# So how \*does\* Facebook make money? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [November 5, 2016, 2:06am UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666 "2016-11-05T02:06:11Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Aeschines](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/aeschines/32/16251_2.png) [@Aeschines](https://boards.straightdope.com/u/Aeschines)\ **Post date:** [November 5, 2016, 2:06am UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/1 "2016-11-05T02:06:11Z")
Pertinent link: > **[Facebook's stock drop 'a gift to investors'](https://www.cnbc.com/2016/11/03/facebooks-pullback-a-gift-to-investors-internet-analyst-says.html)** > > Facebook's announcement of slowing growth should be seen as an opportunity for hesitant investors to buy the tech giant's stock, one analyst says. When I think of online companies that make money, only two names really come to mind: Google and Facebook. I understand how Google makes money: they are so dominant in search that they can make money on sponsored search results. Not sure if AdSense makes money any more, but hey: sponsored search results. Quite comprehensible. But I’ve no idea why Facebook makes money. First, I use AdBlock Plus, so I see virtually no ads on FB. I use FB on mobile without AdBlock… and I still see virtually no ads. I get that a lot of people don’t use AdBlock and do see ads–but still. One side of the coin is doubts about how many people see the ads and click on them. The other is: who the fuck thinks that ads on FB will really work? Is there anyone making bank by advertising on FB? It just doesn’t seem like something that would work at all. But, I dunno, maybe big companies are throwing a portion of their advertising budget at FB and hoping that it works. FB also charges for dumb shit like promoting your posts and whatnot. Again, who is rolling in the DOLLAZ from doing that? I’ve only seen this feature criticized, never praised. In fact, I have never seen FB praised as an advertising opportunity. Oh sure, some gurus have promised to reveal the secrets of doing this and that on FB–but they shovel the same horseshit about Twitter, which is bleeding cash. So yeah, I don’t get it. Edify me, O Dopers!!! ---
**Author:** ![ZipperJJ](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/zipperjj/32/211_2.png) [@ZipperJJ](https://boards.straightdope.com/u/ZipperJJ)\ **Post date:** [November 5, 2016, 2:15am UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/2 "2016-11-05T02:15:36Z")
I’m working with two PACs to get two local issues passed and we’re happily pumping money in to boosting our PAC posts on Facebook. You can go click-click-click and get your ad to the EXACT audience you want and get tons of instant feedback about how your ad is doing. Newspaper ads cost much more and don’t do give me the right audience or give me any feedback and aren’t even clickable. My brother uses Facebook ads to advertise his band’s shows and shows at his venue. All of the home sales consultants I know use Facebook to advertise their shops. I know that’s just a teeny sample size but in the short time I have needed it Facebook advertising has been cheap and extremely useful. There is no barrier to entry. If Facebook is making money off me $50 at a time imagine how much it’s making off Wal Mart and re-elect Councilman Jones. ---
**Author:** ![BigT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bigt/32/12044_2.png) [@BigT](https://boards.straightdope.com/u/BigT)\ **Post date:** [November 5, 2016, 4:20am UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/3 "2016-11-05T04:20:32Z")
Facebook runs the same types of ads Google does, with a couple exceptions. It had a side bar that can be ads like Google or can link to a page–which you pay Facebook to promote. (Not a profile, but a page–like for a brand or celebrity.) It also will put items in your newsfeed saying telling you that your friends like this particular thing. These are not organic–they are actual ads. Facebook also allows you to pay to get wider promotion of your content to more people at once. Without money, Facebook only contacts a certain percentage of your followers, and then checks the likes to see if it should send them to more people. Paying gets around that. Oh, and you can pay to get further in their various free-to-play games. The game owners get money, and Facebook gets a percentage. Finally, I believe I’ve heard they are starting to run ads on videos, but I’ve not seen any the few times I’ve checked without adblock. ---
**Author:** ![magnusblitz](https://avatars.discourse-cdn.com/v4/letter/m/b4bc9f/32.png) [@magnusblitz](https://boards.straightdope.com/u/magnusblitz)\ **Post date:** [November 5, 2016, 6:27am UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/4 "2016-11-05T06:27:30Z")
It’s not like you need to click on an ad to have it work. You didn’t click on an ad you saw in a magazine or on the TV. It’s just a matter of exposure and repeatedly hammering products into your reptilian brain so when you do make a purchase, you go for the one advertised to you. ---
