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How Does Facebook Make Money?
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Quote:Facebook is a social media giant, with 2.23 billion active users engaged with family and friends on Facebook, (FB) - Get Report and 400 new users signing up to use the site every minute.

With activity like that it's no wonder Facebook's market capitalization stands at $450 billion and its stock price trades in the $155 range.

With the ability to rake in money from multiple sources, Facebook has established a firm foothold on Wall Street as a financial giant, and branching out in new directions should add to its bottom line.

Consider Facebook's new digital line-up, each of which contributes to the company's profits, or is expected to in the near future:

Facebook Payments. This Facebook business generates money through payments, similar to peer-to-peer payment systems like Venmo.

Jibbigo. This language translation app, acquired by Facebook in 2013, allows Facebook posts and chats to be translated into multiple languages. The ability for companies to advertise their products in several languages would be a huge attraction in both a digital and global economy.

Atlas Solutions. Purchased by Facebook in 2013 from Microsoft, (MSFT) - Get Report Atlas enables advertisers to effectively monitor their social media outreach programs.

Onavo. This mobile utility application aids data performance on mobile devices, and allows companies to track their app's performance against other apps in the same business category.

Instagram. Purchased in 2012 for $1 billion, this photo-sharing app boasts 400 million users and is expected to be a huge linchpin for Facebook in the burgeoning photo app digital marketplace. While Instagram hasn't actually produced much revenue for Facebook before to this year, analysts expect that to change, estimating between $10 billion and $16 billion by the end of 2018.

Oculus VR. Virtual reality is another technology widely viewed in marketing circles as a great consumer outreach tool. With Facebook's purchase of Oculus VR in 2014, for $2 billion, Facebook now has a foot in the door to VR technology and market, where companies can reach consumers (the video game market is a great example) in ways that marketers could never have imagined even 20 years ago.

WhatsApp. Facebook purchased WhatsApp for $19 billion in 2014, making it the largest acquisition the company has made in recent years. WhatsApp is a wildly popular instant messaging platform that advertisers would love to crack, given its pervasive use not just in the U.S, but all over the world. Facebook is ramping up a new business model that would charge advertisers a fixed price for engaging with WhatsApp customers.


What forms of advertising does Facebook use to make its money? Here's a list:

1. Self-Serve Advertising

This type of advertising is widely used on Facebook - self-serve advertising enables anyone to create and put up an ad on Facebook. Self-serve advertisements appear on the right side (or "sidebar") on Facebook pages, for individuals, groups, user profiles, events, and third-party pages. Facebook's Ad Manager page helps advertisers create their own ads, offering granular target tools to ensure the ad reaches the intended audience.

2. Targeted Advertisements

Facebook holds a massive amount of personal data on its user base, including gender, age, hobbies, career choices, political preferences, shopping preferences - even their favorite baseball team. That allows Facebook to sell advertising space to companies and organizations who want to hone in on a specific demographic, like video game players or Range Rover owners. Or, more generically, advertisers can target ads to larger groups of people based on political preferences, religion, or even age. Advertisers can use specific tools like Facebook's Dynamic Ads to market their entire inventory of products to users at different income levels, to up their chances of making a sale. Targeted ads are a significant revenue generator for Facebook, and it's all due to the data the company collects on its user base.

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