How User Data Makes Facebook Money

Credit: Marketing Land

The main challenge to data privacy is that Facebook’s entire business model relies on putting your data to use.

Facebook’s landed in a lot of hot water during recent years. The thing is that people are becoming more aware of the current state of data privacy, and they want their data to be secure. It’s hard for Facebook to prioritize privacy, however, when they make all of their money from that data.

Facebook made over $40 billion in revenue for 2017. Of that revenue, just under 90% came from Facebook advertisements. Digital marketing starting booming years ago, and the boom is far from over. The company’s main rival in the digital marketing industry is Google, but unlike Facebook, Google doesn’t actually sell your data. Google uses keywords to match those who are searching for something with someone who’s trying to sell it. Facebook’s model is quite different and more intrusive, as they use targeted ads that are sent your way based on, you guessed it, your data.

Facebook is currently trying to improve its users’ data privacy, but this is a challenging task for a company like them. They make money through digital ads and selling data. Facebook’s biggest scandals in the last few years have come from Facebook compromising users’ data, privacy, and security by offering companies access to this information. The companies they’ve sold data, in some cases including access to private messages to include Netflix, Spotify, and Amazon. Recent news has also gone against statements by Facebook that said the company stopped selling access to user data years ago.

Facebook typically makes money off of your data by first collecting it. They collect it based on your activity on the site, or in many cases by external activity which they can see. There is a fairly complex targeting system for advertisers to use on Facebook, and advertisers have many options which can determine how much they have to pay Facebook. Broadly speaking, the more people you’re reaching out to, the more Facebook will charge you, but you’re also rewarded for better, more specific, more appropriate targeting.

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5 years ago
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