How Facebook Makes Billions From Your Personal Data

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Facebook is the world's largest social media network with an average of 1.97 billion daily active users and 2.93 billion monthly active users who interact according to their Second Quarter 2022 Financial Report. Here are some interesting facts and figures about the social networking platform.

• In Q2 2022, ad revenue came in at $28.15 billion.
• Facebook app was downloaded 416 million times in 2021.
• Every 60 seconds, there are 510,000 comments posted, 293,000 statuses updated, 4 million posts liked, and 136,000 photos uploaded. That's a lot of data!
• Over 200 million businesses use Facebook to connect with customers, grow their brand presence, drive traffic, and boost sales.
• Facebook's market cap of $562.19 Billion makes it the seventh most valuable company by market cap.
• Mark Zuckerberg has a net worth of $64.7 billion, making him one of just 10 centi-billionaires on the planet.

Image Source: companiesmarketcap.com

How does Facebook make money?

Facebook is free to use, so how does it make these obscene amounts of money? There is a well-known saying that “if you're not paying for the product, then you are the product.”

This has been used to describe Facebook's use of user data. In a way, it is true...Facebook DOES make money from your personal data, just not in the way you might think.

Facebook doesn't sell your data...not really

There is a common misconception that Facebook sells your personal data to advertisers and third parties. It doesn't “sell” the data, instead, it collects the data and charges businesses to target advertise according to that data. Facebook is basically acting as an intermediary between users and the businesses serving the ads.

In answer to the Senate's questions in 2018 during the Cambridge Analytica scandal, Zuckerberg explained how it works:

"What we allow is for advertisers to tell us who they want to reach, and then we do the placement. So, if an advertiser comes to us and says, 'All right, I am a ski shop and I want to sell skis to women,' then we might have some sense, because people shared skiing-related content, or said they were interested in that, they shared whether they're a woman, and then we can show the ads to the right people without that data ever changing hands and going to the advertiser." – Mark Zuckerberg

This isn't really anything new or groundbreaking in terms of business structure.

The Facebook business model follows what is known as the “platform business model”.

Platform businesses create scalable networks that can be accessed on demand, creating communities and markets that allow users to interact and transact.

In the Facebook business model, it doesn't own the means of production instead it creates value by facilitating interaction between two or more groups.

Facebook's user groups and value

Facebook has three customer segments: users, businesses and advertisers, and developers. For the purpose of this article, we'll focus on the first two.

The users make up Facebook's biggest customer segment, yet they aren't responsible for the revenue, at least not directly— they don't pay to use the platform. That falls to the businesses and advertisers who pay to have their products and services shown to their target audience.

• User's Value: Users gain value from the community aspect— the ability to connect with family, friends, and strangers across the world via posts, photos, videos, comments, and private messages. Many also use the platform for entertainment and news.
• Businesses and Advertisers' Value: This segment gains value from achieving greater penetration of their main audience and higher engagement with their ideal customers.

The more people share and interact on Facebook, the more data the platform can collect on them. This allows Facebook to provide businesses and advertisers with better-quality leads.

So, what data does Facebook collect?

There is a lot to go through here, so get comfortable.

Meta's Privacy Policy details what data it collects across all of its “products”. This includes Facebook, Messenger, WhatsApp, Instagram (plus Instagram add-on apps like Boomerang), and Oculus products (when connected to a FB account).

The data is collected in four different ways:

• Your activity and the information you provide
• Information about your friends, followers, and other connections
• App, browser, and device information
• Information from partners, vendors, and third parties

Let's break each of them down.

Your activity and the information you provide

First, let's define what is meant by “your activity”. Basically, this refers to everything you do on the platform.

So, the content you create, click on, like, post, comment on, or interact with, constitutes an activity. And Facebook is there taking note of it all, including the time of day, how often you do it, and how long for.

This goes as far as the messages you send and receive, including their content (unless you choose end-to-end encryption, soon to be default for all Messenger chats).

It also collects data on the apps, features, and hashtags you use, the type of content you interact with, and how you interact with it. Facebook knows whether you're more into serious news articles, video content, or cat memes!

It also collects data on any purchases made on the platform, for example, games, donations made to a friend's FB fundraiser, or transactions made on the marketplace.

And yes, this data does include your credit card details.

Then there is the metadata— data about your data. For example, the location the photo was taken, or the date and time a message was sent.