**Author:** ![Aeschines](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/aeschines/32/16251_2.png) [@Aeschines](https://boards.straightdope.com/u/Aeschines)\ **Post date:** [November 5, 2016, 11:15am UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/5 "2016-11-05T11:15:12Z")
All the information you have provided is good, thanks. But I guess what I don’t understand is _why_ those offerings are adding up to a lot of $$$. **ZipperJJ** provides the best clue so far as to why one may be motivated to advertise on FB (really the first actual “case study” I’ve ever heard; it seems you never hear anything concrete along those lines in the media). But it also sounds like a lot of nickels and dimes to add up to billions in revenue. For Google, it’s easy to understand for me how he money adds up, and I’ve studied pay-per-click campaigns to some extent. Facebook, sure, it’s a big platform with a lot of users, but so is Twitter, so have been many failed Internet plays. And we also know that Google’s YouTube is _not_ making money even though it’s wildly popular. So I’m curious why FB is different in this regard and is, with Google (in the aggregate) one of the two big money-makers (I’m excluding online retailers: I’m talking about making money off the platform itself). ---
**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\ **Post date:** [November 5, 2016, 12:19pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/6 "2016-11-05T12:19:29Z")
They sell your data to other companies. Watching what you click on, what types of activities you are interested in, etc. gives them some of the best tracking data on you that you can imagine. And if you’re foolish enough to give them your real name, etc., they really are tracking **you**. Other companies love this type of specific information about specific people. So they are willing to pay $ for it. “If you are not paying for it, you’re not the customer; you’re the [product](http://www.lolwithme.org/wp-content/uploads/SocialMediaAndYou.jpg) being sold.” -Andrew Lewis ---
**Author:** ![Aeschines](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/aeschines/32/16251_2.png) [@Aeschines](https://boards.straightdope.com/u/Aeschines)\ **Post date:** [November 5, 2016, 12:45pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/7 "2016-11-05T12:45:41Z")
> [@ftg](#): > > They sell your data to other companies. Ah yes, I had forgotten about that. I wonder what % of their revenue such data sales make up. ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [November 5, 2016, 12:46pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/8 "2016-11-05T12:46:43Z")
From page 9 of FB’s 2015 10-k: > [@](#): > > For 2015, 2014, and 2013, advertising accounted for 95%, 92% and 89%, respectively, of our revenue. In addition, we have recently introduced advertising on Instagram. As is common in the industry, our marketers do not have long-term advertising commitments with us. Many of our marketers spend only a relatively small portion of their overall advertising budget with us. > > … (much later in doc) > > Financial results: > • > Revenue was $17.93 billion, up 44% year-over-year (or 53% year-over-year on a constant currency basis), and ad revenue was $17.08 billion, up 49% year-over-year (or 59% year-over-year on a constant currency basis). > > Total costs and expenses were $11.70 billion. > • > Income from operations was $6.23 billion. > • > Net income was $3.69 billion with diluted earnings per share of $1.29. > • > Capital expenditures were $2.52 billion. > • > Effective tax rate was 40%. > • > Cash and cash equivalents, and marketable securities were $18.43 billion as of December 31, 2015. > • > Headcount was 12,691 as of December 31, 2015 ---
**Author:** ![Aeschines](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/aeschines/32/16251_2.png) [@Aeschines](https://boards.straightdope.com/u/Aeschines)\ **Post date:** [November 5, 2016, 1:19pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/9 "2016-11-05T13:19:14Z")
> [@JohnT](#): > > From page 9 of FB’s 2015 10-k: Thanks! So assuming that sales are not included in “advertising” somehow, then it would seem that such sales account for at most 5% of revenue. That then leads me back to the question why FB has been successful at online advertising where so many others have failed. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [November 5, 2016, 2:20pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/10 "2016-11-05T14:20:19Z")
