How Does Facebook Make Its Money?

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With more than $1 billion per quarter in advertising revenue and 1.2 billion monthly active users, few realize that Facebook is more than just a social networking site – it’s a shrewdly run corporation, worth more than $100 billion.

The Numbers Speak For Themselves

Skillfully targeting ads based on personal information users share, the site knows what it’s doing.
Annual revenue by year
2008 2009 2010 2011 2012 2013
$272M $777M $1.97B $3.71B $5.09B $7.8B
82%
Proportion of first-quarter 2012 revenue from advertising
$872 million
Facebook’s first-quarter 2012 advertising sales
The rest of its millions is due in large part to its virtual games.
$186 million
First quarter 2012 payments generated from non-advertising revenue, such as selling credits for games like FarmVille

The Biggest Spenders

Here’s a look at some of the biggest advertisers who’ve invested big money in Facebook — and how they utilize the site:
FORD
This vehicle giant believes that when someone “likes” you on Facebook, they’re more likely to advocate the brand.
HSBC
This bank has a large Facebook footprint in Asia and Europe.
ANHEUSER-BUSCH INBEV
In 2010, Budweiser offered a free beer to people turning 22.
MCDONALD’S
Has more than 30 million likes and was the first location-based check-in marketer in 2010.
VISA
Spent big on the summer Olympics in 2012.
NIKE
Known to break campaigns on Facebook before they appear on TV.
JPMORGAN CHASE
This bank has more fans than its rivals.
STARBUCKS
Starbucks saw a 38% lift from users who saw Starbucks appear in their feed.
DISNEY
Utilizes the network for its online games and its more than 46 million fans.
DELL
Utilized a Facebook app to help advertise its promotion of Lollapalooza. It has made more than $9 million in advertising through social media.
SAMSUNG
Was the first company to buy Facebook’s logout page to advertise its new Galaxy S III phone.
NESTLE
With over 5 million likes, its head of marketing and consumer communications is on Facebook’s client council.
UNILEVER
Utilizes its partnership with Facebook to provide clean drinking water to communities in need.
VERIZON
Offers fans exclusive access to TV content, such as a Green Day concert via FIOS.
GOOGLE
Advertises its Chrome browser, which has a set of Facebook extensions downloaded 34,000 times a week
WAL-MART
In addition to its own Facebook page, almost 4,000 of its stores have their own Facebook pages.
GROUPON
Its contract with AdParlor is worth tens of millions, as the company uses Facebook extensively to drive email signups and sell daily deals.
AMERICAN EXPRESS
Amex’s Facebook app “Link, Like, Love” allows cardholders to link their cards to their accounts and in return get deals from such companies as Whole Foods, Dunkin’ Donuts and Sports Authority.
AT&T
The company has worked together with the social media giant on hackathons to help developers create apps that allow payments to be collected via AT&T’s phone bills.
ELECTRONIC ARTS
After investing $2.75 million in advertising on just one of its games, Battlefield 3, the company saw a 440% return on its investment in sales.
ZYNGA
Creator of popular games such as FarmVille and Zynga Poker, it spends more than $200 million in its “player acquisition costs.”

What They’re Paying For

While Facebook invites advertisers of all sizes, they’re all after the same thing: likes and shares.
The cost of Facebook ads varies but generally ranges from 5 cents to 5 dollars per click. Cost goes up based on targeting, bids and engagement.
Sidebar ads
The most common ads, these appear on the side of the site. Cost is about $1-$5 with most types of targeting.
Sponsored stories
Status updates from businesses turned into ads. Usually cost around 50 cents per click, since they get higher engagement (more likes and comments).
Promoted posts
Posts that are targeted to fans and friends of fans. Typically cost about $5 per every 1,000 people targeted.
A $1,000 budget for Facebook ads might look something like this:
Sidebar ads: 700 clicks to website – $700 ($1 per click)
Sponsored stories: 400 clicks to Facebook page – $200 ($.50 per click)
Promoted posts: 20,000 views – $100 ($5 per 1,000 views)

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Sources:
http://money.msn.com
http://readwrite.com
http://www.businessinsider.com
http://www.ppbh.com
http://www.techvibes.com
http://www.marketwatch.com