How Facebook Makes Money

by Barbara J. Feldman on April 19, 2011

It seems that just about everyone has a Facebook page these days.  How long did you have an account before your parents “friended” you and began sending you notes of encouragement?  As millions of people set up their accounts without paying a service fee, a legitimate question arises.  How does Facebook make money?  Well, there is a single element that generates hundreds of millions of dollars per year for the social networking giant:  advertising.  Corporations are shelling out incredible amounts of money for the right to advertise along the right-hand side of your Facebook screen.

The Ability to Reach a Target Audience

The days of passing out flyers seem to have faded as the digital networking world has taken hold of just about everyone.  By offering you the ability to socialize, post your thoughts, set up plans, and have a sort of personal resume, they are getting you to offer up your interests.  Once you have done so, they are able to offer advertising space on the profiles that may be interested in the product or service being offered.  Here’s an example:

John loves kayaking and it’s listed among his interests on his Facebook profile.  An outdoor sports supplier will pay Facebook a lucrative amount of money to advertise on John’s profile.  In doing so, when he opens up his Facebook page, which is almost daily, he’ll see the advertisement for 20% off of kayaking equipment and may take notice.  This selective advertising technique ensures that companies are spending their budget reaching their target market.  This has replaced the “old school” technique of posting flyers throughout the neighborhood and hoping someone notices.

The Creation of Applications

A much smaller percentage, relatively of course, of Facebook’s revenue comes through profit sharing agreements with application developers that create Facebook apps for the users to play with.  In doing so, they sell their own advertising space, or sell the application itself, and give Facebook a piece of the pie.  It’s a win-win for both parties.

Facebook has posted massive profits reaching half a billion dollars in 2009 through advertising revenue.  When you join the social networking site, you can enjoy up to the minute connections with friends regardless of their location.  This is very enticing to many, and while they are enjoying the free communication service, the website is posting record profits.  There’s nothing malicious in the design, as many may claim, but instead, the service is offered, and the information is utilized.

The Critics of the Design

Critics are everywhere when Facebook’s tactics are discussed.  Privacy issues seem to be at the forefront of every opposing argument, but there are flaws.  If someone is posting all of this information on the internet, do they really deem this information to be private?  At some point, a certain level of self-responsibility comes into play.  The service is free, and over half a billion people enjoy the benefits.  When considering the voluntary release of the information, it seems that no foul play can be claimed.

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Cite This Page

Feldman, Barbara. "How Facebook Makes Money." Surfnetkids. Feldman Publishing. 19 Apr. 2011. Web. 2 Dec. 2014. <http://www.surfnetkids.com/tech/810/how-facebook-makes-money/ >.