Facebook is one of the biggest and most profitable companies in the world thanks to its advertising business. As a primarily ad-supported platform, Facebook generates the vast majority of its massive revenues from selling advertising across its family of apps and services.
How does Facebook make money from advertising?
Facebook makes money from advertisers in a few key ways:
- Selling ad space in the News Feed
- Selling ad space in the right-hand column
- Selling video ads on Facebook and Instagram
- Selling ads within Stories
- Promoted posts from Pages and public figures
- Sponsored content in Messenger
- Marketplace ads
Facebook offers advertisers a wide range of ad formats and placements to reach its billions of users across its apps. Advertisers can buy video ads, display ads, carousel ads, Collection ads, and more. Placements include the News Feed, Stories, Marketplace, and the sidebar. Facebook also provides robust ad targeting tools to reach specific demographics and interest groups.
How many monthly active users does Facebook have?
As of Q3 2022, Facebook reported having 2.96 billion monthly active users across its family of apps:
- Facebook app: 2.96 billion MAUs
- Instagram: 2 billion MAUs
- WhatsApp: 2 billion MAUs
- Messenger: 2.87 billion MAUs
This huge user base represents a massive opportunity for advertisers to reach customers and drive results. With billions of engaged users spending time across Facebook’s apps every month, there are ample opportunities for brands to connect with their target audiences.
How much money does Facebook make per user?
While Facebook does not break this out directly, we can estimate Facebook’s average revenue per user (ARPU) based on its financial disclosures:
| Quarter | Revenue (billions) | Monthly Active Users | Estimated ARPU |
| Q3 2022 | $29.0 | 2.96 billion | $9.80 |
| Q2 2022 | $28.8 | 2.93 billion | $9.83 |
| Q1 2022 | $27.9 | 2.94 billion | $9.49 |
Based on this, we can estimate that Facebook generates around $9.50 to $10 per user globally from advertising and other sources of revenue. This ARPU varies widely by region, with Facebook earning much more per North American user compared to Asia-Pacific or the rest of the world.
How much revenue does Facebook generate from advertising?
Let’s take a look at Facebook’s advertising revenue over the last 5 years:
| Year | Advertising Revenue |
| 2018 | $55.0 billion |
| 2019 | $69.7 billion |
| 2020 | $84.2 billion |
| 2021 | $115.2 billion |
| 2022 (projected) | $135 billion |
As we can see, Facebook’s ad revenue has grown at a tremendous pace, more than doubling from 2018 to estimated 2022 totals. The company continues to find new avenues to monetize its platforms with ads. In 2021, advertising accounted for over 97% of Facebook’s total $117.9 billion in revenue.
How many advertisers does Facebook have?
Facebook does not disclose its exact number of advertisers. However, it does share that its advertiser base includes millions of small businesses and larger brands across nearly every industry vertical.
Some estimates for Facebook’s advertiser base:
- 10+ million active advertisers worldwide (est)
- Over 90 million business Pages on Facebook
- Over 200 million business accounts on Instagram
Key factors attracting so many advertisers to Facebook:
- Massive audience reach and detailed targeting capabilities
- Powerful ROI measurement tools
- Range of ad formats, placements, and bidding types
- Streamlined ad buying through Ads Manager
- Robust creative services and partnerships
The company is constantly innovating new ad products and services to maintain its appeal and better monetize its platforms.
How has Facebook’s advertising business grown over time?
Let’s look at some key milestones in Facebook’s advertising journey:
- 2005 – First ads appear on Facebook as simple text ads on the sidebar
- 2007 – Facebook launches its self-service Ads Manager platform
- 2010 – Sponsored Stories advertorial format is introduced
- 2012 – Facebook hits 1 billion monthly active users
- 2014 – Video ads launched across Facebook and Instagram
- 2015 – Retargeting pixels allow off-Facebook ad targeting
- 2016 – Launch of action-oriented Call-to-Action ad formats
- 2017 – Messenger ads, Dynamic Ads, and Custom Audiences arrive
- 2018 – Advertisers gain access to Stories ad placements
- 2019 – $69.7 billion in annual ad revenue
- 2020 – Shops makes social commerce push across Facebook and Instagram
- 2021 and beyond – A continued pace of new ad product development and innovation
Facebook will likely continue expanding its advertising business across emerging formats like Reels and the metaverse. Video ads, augmented reality, and new ways to turn data into hyper-targeted ads will drive future growth.
What categories of advertisers spend the most on Facebook?
Facebook has publicized some of the top-spending advertiser categories on its platforms:
- Retail
- Entertainment
- Consumer Packaged Goods (CPG)
- Tech
- Telecom
- Automotive
- Financial Services
- Travel
Retail brands in particular have flocked to Facebook and Instagram to drive sales through dynamic ads, product tagging, and store integrations. CPG brands also spend heavily to promote their household products through video and social campaigns. Overall, the most ad spend comes from large brands in major industries seeking Facebook’s unprecedented targeting capabilities and audience reach.
How does Facebook make money from advertisers?
