How Facebook Business Model Works?

Hello Everyone! Welcome to learnvern.

In the previous lecture, we learned about digital marketing and we have also seen which modules come under digital marketing, likewise content marketing, social media marketing, branding, application development, website development.

Today we will learn about Facebook's business model.

Now you will think, how is the Facebook business model important for me? I will do just my Facebook marketing and I will run ads, make a social media account. No, that is not enough.

If you are working on any platform, then you should be aware of what is the name of the parent company of that platform and why did they change their name and what is their future vision, you must have to learn about all of these. Because you are working in technology.

Facebook marketing is based on technology and technologies regularly change that’s why you have to update yourself timely.

Now, how does the Facebook business model work?

I have written three things here.

“Meta makes money by selling ads on its various social media platforms.”

“Meta is the parent company of Facebook.” As we already discussed in a previous lecture, Facebook has changed their name to Meta. Social media name remains the same but their parent company name changed to Meta.

So what does Meta actually do? Meta shows ads to consumers and earns money through agencies.

If I explain to you in simple language.

Let's see here, you are a user and you are on Facebook. Now Facebook has your data. Facebook uses that data and shows ads to you accordingly.

Who's showing you those ads? Those ads are represented by agencies.

So basically, they capture your data and show you ads based on that data. And those business agencies make payments to Facebook directly. This is a very simple model.

If I explain this to you in easier language. I will show you a diagram to understand better.

This diagram is very much clear to you. A user joins Facebook and Facebook captures their data and shows ads accordingly. And who runs those ads? Those ads are run by Big business groups .

Now, we can see targeted ads here. I will explain the previous diagram in a better manner here. First of all, you have to understand what I am trying to say here.

Now see, first of all you are on Facebook. Here you are and here it is Facebook. Facebook uses your data. Now you will say what does data mean by data? What kind of data is used by Facebook?

When you create an account and at that moment, you fill your name, then after your email ID and address and after that you fill your interests.

Interest means like, suppose I am seeing Nike shoes online and I Like it. So, from there Facebook gets the signal that I like Nike products and that signal is given Nike to Facebook. Nike gives data to Facebook that this consumer is interested in Nike products. That’s why Facebook shows you Nike Ads.

You also noticed that if you go on amazon and you add to cart any shoes of Nike on amazon and you don’t make the payment. After that you will find Nike ads again and again on Facebook.

It is very clear that Facebook uses your data and shows the ads.

Now, you will say that this is illegal. Then, this is not illegal, all social media websites do the same.

At the time of creation of the account, you tick mark on “agreement” and do the next process, there everything is already mentioned. But in most cases you don’t read that.

Now, it is clear that Facebook captures users’ data.

Now publishers or content writers or content creators or those who upload content, everyone is paid by Facebook.

When you like any content then that detail is being captured by Facebook. And on the base of liked content, Facebook shows you ads.

And ads payment directly goes to Facebook. It means, this process goes on again and again.

In the sense, advertiser gives money to Facebook, now Facebook will pay to publisher

Lets say , advertisers run 100 Rs Ads on Facebook, now Facebook will show those ads on account and feed posts or through bloggers, that ads will be seen by users and from there advertisers get their business and Facebook will also get business.

And this whole process will go on in the circle. And that is the main business model of Facebook.

Now you understand how Facebook earns.

But if I explain to you in easier language. This is the simplest one. I also drew a diagram.

Lets say, this user is you. Now your data is available with Facebook and Facebook will use that data and show you ads. You data means like I said, you are interested in Nike, you will see ads related to Nike. If you are interested in cricket then you will see ads related to Cricket. If you are interested in digital marketing, you will find ads related to digital marketing. If you are interested in the iPhone, then you will see ads related to the iPhone.

We understand this process. But there is one process also which is outside of this.

Agencies or businesses give payment to Facebook for ads. This payment goes directly to Facebook and they show their ads.

And let's say, you'll see those ads and purchase from there, it means you are making revenue for Facebook. The same revenue paid to Facebook by agencies. This circle goes on.

I tried to explain to you in very easy language.

Now viewing the post. When you see the post, Facebook captures data from there also.

I have shown previously how Facebook captures the data.

Let's say you create any post and you upload the same. Let's say you are a makeup artist. And you make a post related to makeup artists that are the makeup tips which you can follow in your daily life.

You posted that content and the user is viewing that. If the user views that post and likes it and means he/she is interested in makeup items. That data also goes for Facebook.

And the user who posted related to makeup, that data also goes to Facebook.

It means, if I am posting related to digital marketing then Facebook knows that I am interested 4 digital marketing but let's say I received 10 likes on my post. Now those 10 Likes are also interested, and it becomes 10 + 1 = 11. It means a total of 11 people are interested in Digital marketing.

Now, on the basis of that interest, you will get ads regularly.

You might have seen that, if you search anything related to website development, and even though you are not a businessman you are just a normal user, you will find “GoDaddy” ads again and again.

When you take the phone of your father and open YouTube, you will not find “GoDaddy” ads there. Because their interests are very much different.

Again if you take the phone of your mother, you will find cooking related ads there mostly.

It means that everything works on data only. You see ads because of that data only.

That all depends upon viewing posts and liking posts. This works like that.

Now this is an ecosystem.

First, we'll talk about users. Users include social networks, free content distribution, news and gaming. All these things are provided by Facebook to the users freely.

It seems like it is free, but it is not. They provide you for free and in return they capture your data.

Nowadays, data is an asset. They are capturing your data and showing ads from advertisers based on that data. This is called market targeted advertising.

I gave you a brief about this first thing.

Second one is the publisher. There are lots of publishers like Times of India, Inshorts. They upload lots of things and then there are readers as well. You can monetize your content through the help of those posts on your account.

After that, there are game developers as well. They develop a game and there are players and inventory monetization also.

So here are Four things. 1. Users means you, me and all of us. They use our data and sell that data to advertisers. And they trough advertisers by showing us the ads.

Then after, it comes publisher and game developers.

Here we talk about three things.

1. Ecosystem
2. Viewing post
3. Targeted Ads

Total there are three things on which Facebook models work. 

We have seen how the ecosystem works. It includes Users, advertisers, publishers and game developers.

After that, it is viewing posts.

Whatever data you uploaded on Facebook, it means that you are interested in that data and if someone is liking that data means they are also interested in that data. All these details are going to Facebook.

It means User data is going to Facebook. And Those who are liking it, that data is also going to Facebook.

They capture that data and show you ads based on that data.

And from there businessman and Facebook both earn.

And you are also beneficial because you are getting advertisements related to your interests.

If you have any queries or comments, click the discussion button below the video and post there. This way, you will be able to connect to fellow learners and discuss the course. Also, Our Team will try to solve your query.

In the next topic, we will learn about why Facebook changed their name to META.

That is a very interesting topic. I will explain all of those details in the next topic.

Thanks!!