$17B in ad revenue (thanks **JohnT** ) comes from X impressions times Y price. What FB seemingly has is vastly more X than someplace like twitter. At which point your question becomes: “Why is FB popular?” times “How many ads can they cram on an average page before their audience revolts?” Damned if I know the answer to either question. But those are the relevant questions. ---
**Author:** ![WhyNot](https://avatars.discourse-cdn.com/v4/letter/w/c77e96/32.png) [@WhyNot](https://boards.straightdope.com/u/WhyNot)\ **Post date:** [November 5, 2016, 2:27pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/11 "2016-11-05T14:27:17Z")
> [@Aeschines](#): > > Thanks! So assuming that sales are not included in “advertising” somehow, then it would seem that such sales account for at most 5% of revenue. That then leads me back to the question why FB has been successful at online advertising where so many others have failed. _shrug_ Dunno. I think if you can figure that out, you’ll have the holy grail of marketing. But I’ll add to the chorus that it’s so. My theory - which is no more informed than anyone else’s - is that people inherently trust their friends, and Facebook is where you see what your friends are into. Peer pressure + advertising = results. I run Midwest Herb Fest, a small festival teaching about medicinal herbalism, every year. So far, we haven’t actually paid for any online advertising, because we have no budget. But we have used Facebook and Twitter’s free features. 27.3% of our attendees this year told us that they heard about the event on Facebook. We got 0% from Twitter, and 0% from links to our own website on other websites. 9.1% said they found out about us from our website directly. Facebook allows me as a user to get involved in communities (Groups) and slide my links in very occasionally and casually, so it doesn’t feel like I’m spamming anyone. When the content of what’s essentially an ad matches the conversation we’re having, it’s appreciated, rather than annoying. Facebook also makes it super easy for me to create on online community space to keep my current crop of customers engaged during the 362 days we’re not together. It’s also a place to upload flyers that any of them can download and print and give to their friends in person, or at meets or events they go to and I don’t, which gets my message out to people I haven’t met without even costing me printing fees and paper! As soon as I have some money, I can tell you who I’m going to give it to for advertising. It’s going to go to Facebook, because even their free tools have served us far better than anyone else’s. ---
**Author:** ![Infovore](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/infovore/32/420_2.png) [@Infovore](https://boards.straightdope.com/u/Infovore)\ **Post date:** [November 5, 2016, 11:37pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/12 "2016-11-05T23:37:09Z")
I think Facebook is successful because so _many_ people use it, and it’s so easy to laser-target your advertising to exactly the audience you want to hit (or test various audiences to see which ones are successful). FB advertising isn’t cheap, but it is effective if you use it right. You’ve got access to this amazing demographic data that you can slice and dice so your ads are guaranteed to be sent only to those people who might have an interest in what you’re selling. I suppose you can do that with Google too (I haven’t used Google Ads yet) but I’m not sure even Google has the kind of demographic information about people’s interests that FB does. ---
**Author:** ![Oredigger77](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/oredigger77/32/3181_2.png) [@Oredigger77](https://boards.straightdope.com/u/Oredigger77)\ **Post date:** [November 6, 2016, 3:24am UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/13 "2016-11-06T03:24:45Z")
One thing that Facebook does better then anyone including Google is targeting. Since people willingly give them tons of personal data it’s really easy to target 25 year old men living or working withing 5 miles of a liquor store what like to drink craft spirits and then send them a coupon to buy my rum at that store. Its actually really scary what Facebook knows. ---
**Author:** ![Aeschines](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/aeschines/32/16251_2.png) [@Aeschines](https://boards.straightdope.com/u/Aeschines)\ **Post date:** [November 6, 2016, 2:20pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/14 "2016-11-06T14:20:15Z")
The targeting thing makes sense. I’ve just never experienced that on FB. I’d say it was AdBlock, but I don’t get it on mobile, either. ---