Facebook offers advertisers a variety of pricing models and bidding types to fit different objectives and budgets:
- CPM (cost per impression) – Advertisers pay for each time their ads are displayed. This is useful for increasing brand awareness among a broad audience.
- CPC (cost per click) – Advertisers pay each time a user clicks their ad. This is good for driving traffic to a website.
- CPA (cost per action) – Advertisers pay for a specific action like a purchase, signup, or download. This is ideal for capturing leads and conversions.
- ROAS (return on ad spend) bidding – Advertisers pay based on the sales or revenue generated from their ads. This allows Facebook to optimize delivery to users most likely to drive real business results.
Facebook offers access to these bidding strategies across most placements and ad formats. Advertisers choose the model that makes the most sense based on campaign goals and target metrics.
What is Facebook’s average ad cost?
Facebook’s ad costs vary significantly based on factors like:
- Ad format and placement
- Bidding strategy
- Targeting parameters
- Competition and auction dynamics
- Optimization goal
- Ad quality and relevance
Some typical ad costs on Facebook:
- Feed ads: $0.50 – $2 per CPM
- Story ads: $0.25 – $0.75 per CPM
- Video ads: $25 – $50 per CPM
- Dynamic ads: $5 – $15 per CPM
- Click ads: $0.75 – $2.00 per CPC
With so many variables at play, average costs can fluctuate greatly. Competitive and in-demand ad placements like Facebook feed ads will be priced higher by the auction system.
How does Facebook’s ad revenue and business compare to competitors?
Facebook dominates the digital advertising landscape, vastly outpacing rivals like YouTube, Instagram, Snap, Twitter, LinkedIn, Pinterest, and TikTok. Key stats:
- Facebook owns nearly 25% share of the $763 billion global digital ad market
- YouTube is a distant second with under 10% market share
- Facebook’s ad revenue is greater than YouTube, Instagram, and Snapchat combined
No other platform comes close to matching Facebook’s reach, targeting, and revenue when it comes to digital advertising. Its ad business dwarfs all competitors.
What new ad products is Facebook developing?
Facebook is constantly testing and launching new ad products across its family of apps. Some recent developments include:
- Instagram’s new post-loop ads within Reels
- Sponsored content within Facebook Reels
- Expansion of ads within Facebook Messenger
- Testing of new ad placements in VR environments
- Sticker ads in Stories
- Integration of Click-to-Messenger ads
- Expansion of omni-channel commerce capabilities
Facebook is also developing more performance-based and lower-funnel ad solutions for driving in-store sales, digital subscriptions, mobile app installs, and other measurable actions beyond just clicks and impressions. The overarching focus is on developing ads that feel less disruptive to the user experience.
How has Apple’s ATT impacted Facebook’s ads?
Apple’s App Tracking Transparency (ATT) policy has had some negative impacts on Facebook advertiser capabilities and spend. Key effects include:
- Reduced ability to track users across apps with Identifier for Advertisers (IDFA)
- Reliance on less precise “cohort” and context signals for targeting vs. individual data
- Measurement challenges around attribution and calculating return on ad spend (ROAS)
- Increased costs for achieving desired results and lower delivered volumes
- Some advertisers pausing spend due to targeting uncertainties
Facebook has updated its Ads Manager tools to help advertisers adjust to a post-IDFA, privacy-first era. But overall, ATT represents a notable challenge that has slightly eroded Facebook’s advertising power and advantage.
How can advertisers optimize Facebook ad performance?
Some tips for maximizing Facebook ad results include:
- Utilize detailed targeting parameters like interests, behaviors, and connections to home in on your best potential customers
- Test different placements, formats, creatives, audiences, and bidding strategies
- Monitor real-time reporting and optimize towards key metrics and conversion events
- Take advantage of unique ad options like polls, lead forms, and promotions
- Align creatives, calls-to-action, and landing pages to your campaign goals
- Ensure ads are relevant to customers and deliver value
- Improve underperforming ads through A/B split testing
Mastering Facebook’s wide range of targeting tools, ad types, and analytics capabilities takes time. Leverage their team’s expertise through Facebook Blueprint courses and certified agency partners.
What does the future hold for Facebook’s ad business?
Facebook will likely continue its rapid growth and innovation in advertising with initiatives like:
- Monetizing new short-form video formats
- Building the metaverse and VR ecosystem
- Expanding commerce capabilities
- Developing more predictive marketing and “proactive” ad tools based on artificial intelligence
- Identifying new techniques to responsibly target ads in a privacy-centric landscape
- Opening up more ad inventory across growing surfaces like Reels, Maps, and beyond
Advertising represents the core of Facebook’s business. With so many daily active users across its apps, Facebook’s ad platform will continue providing immense reach for marketers in new and expanding ways.
Conclusion
Facebook’s massive advertising business drives its success as one of the tech world’s most profitable giants. Generating over $115 billion in ad revenue in 2021 alone, Facebook offers advertisers unrivaled scale and innovative targeting to connect with relevant audiences. Looking ahead, Facebook will continue aggressively growing its advertising capabilities as new formats like Reels and VR come to the forefront. For any brand seeking to reach consumers where they already spend significant time and attention, Facebook’s ad products will remain a premier choice.