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How Instagram And Facebook Make Money-zKk9to7Zcdg

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How Instagram And Facebook Make Money-zKk9to7Zcdg

Every day, more than two billion people use Facebook, Instagram, WhatsApp or Messenger.
That’s more than a quarterof the world’s population.
And despite a rising number ofprivacy scandals and public backlash,
Facebook is still growing.
Total revenue for 2018was $55.8 billion,
up 37% from 2017.
But with all of those users payingnothing to use these apps, how does
Facebook make money?
Is the company selling yourpersonal information to companies, politicians
and even foreign governments?
It’s actually much simpler than that.
How do you sustain a business modelin which users don’t pay for your service?
Senator, we run ads.
Throughout its entire history, Facebookhas relied on advertising for
revenue here and there.
The company has experimented with othertypes of revenue, such as hardware
with its Oculus VR headsetsand its new Portal speakers.
But really all of that is chumpchange compared to the revenue that it
generates from advertising.
About 99% of Facebook revenuecame from advertising in 2018.
There are about 7 million advertisers onFacebook and the ads that you see
aren’t like a traditional TV commercialor newspaper ad that looks the same to everyone.
Facebook and its entire family of apps usea type of ad that’s much more
sophisticated and much more valuable.
When they first started out these weresimple display ads on the company’s
website. But since then, they have evolvedinto very targeted ads where an
advertiser can pick the kind ofaudience that they want to reach.
I believe that started happening afterSheryl Sandberg joined the company
and from her experience with advertiserson Google were looking for.
And she could provide that to them.
And probably more than that usingthe Facebook data that everyone
volunteers. Facebook ads are targeted, whichmeans each ad that you see
was specifically for you.
Companies only want to pay to show adsto people that are likely to buy
its products.
Facebook provides advertisers with a nearguarantee that they won’t waste
their time or money, an assurance that aprom dress ad will be seen by a
high school student and not a retiree, orthat an ad from a new burger
joint will be seen by ameat eater and not a vegan.
As a result of this targeting, corporationscan save money in the long run
and drive more sales for advertisers whosimply want to reach as many people as possible.
There’s no better way tospend money than Facebook.
The other reason that advertisers useFacebook is because of the targeting
that the company offers.
The company has a ton of data onits users and that’s very valuable to
advertisers, especially those who maybe on abudget and want to make sure
that they’re reaching users whocould realistically turn into customers.
This has led television andprint advertising to decline.
This year, it is estimatedthat digital advertising will surpass
traditional advertising for the first time,capturing more than half of
all ad dollars spent.
But how does Facebook know exactly whoyou are and what you’re interested
in? Many paranoid users have alleged thetech giant is listening in on
your conversations through themic on your phone.
This isn’t true, although Facebook hasfiled patents that suggest it could
eventually pick up audio signals from yourTV to give you better ads.
It’s also filed a patent that caninterpret the expression on a user’s
face as they read their news feed.
The company claims it will not usethese patents, but clearly it continues
to focus on ways to gathereven more data on its users.
At the moment, it can gather almostas much information just by what you
do on its family of apps.
Of course, you input basic info likeage, location and education on your
profile, but you’re also liking pages,joining groups, RSVP to events and
sharing your location.
Facebook is able to package all thisinformation and actually harvest it to
try to figure out what kind of personyou are and perhaps what you are most interested in.
Or better yet, what you are lookingto find and then sell that information
to advertisers who aretrying to find you.
Facebook can also get data on youfrom other websites that you visit
through what’s known asthe Facebook Pixel.
Based on this kaleidoscope ofdetails, Facebook forms an advertising
profile for each user, putting theminto certain groups that advertisers
can pick and choose fromwhen buying ads on Facebook.
Corporations can target ads based onyour interests, what type of phone
you have, your political leaningethnicity and even income level.
And with enough information, these ads canblend into your feed so well
that you might not evenrecognize it as an ad.
But all of these details arestill just Facebook’s best guess.
Not an exact science.
The company has found itself in hotwater on more than one occasion for
heavy handedness in itsad targeting tools.
Pregnant women who have had miscarriageshave criticized the company for
continuing the show thembaby product ads.
A ProPublica investigation found thatFacebook had several anti-Semitic
advertising categories,including Jew-hater.
The Trump administration recently chargedFacebook with discrimination in
its advertising practices for housing,which until recently allowed
employers and landlords to limit audiencesbased on race, ethnicity or
gender. The company has pledged to reformits system to prevent this type of discrimination.
Just as ads can influence consumersto buy products, they can also
influence voting behavior.
In the Cambridge Analytics scandal, 87million Facebook users had their
data stolen to helpinfluence the 2016 U.S. presidential election.
We didn’t take a broad enough viewof our responsibility, and that was a big mistake.
So what can you do if you don’t want Facebook to show you personalized, targeted ads?
If you’re trying to avoid adson Facebook, that’s pretty much impossible.
But there are a few things that youcan do to make it harder for Facebook to target you.
Users can adjust the categoriesthat Facebook has determined you’re
interested in by goinginto your settings.
But it’s nearly impossibleto opt out altogether.
Even if you delete Facebook, whichhas become increasingly popular, the
company still has your data ifyou use Instagram, WhatsApp or Messenger.
Instagram just past 500 million dailyactive users on stories, a feature
that is found on every app inthe Facebook family that allows user
generated photos and videos to takeover your entire phone screen.
Recently, Facebook has started tochange its advertising strategy by
placing an emphasis onits stories product.
Facebook is starting to sell ads toadvertisers and brands in this same
format. It is hoping to ramp thatup in a way that will eventually
generate more revenue than the advertisingthat they get from news feeds.
In its latest earnings call, thecompany announced that two million
advertisers are using storiesto reach customers.
So despite data breaches andlawsuits, Facebook continues to lure
advertisers. And while user growth hasslowed, it is still growing.
But there are things that couldaffect the outlook for Facebook’s
advertising business.
Many people have become concerned abouttoo much use of social media.
Salesforce CEO Marc Benioff recently comparedusing Facebook to having a nicotine addiction.
Apple introduced Screen Time to help userscrack down on how much time
they’re spending on socialmedia and their phones.
We are veryconcerned about regulation.
The EU has put into placesome pretty onerous regulations for companies
that are doing business on the internet,and I don’t think it’s beyond
imagining that that could occur inother places, especially the United States.
Another factor that Facebook hastalked about hurting its advertising
revenue is of its own making.
This is a new feature called ClearHistory that the company said is going
to roll out to users in 2019.
Clear history essentially gives users theability to scrub the data that
Facebook has on them.
The less data that Facebook has hurtsthe ability of the company to target
ads to you with precision.
Mark Zuckerberg recently announced a newvision for the company where he
outlined building a privacy-focusedmessaging and social networking
platform, raising questions for investorson how targeted advertising
products will work ifusers aren’t posting publicly.
Three weeks after that announcement, amass shooter used Facebook Live to
broadcast his attack on twomosques in New Zealand.
Facebook had to remove 1.5
million copies of thevideo off its platform.
In spite of all of these eventsthat seem like it would affect Facebook
business, it keeps growing.
I don’t think it looks like anybodywho actually uses his platform cares in
the least about what they’re disclosingto Facebook because they keep doing it.
That’s the crazy thing.
They just keep doing it.

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