**Author:** ![Bear\_Nenno](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bear_nenno/32/3358_2.png) [@Bear\_Nenno](https://boards.straightdope.com/u/Bear_Nenno)\ **Post date:** [November 6, 2016, 2:51pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/15 "2016-11-06T14:51:24Z")
Facebook Ads are specific and targeted. They are, more often than not, items or companies I would be interested in. This is more convienient than annoying. Every ad has an option to tell Facebook that I dont like it because either I feel its spam, it is irrelevant, I already have one, or I just dont like the company. The more I interact with it, the more relevant and better quality my ads are. I have purchased many things off Facebook ads. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [November 6, 2016, 3:41pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/16 "2016-11-06T15:41:26Z")
Interesting. IANA facebook user and I wonder what would happen of you simply clicked “this is spam” on 100% of the ads they show? What do we think would happen then? ---
**Author:** ![Infovore](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/infovore/32/420_2.png) [@Infovore](https://boards.straightdope.com/u/Infovore)\ **Post date:** [November 6, 2016, 3:57pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/17 "2016-11-06T15:57:13Z")
> [@LSLGuy](#): > > Interesting. > > IANA facebook user and I wonder what would happen of you simply clicked “this is spam” on 100% of the ads they show? What do we think would happen then? Dunno, but the whole point of _good_ FB ads is that they’re targeted to very narrow interests. If they get it right, the people who see them won’t consider them spam, and might actually take a look at them because they promote something they might want to buy. Take me for example: I get a lot of FB ads for new urban fantasy series, geeky stuff, etc. --in other words, stuff I’m interested in. But without this targeted focus, advertisers would be wasting their time with me because very little of the stuff that “should” appeal to someone of my age and gender actually does. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [November 6, 2016, 4:16pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/18 "2016-11-06T16:16:58Z")
True enough; targeting done well improves your ad-seeing experience. While improving the ad buyer’s cost per successful sale. OTOH, my goal is to see zero ads everywhere all the time. An ad, in and of itself, is 99% objectionable. Relevance / irrelevance adds or subtracts maybe 0.5% at the edge. As a result I’d much rather keep my absolute anonymity / privacy than experience “better” ad targeting. Admittedly my POV is a fringe one. ---
**Author:** ![Infovore](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/infovore/32/420_2.png) [@Infovore](https://boards.straightdope.com/u/Infovore)\ **Post date:** [November 6, 2016, 4:25pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/19 "2016-11-06T16:25:59Z")
> [@LSLGuy](#): > > True enough; targeting done well improves your ad-seeing experience. While improving the ad buyer’s cost per successful sale. > > OTOH, my goal is to see zero ads everywhere all the time. An ad, in and of itself, is 99% objectionable. Relevance / irrelevance adds or subtracts maybe 0.5% at the edge. As a result I’d much rather keep my absolute anonymity / privacy than experience “better” ad targeting. > > Admittedly my POV is a fringe one. Yeah, I think it is. Advertising in an of itself isn’t inherently bad (unless you’re one of those people who never buys anything). If done right, it can show you things you might want to buy (or experience, or whatever) that you might not know about. Granted, it’s _way_ too intrusive in our society. But I think most people would agree that at least a subset of it has its place. I totally hear you about keeping your anonymity, though. I’ve pretty much given up on that since I spend so much time online, but I still get creeped out and annoyed when I look up something online and then ads for it follow me around for the next month or two. ---
**Author:** ![WhyNot](https://avatars.discourse-cdn.com/v4/letter/w/c77e96/32.png) [@WhyNot](https://boards.straightdope.com/u/WhyNot)\ **Post date:** [November 6, 2016, 7:28pm UTC](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666/20 "2016-11-06T19:28:10Z")
> [@Infovore](#): > > …I still get creeped out and annoyed when I look up something online and then ads for it follow me around for the next month or two. I get annoyed by that because - Dude. I JUST BOUGHT THAT THING. Why are you showing me ads for the thing I just bought?! I understand that they can’t show me an ad for a nursing bag \*before \*I know I want to buy a nursing bag (unless they’re Target, because Target’s targeted ads are written with assistance from the dark lords, apparently), but once I’ve bought it, your ad is completely, utterly useless. Why’n’t you show me some ads for nursing shoes, or nursing scrubs, or tacky sentimental nursing jewelry? I mean, I’m probably not going to buy those, either, but there’s a better shot at that than my buying another nursing bag two hours after just having purchased a new nursing bag. :dubious: [Next page](https://boards.straightdope.com/t/so-how-does-facebook-make-money/770666.md?page=2)