Facebook was originally created as a social networking platform to connect people online. However, over time it has evolved to become much more than that. A significant portion of Facebook’s revenue now comes from advertising, leading many to wonder – is Facebook primarily an advertising platform nowadays?
How does Facebook make money?
The vast majority of Facebook’s revenue comes from advertising. In 2021, Facebook reported total revenue of $117.9 billion, with advertising revenue accounting for $115.2 billion or 98% of that total. Only about 2% came from payments and other fees. Clearly, advertising makes up the bulk of Facebook’s business.
Facebook enables different types of advertising on its platform:
- Display ads – Banner ads that appear on the sidebar or in the News Feed
- Video ads – Video commercials that play before or during videos on Facebook
- Stories ads – Full screen ads that appear between stories
- Marketplace ads – Ads promoting listings on Facebook Marketplace
Advertisers can target these ads very precisely based on user data and demographics. As a result, Facebook ads tend to be highly relevant and engaging for users.
How much do ads contribute to Facebook’s revenue?
As mentioned earlier, advertising accounted for 98% of Facebook’s total revenue in 2021. This percentage has stayed remarkably consistent over the past 5 years:
| Year | Total Revenue | Advertising Revenue | Advertising % of Total |
|---|---|---|---|
| 2021 | $117.9 billion | $115.2 billion | 98% |
| 2020 | $85.9 billion | $84.1 billion | 98% |
| 2019 | $70.7 billion | $69.7 billion | 99% |
| 2018 | $55.8 billion | $55.0 billion | 99% |
This shows that advertising has consistently made up over 98% of Facebook’s total revenue over the past 5 years. The reliance on ads for revenue generation is extremely high.
How many users see ads on Facebook?
Facebook reported having 2.91 billion monthly active users in the fourth quarter of 2021. The vast majority of these users see ads when using Facebook:
- Ads in the News Feed are seen by most users scrolling through their feed
- Sidebar display ads are seen by users on desktop
- Stories ads are displayed to users between stories
- Marketplace ads are seen by users browsing Marketplace listings
One estimate is that the average Facebook user sees between 1500 to 4000 ads per month on the platform. With billions of users, the number of impressions and potential ad views is enormous.
Do users have to see ads on Facebook?
Users do not have to see ads on Facebook, but it requires taking proactive steps:
- Installing an ad blocker can remove display ads
- Paying for Facebook Blue subscription ($11.99/month) removes many ads
- Using alternative apps like Facebook Lite has fewer ads
However, most users tolerate ads on Facebook as a necessary tradeoff for free access to the social platform. The prevalence of ads is likely a major reason why Facebook has not charged subscription fees historically.
Does Facebook sell user data to advertisers?
No, Facebook does not directly sell user data to advertisers according to its data policy. However, Facebook does utilize user data to enable targeted advertising:
- Facebook collects extensive data about users including interests, demographics, behavior
- Advertisers can target users based on this data for relevant ads
- User info is kept anonymous and aggregated for ad targeting
So while individual user data is not sold directly, access to Facebook’s data targeting and segmentation capabilities are extremely valuable to advertisers.
Criticisms of Facebook’s ad model
Facebook’s ad-driven model has received criticism on a few fronts:
- Privacy issues – Collecting user data for targeting ads raises privacy concerns
- Spread of misinformation – Clickbait and misinformation often spread farther and faster on social media since they get more engagement
- Political manipulation – Concerns that politicians and organizations can exploit Facebook’s ad model to influence elections and public discourse
These are challenges Facebook continually has to grapple with.
Conclusion
Given that 98% or more of Facebook’s revenue comes from advertising, it’s clear that Facebook’s primary business model is as an advertising platform. While Facebook offers many non-ad features for users, serving ads to billions of users worldwide is the core of Facebook’s business.
Facebook built up a massive user base and is now monetizing through highly-targeted ads. This ad focus frequently takes priority in Facebook’s product decisions and feature rollouts. Facebook will likely continue to optimize its platform to serve its true customers – advertisers.