How Facebook Is Earning Money?

This post would explain you on “How Facebook is earning money” from the various sources.

It is a well-known fact that the growth of Facebook has been extremely fast as it is a perfect place for the people to experience the social benefits.

Few years back, there was a rumor that it would be a paid membership site. Facebook denied it and specified that it is a free website for the members.

So, it is not making money with membership fees, and you might think “how Facebook is earning money?

I know, you read about “How to make money with Facebook?” in most of the blogs and websites. But most of the people including the Facebook users don’t know how Facebook earns money.

So I take an opportunity to illustrate the income streams of Facebook through this post.

Little About Facebook

Facebook is a popular social networking website, founded by Mark Zuckerburg in the year 2004. As of now it has more than one billion active users, and it is a primary source of entertainment for most of the people around the world. It is actually used by the public to interact with others for both personal and professional purposes.

Facebook earnings

Mark Zuckerburg

Availability in more than 70 languages, not requiring any particular skills to use, having good privacy options and possibility of content and video sharing are some of its unique qualities that stimulate the people to use it effectually. Many online businesses are expending the features of Facebook to generate massive traffic to their website.

How Facebook is Earning Money From Various Sources?

The last year (2012) earnings of Facebook is approximately about $2.6 billion. Of that, 55% revenue comes from web advertisements, 30% from mobile advertising and 15% of income from other sources like games and gift shops. Let’s see its revenue generating sources in detail.

1. Advertising

Advertising is the main reason for Facebook’s success. Many businesses create ads on Facebook, and it gets paid to deliver the ads. It publishes ads on the screen that is directly related to the users by gathering their likes and activities. i.e. if a user mentions that he/she is a fan of Coca-Cola, then the ads related to that will be showing up to that user.

Even though the click through rate of Facebook is not as high as Google, it is generating real traffic with the ads in it and letting the businesses to have a successful advertising campaign. This type of ads is called Engagement ads, and it is placed on the homepage of Facebook.

There is another type of adverting called self-serving ads, in which the users can set up their advertisements (check here to create your ads). Different types of Facebook ads associated with this type of advertising are Standard ads, Like ads, Page post ads, Sponsored Stories and so on.

As these types of ads are easy to create, small business people are making use of it, and Facebook is generating considerable revenue with this self-serve ad.

The Ford, HSBC, Samsung, Groupon and American Express are the biggest brands who invested a huge amount of money in Facebook advertisements. 

2. Mobile Advertising

About 1/3 rd of Facebook’s revenue comes from mobile advertising. Recently, it launched its own App Center similar to Apple which let the users download their desired applications from the appropriate store directly and getting paid by the developers.

Also, it cooperates with mobile advertising agents to help the advertisers like AdMob and iAd to bid for the space to advertise.

Moreover, the Facebook starts its monetization strategies with Instagram.Facebook earning money                                                                                Image credit: Flickr

3. Non-Advertising Methods (other sources)

Games, gift shop, Facebook credits and some featured applications are some of the non-advertising ways with which the Facebook is creating a huge income.

a. Facebook Games

Games like Farmville, Mafia Wars, City Ville, Empire & allies are some of the popular games that have millions of users who pay real money to play with it. These games are made by Zynga and Facebook takes 30% revenue from it.

b. Facebook Gift Shop

Facebook Gift Shop is one of the contributors to its revenue that let the users send virtual gifts to their friends and other users. It also opens this shop to third party developers to get the variety of products to sell. Small items like dolls, birthday & other occasion cards can be purchased, and the Facebook will deliver it to the preferred person.

c. Facebook Credits

Facebook is generating good revenue from its credit program as it is an easy payment for the users to buy virtual goods, to play games and to use various applications.

Check the 2012 earnings of Facebook

Recent earning report of Facebook

Conclusion

Facebook has amazing features and it is aiming to improve its monetization ways by redesigning its news feed. Recently it announced its first-quarter earnings of 2013. Its income was approximate $1.25 billion and 30% of this revenue generated through mobile advertising with 751 million mobile active users.

The income from advertising for Facebook was about $1.25 billion and earned $213 million from payments & other fees. The number of active users has incredibly increased when compared to last year and as of now it has 665 million active daily users worldwide.

I hope now you understand How Facebook is earning money in billion dollars every yearWhat do you think about the revenue success of Facebook?  Share your point of views in the comment section.

48 Comments (click here to leave a comment)

  1. Great information Nirmala. Ads make up a large portion of the revenue for Facebook (and also other giants like Google).

    But these days the ads are becoming more and more annoying, specially the ones in the newsfeed. That’s why so many people are voicing against these ads. Facebook really needs to think of a better way to incorporate those ads instead of just pushing the ads towards us, the users.

  2. Nirmala, I didn’t know that Facebook earns also by non-advertising methods which you mentioned. I think this is a clever case study by you. I love the way in each article how you start with basic/intro (just a few examples ‘something about Facebook’, ‘What is antivirus’, ‘what is Twitter’, etc.) and then jump to the main topic. Each of your articles stands out by that. Even if a reader who is new to the subject is reading an article, he/she doesn’t have to search elsewhere for reference. True expertise! Keep up this same style!

    • Oh! this is a great appreciation comment for me and this is truly an inspiring one Jignesh :)

      My strategy is to give the best for my readers and should talk about the basics for every topic.

      I am having a (bad) quality! If I take a work to complete, I’ll try to do my best. If not, I never touch that work.

      Yeah, Facebook is earning a little revenue with non advertising methods and these ways are really entertain its users.

      Many thanks for your encouraging reply, will follow my unique style forever :)

  3. Hi Nirmala,
    This is good information to know. This question has been on the lips of many and sadly, many of these have not had the answer.

