Facebook: the Cigarette Manufacturer of the Digital Era

  • PUBLISHED ON:
  • Wed 09 Aug 2017

While most industry insiders have a firm grasp on Facebook’s monetization models, most people still don’t understand how Facebook makes money. For those that still don’t know how Facebook makes money, we thought we’d take the opportunity to break down Facebook’s various revenue streams including the past and future streams of revenue. After reading this guide, you should have a complete understanding of how Facebook makes money.

The number of Facebook users are increasing exponentially day by day.

 

Number of Facebook Users

Facebook: the cigarette manufacturer of the digital era — we’re addicted to giving them our data… and they’re addicted to selling it.

 

What is the business model of the cigarette industry? They sell for dollars, costs cents to make and are addictive too!When they introduced adverts, they did what everyone did and put display ads around the page. At this point in time, Facebook was simply AOL: A walled garden where they served you banner ads.If there is one reason Facebook might, and I mean this is still unproven, might have a better business model than Google, it is mobile.The iPhone happens, Android happens, and more and more people start using Facebook and Google on their smartphone.Google is obliged to show you less adverts on a smaller screen. Otherwise it puts people off. Facebook was obliged to leave out display ads and put adverts directly into your newsfeed. This turned out to be the best thing that could have ever happened to them.

Here is the revenue equation for Facebook

Monthly average users (MAU) * average revenue per user per month (ARPU)Where average revenue per user is:Number of newsfeed items viewed in a month (think time user spends on facebook) * ad load * price per ad.Facebook’s business model is your time. They are churning you and your friend’s content back at you. And lacing it with paid for advertising.

Facebook Revenue From 2011 to 2016

 

Facebook Revenue Per User

 

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