How Does Facebook Make Money? Ever Wonder?

Facebook.com, pehaps the worlds biggest social networking website, is free to register and free to use – but there must be some way the owner makes money. Mark Zuckerberg, the youngest billionaire didn’t inherit this fortune – he earned it, and yes, all through the giant called “Facebook” he built up over the years.

So how does Facebook make money AND give away free accounts?

Ever seen ads on your Facebook homepage? Yes, that’s where the mystery lies- advertisements. Facebook generates bundles of cash through its ads. You want to promote your business, want to reach millions of users, just create a Facebook ad, get millions of views, and that too for a very low price. If you still don’t believe me, take a look at the IPO filings for 2011.

Over the past three years the percentage and dollar figures improved significantly, with around four billion dollars of revenue in 2011. Here are the stats:

Facebook revenue through advertising increased over the past three years
Source

Facebook is intelligent – if you have mentioned that you are a fan of Adidas, then you probably like sports. Ads related to sports will start showing up. Which ad is shown to which user depends on the likes and dislikes of that person’s data saved on the profile.

Another way Facebook makes money is to send a virtual gift! The “send a gift” option is a big incentive for those who want to send a virtual gift to their friends and family. The revenue goes to Facebook!

2011 marked an important change for Facebook because a significant rise in other Payments. One of the most important piece of “Other payments” is through the different applications which sell through the Facebook platform. Take ‘Farmville’ for example – a game launched on Facebook which allows users to maintain their virtual farm. The parent company, Zynga, is getting a lot of traffic through Facebook. Of course, Facebook takes a ‘rental fee’ from the revenue generated by the game. Companies like Zynga increases their user base, and Facebook eats a slice of their pie.

An interesting fact shows that half of Facebook’s access base is through mobile phones – an area Facebook might like to investigate into for future revenue generation.

Interested in how YouTube.com and Twitter.com make money? Check out our articles on How Does YouTube Make Money? and How Does Twitter Make Money?