    Facebook is making lots of money for its owner. I’m yet to see the next big thing that will beat it 😉

    • Am surprised and happy with your comment Enstine sir!

      Many thanks for commenting on my blog.

      Yeah, my title of the post is a popular question among the people and Facebook users, so I decided to include the answer here.

      Thanks for sharing your views here, you’re most welcome :)

    • Thanks for the comment!

      But i don’t know what makes to you tell that Facebook is not good. It depends on the views and activities of the users. As a blogger, just make use of it and try to maintain its proficiency :)

  4. Nice to know about Facebook’s earning sources. Its really good to see that the Facebook is earning a lot from these sources. nice post!

    • Many thanks for commenting here Atish!

      Am feeling excited, Bcoz I got 1000th comment from you :)

      I really thankful to you as you’re encouraging me to do an enhanced blogging. Learning immense skills from you and expanding my knowledge with your blogs.

      Show your presence here to suggest about the unknown stuffs :)

  5. Giriraj

    Starting at a very low advertising rates, Facebook has attracted many start-ups to promote their business online. This article provides a good insight of the revenue system of FB.

    Thanks.

  6. Thanks for sharing this wonderful post. I am a big fan of your writing skills and learned a lot from you, by reading your blogs. This one is also one of the top most blog published by you. By taking the inspiration from you, I am working on Online money making related articles(http://moneybies.com/), which is so much unique and authenticate content. Surely i will come back again for acquire more technical terms and knowledge by your blogs :)

    • Thanks for coming here and commenting Vivek :)

      Glad to hear that you are liking my writing style. Simple, basic n clear is my secret of writing, nothing special in it.

      Yeah, I read your post related to writing and left my comment too.

      Am pleased with your appreciation and am suggesting you to blog with passion.

  7. Thanks again for your appreciable suggestions. I will surely recommend your knowledge regarding blogging and will do blogging passionately as you always do. It’s for me, just need to focus on some basic points and it’s done. :)

  8. Online earning through advertisements for most of the websites on the internet and facebook too. Facebook ads have become frustrating these days as they’ve introduced ads in the users timeline .. Third Party Games are another key source of income for facebook. thanks for sharing this information

    Regards,
    Pramod

    • Yes, it happens. Sometime the users might annoyed with ads.

      Advertising is the popular internet business and many of the websites are greatly earning with it.

      Thanks for coming and leaving your point of views, keep coming :)

  9. Ryan Biddulph

    Facebook is such a monster company Nirmala, I believe even Mark Z is surprised at the immense growth.

    They are smart to capitalize on advertising, both mobile and traditional online.

    They will continue to grow too; I see more and more people around the world using the network as I travel around the world.

    Thanks for sharing!

    Ryan

  10. What a lovely and informative post Nirmala, i truly love the read. You know, i argued with my friends some months back about how Facebook makes their money but they argued seriously with me. Now this post will be a backup plan :) Thanks for bringing it up and doing a deep research on it.

    • Thanks for appreciating my work and glad you liked this post Baba :)

      Its nice to read your experience.

      Yeah, I had done a great research to figure out its income exactly.

      Show your presence frequently here!

  11. Ahh! Why are you so interested to research the ways Facebook earns?

    Facebook is the most popular social network and now it can think of millions of ways to make money. Once you have traffic, what can stop you?

    BTW, it was interesting to learn that Facebook is earning even with the credit systems that is used to buy virtual things!

    • I love to write about Online money making ways Suresh, while researching something, I came across in many blogs with the topic “How to make money with Facebook?” and it stimulated me tow right about “how Facebook is earning money?”

      Yeah, you are right! Having millions of users is the secret of the Facebook to earn money in billion dollars.

      Thanks for leaving your opinions Suresh, come again here!

  12. Hi Nirmala,
    Facebook has become one of the most successful Social Network out there, and I believe should earn more than all others. Talking about the ways they make their money, I never knew some games where been paid for before you could play. That’s a cool innovation, Thanks for sharing.

  13. Yes, they are making huge revenues and their concepts are so damn clear, i mean they known how to reach the audience and now i can clearly see that Google is trying hard to compete with Facebook in social network. nice article :)

  14. Rudraksh Pathak

    Nice Post Nirmala. Yesterday I watched “The Social Network” Movie. I just loved it. And see here comes your post. What a coincidence.

  15. Hey Nirmala,

    Facebook really an giant which makes an money with many stuff but those things are not aware of others great to see them on your post

  16. mycol

    i really needed an answer to that questionion. it was of much help. i keep on refering to it occassionaly.
    your efforts are highly appreciated.
    thanx

  17. Hi Nirmala,

    Another compelling post from your end!

    My website students had asked me one day, “Sam, how does facebook make money.” I didn’t blame them for wanting to know because I have always asked myself that too until I started making a research about it.

    I told them this same thing and I’m happy I wasn’t wrong anyways. So cool!

    I love the way with which you annalyzed it…it’s quite understandable. Thanks!

    Trust you’re good ma’am.

    Sam

  18. kiran

    Hi Nirmala, Great information about Face book . Actually i have been searching for how facebook earns money . and i got it.

  19. Amit Tak

    Thanks for sharing this wonderful post, before reading it i really don’t know how how Facebook earns money. But now i understand everything which you’ve mentioned very clearly in this post.

  20. It’s too simple: If you have traffic (Facebook has lots of it), then you can either sell something or help other to sell something in exchange of money. And Facebook does both.

  21. ShinooB T M

    Hi Madam,

    Thanks for resolving my big query regarding this. Also your way of explaining s very appreciable. Go ahead

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