How Facebook Is Earning Money?

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?”

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 revenue from other sources like games and gift shops.
 Let’s see its revenue generating sources in detail.

1.       Advertising

Advertising is the main reason of Facebook’s earnings and success. Many businesses create ads on Facebook and it gets paid to deliver the ads. It publishes ads on the screen which is directly related to the users by gathering their likes and activities. i.e. if an user mentions that he/she is a fan of Mercedes Benz, then the ads related to that will be showing up to that user, it is the same thing as Google operates Adsense, only difference is Adsense is way better. Even though the click through rate of Facebook is not as high as Google, it is generating good 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 own advertisements. 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 large revenue with this self-serve ads.

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 to download their desired applications from appropriate store directly.
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.

3.       Non advertising method (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 Farmvillie, Mafia Wars, Cityville, Empire & allies are some of the popular games which 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 which let the users to 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.