Information about your friends, followers, and other connections

The Facebook business model is built on a community so therefore it should come as no surprise that they collect data on how you interact with that community. Data on your friends and followers, who you engage with the most, the groups you've joined, and the pages you interact with are all noted.

Then there is the data collected about you based on other people's activity.

This includes instances such as:

• When others share a photo you're tagged in, or if they comment on it.
• When someone sends you a message or invites you to join a conversation.
• If you're invited to play a game.
• When someone uploads their address book and has you as a contact.

App, browser, and device information

Facebook also collects and processes details about the device(s) you use to access the platform. For example, whether you're using a desktop, laptop, tablet, or smartphone.

It will collect data on the network you're connected to, your IP address, the type of operating system, the hardware or software you're using, and other device characteristics such as battery life, available storage, browser, and plugins.

Then there are the signals from your device, which include GPS, Bluetooth signals, and nearby Wi-Fi access points.

If you've given Facebook access to your device's camera roll through the device settings, then Facebook will also collect metadata about your photos and videos, including the date and time they were made.

And, don't forget the cookies...

Cookies are the technology that tracks you across the internet, sees what you're interested in, and feeds that back to Facebook so they can show you an ad based on your internet activity. They are the secret (well, not so secret) ingredient to the success of the Facebook business model. Facebook ad revenue is what keeps it afloat...if by “afloat” we mean riding sky-high with no sign of stopping.

Information from partners, vendors, and third parties

If all that wasn't already enough, Facebook collects data even when you're not even logged in or using their site. This particular data set is provided by businesses you interact with online and which use Facebook Business Tools and Meta Audience Network technologies.

For example, say you visit the Sony website, and Sony just so happens to be using Facebook tools, the next time you log into Facebook, you'll see an advert for Sony products.

These partners will also share device details, email addresses, purchases and transactions you make, and how you use their products and services.

It's worth noting that they will share this information with Facebook whether or not you have an account on any of the Meta Products.

Data pays

In answering “how does Facebook make money?” we can't ignore how the Facebook business model has made its own service indispensable to other businesses.

Businesses and advertisers can't afford to NOT use Facebook as part of their marketing strategy. 36.8% of the world's population has a Facebook account. To give you some context, that's an active user base larger than the combined total population of China and India.

No other advertising method is going to give that kind of reach.

This makes your personal Facebook data a valuable commodity. Let's say it again, your personal data is the beating heart of the Facebook business model.

Facebook's average revenue per person worldwide is $9.82 at the end of the second quarter of 2022. With 1.97 billion daily active users, you can see how this would soon stack up.

Image source: Statista

Facebook's ad revenue

This is the crux of answering “how does facebook make money?” Facebook basically bundles up all your data and makes it available to businesses, advertisers, vendors, and service providers— all willing to pay to have their ads put in front of the right people.

As we mentioned, the huge majority of Meta's billions come from its advertising program, 97% to be exact. The rest is from payment revenue from the developer community or from sales of Oculus products.

But, advertising continues to be Meta's pot of gold. In 2021, the company generated $114.93 billion in ad revenue alone.

How to take back control of your personal data

Is it fair that big tech giants like Meta and Google make BILLIONS from our personal data that we give them for FREE?

You can guess what our answer is!

But how can you prevent Meta from using your personal data? At the moment, you can't. Not if you remain a registered user of its products such as Facebook, Messenger, WhatsApp, and Instagram. Just by having an account on Facebook, you give it permission to log your activity on the site. It's literally built into the Facebook business model.

But there are some ways to control how your data is used and reduce the amount of data collected by partners. First of all, to control how your data is used:

• Visit the ad preferences page in your account settings.
• Select Ad Topics.
• Here, you can control the topics advertisers can reach you on.

For further control, click on Ad Settings and you'll be given the chance to manage what personal data is used to show ads, and a permission toggle bar to turn them off.

Keep in mind, that this doesn't stop Facebook or their partners from collecting the data, and it doesn't reduce the number of adverts you'll see on your FB page. They will just be less relevant to you.

So how does Facebook make money? The quick answer is YOU.

If you want to cut them off at the source and control how much data is collected by partners and fed back to Facebook, then you'll have to use other methods such as using a privacy-focused browser that reduces the number of tracking cookies.

Or just bite the bullet and delete your Facebook account.