opportunities for global communication and business expansion.

Facebook value propositions bring the world closer and give people the power to express their opinion and connect with anyone they want to. Its easy accessibility and payment Infrastructure along with virtual reality and brand publishing have also been crucial in optimizing its user base to more than 2 billion users who supercharge its revenue stream.

Let us now have a look at its value propositions to users, businesses, and influencers-

Users

• Contact with friends, family, and acquaintances
• Sharing photos, thoughts, and experiences
• Meet ‘everybody’
• Personally relevant content
• Pass time or get entertainment or get news
• Exploration/discovery
• Following friends and VIPs
• Professional networking
• Log into other sites
• Groups that self-organize around topics

Businesses or Advertisers

• Targeting/penetration
• Native integration / ad formats
• Non-interrupt
• Word-of-mouth
• Self-serving business tools

Influencers

• Build personal brand or remain top of mind or stay in touch with followers
• Immediate contact with their followers
• Word-of-mouth & organic virality

How does Facebook Make Money?

 

When it comes to a company like Facebook, the users are the ones that help the company in making the money that it needs to make.

With the increase in the user base, more and more people would want to be a part of the company, and there is no doubt that Facebook will be able to earn a lot of money as a result of that as well. This means that the company will be able to provide the best services to the people further.

Advertisements, Acquisitions, Video Content, User Data are different means that help Facebook make good money. Let us understand some of these in a more detailed manner-

1. Ad Revenue

This is the most powerful medium through which Facebook makes money. Self-serve advertising, engagement ads are the prime ways of generating revenues.

2. Payment Revenues

When developer communities or wholesalers use the Payment Infrastructure of Facebook for different business transactions such as the sale of apps, marketplace featured deals, selling of digital products, money transfer to friends, etc.

3. Selling of Oculus Products

Facebook is also involved in selling Virtual Reality Products of Oculus that also help it make money.

4. User Data for targeted Advertising

Facebook comprises the largest audience base, and hence, it helps businesses with user data to run targeted advertising. This helps advertisers and marketers run relevant ads.

In addition to this, Instagram is also helping Facebook generate revenues. In the future, you may also see the monetization of WhatsApp that will play a key role in the revenue generation of Facebook.

So, that is all you need to know about Facebook. We hope you got the concept in the best way without any difficulty.

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