How Facebook Earns Money

Different searches on how people can make money through Facebook have become a new trend nowadays, but when Facebook posted its recent report on its earnings report for the second quarter of 2013, which is $1.81 B in revenue, the search engines have been filled with a single question:

How does Facebook earn money?

To get a better grip on how Facebook earns money, let's take a good look at its most important attribute first—its ability to gather people. Facebook is a website hosting over 600M accounts from people from different parts of the world.

And when we say accounts here, the majority of them are made because of Facebook's free sign-ups. The website has been known for its vast capabilities in connecting anyone from across the globe, as well as its gaming services that are widely supported by many fans. It is mainly composed of many active users because of its engaging activities such as status and photo sharing, online groups, and online shops. Now, how does Facebook earn money by hosting for free?

Actually, Facebook is not fully a free-hosting site, at least for the commercial-inclined users or companies that wish to advertise in using the site. And with advertising comes marketing, right? And anywhere where there's a massive reach is a huge potential for business. This is where the earnings of Facebook come from: through advertising, gaming, and virtual shops and credits.

Engagement Advertisements

Engagement Advertisements or Engagement Ads are the advertisements that you can see at the right-pane of the homepage of Facebook. However, there's something more to Engagement Ads: they are not the same with what you see and what your friends see.

How can that happen? Every time you post a status, for example, that you like shoes or clothes, advertisements about clothing lines will appear at the mentioned pane. These are what Engagement Ads are—they are advertisements that are meant to engage with your wants and needs. Engagement ads appear at the sidebar, wherein it looks like a box with the Like button in it. This type of ad don't send users to links or pages external to Facebook, because they advertise inside Facebook itself.

They may be in form of applications or events. Since the Like button is already in the box, there is an easier way on users becoming fans of the page, and with that they will be able to receive updates of your page in their News Feed. This kind of ad is meant for large brand advertisers.

Self-Serve Advertisements

Self-Serve Advertisements are the kinds of ads in which you can make your own advertisements. These ads are associated with standard ads, page post ads, like ads, sponsored stories, and so on. With these kinds of easy to create and user-friendly ads, small businesses can have a chance to advertise their products and services to the massive avenue of people which is Facebook.

Gaming

Have you ever played a game in Facebook but ran out of hearts or energies to keep you on playing, and then the game will offer you energy packs that can be purchased with real money so that you can continue with the game? Yep, a percentage of the payment sent in the game will go to Facebook, and majority of those games are created by Zynga, the proponent of FarmVille, CityVille, and ZyngaPoker.

Virtual Shops and Credits

Facebook also brandishes its revenue from the Facebook Gift Shop. The Facebook Gift Shop is an application that allows users to send virtual gifts to their friends. In line with this, Facebook has also established Facebook Credits wherein it is a system in which users can easily purchase virtual goods and game tokens. From these sources of earnings, it is not impossible for Facebook to gain humongous amounts of revenue.

With the continuous developments of Facebook, specifically with advertisers also targeting the mobile app, mobile advertising revenue makes up the 41% of Facebook's ad revenue. It also takes a certain percentage, around 30%, from the earnings from Zynga and a few more percentage from the Virtual Shops and Credits. With the large user database that Facebook has, it is not impossible for advertisers to eye the website in making more business in this website full of potential customers.

Mark Hugh Neri

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