History Of Facebook
Facebook was created in February 2004 by Mark Zuckerberg, a student of Harvard University. It was initially launched to connect Harvard students and then quickly expanded to other universities. In 2012, Facebook went public and became one of the most successful IPOs in history. At the time of writing, it has a market cap of close to $740B USD.
Facebook has always been a free service and there is no subscription fee. In its early days, the company was supported by venture capital and advertising. Fast ahead to 2020 and revenues are derived mainly from advertising and payment processor fees.
The Advertising Ecosystem
Facebook’s business model is built on advertising which accounts for the majority of its revenues. Facebook charges brands and businesses for placing adverts on its platform. Advertisers are researching for two major results: brand awareness and sales. Facebook facilitates the research process by collecting data on each user and the behavior metrics such as: time spent on a page, likes and shares, interactions, comments etc.
Moreover, Facebook further optimizes the process by enabling the advertisers to target their specific desired audiences. To maximize ROI, they can target either broad or narrow/micro audiences. As an example, a shoe company can target people likely to be interested in shoes, based on their age, gender, location and other metrics. Moreover, the company can exclude people who already purchased their product.
Payment Processor Fees
Another revenue stream for Mark Zuckerberg is payment processing fees. In recent years, the company introduced the “Facebook Payment” platform, which enables businesses and developers to receive payments from users who purchase their applications and services. Furthermore, the company receives a fee from each transaction – ranging between 2.4% to 5%.
Marketplace Services
Facebook Marketplace is another source of revenues for the tech giant. It allows users to list items for sale, as well as services. The company makes money from listing fees, featured ads, and commission fees. In addition, Facebook introduced a new feature – the “real estate marketplace”. It is a platform that allows real estate agents to list their houses or apartments for rent or sale.
Expanding The Message
In 2014, Facebook acquired the messaging app “WhatsApp”. This opened new opportunities for the company in terms of monetization. Later, it introduced “WhatsApp Business”, a version specifically created for businesses. Through this platform, companies can send a variety of messages, ranging from appointment confirmations, shipping notifications, customer support etc. Moreover, businesses can pay for their call to action messages, in order to increase their reach.
Spinning The Artificial Intelligence
One of the latest initiatives of Mark Zuckerberg and his team is to expand Facebook’s Artificial Intelligence model. The team developed the “Deep Learning” platform to process huge amounts of data in quick and efficient manner. This is expected to improve user experience and facilitate the interaction between businesses and their consumers. Moreover, Facebook and other tech giants, use AI to create advanced algorithms, which learn and anticipate user behavior.
Data Monetization
Facebook’s data monetization is one of its most important sources of income. The company holds valuable data on millions of users, which they can leverage in various ways. As an example, the company can analyze demographic, geographic, and social data to determine user preferences and buying behaviour, which can be valuable to advertisers. Moreover, the data can be used to predict future trends and user behaviors.
Investments For Profits
Mark Zuckerberg has invested in multiple projects outside of Facebook in order to generate additional profits. This approach has been successful, as he has invested in various start-ups, such as Instagram and Oculus. He also bought a 9.9% share in the Chinese internet giant Tencent, which added to his overall wealth. These investments are expected to yield even more profits in the future.
Engaging branded experiences
The ability to create custom branded experiences on Facebook is another way the company is gaining revenue. Through this model, brands are getting personalized and engaging experiences for their users. These experiences are highly effective for product/service launching, customer support, lead generation, and content/brand promotion. As an example, a brand can use sponsored messages and content on the platform to promote their products, services, discounts, events, and content.
Acquiring and Partnering
Facebook has adopted a strategy of acquiring and partnering with companies to build out its product offerings. In recent years, the company has acquired companies such as WhatsApp and Instagram for billions of dollars. This strategy has been beneficial for Facebook, as it has allowed the company to position itself in the tech world as an innovative leader.
Summary
To sum up, Facebook generates its revenues from various sources, such as advertising, payment processor fees, data monetization, investments, and branded experiences. This strategy has been very successful and has enabled Mark Zuckerberg to achieve billionaire status and become one of the world’s most influential people. As the company continues to innovate and expand, it remains to be seen how the company’s revenue will be impacted in the long run.
