Facebook, now known as Meta, is one of the largest technology companies in the world. As of 2022, Facebook reported having over 2.9 billion monthly active users worldwide. With such a massive userbase, Facebook generates substantial revenue through advertising on its platforms like Facebook, Instagram, and WhatsApp. But where does all of Facebook’s money go? As a publicly traded company, Facebook has to disclose its spending in regular financial filings. By analyzing these filings, we can get a breakdown of Facebook’s major operating expenses and see where the company is directing its resources.
Employee compensation
One of the biggest areas where Facebook spends money is on employee compensation and benefits. This includes salaries, stock-based compensation, healthcare, payroll taxes, and more. As a technology company, Facebook relies on skilled engineers, developers, designers, managers, and other professionals to build and operate its products and run the business. Attracting and retaining this talent requires competitive compensation packages in the demanding tech labor market.
In 2021, Facebook spent $25.5 billion on compensation and benefits for its over 63,000 employees worldwide. This was Facebook’s largest operating expense that year, making up 31% of the company’s total costs and expenses. Employee compensation has been Facebook’s biggest expenditure for the past several years. As the company continues growing its workforce, compensation costs are likely to keep rising.
Average employee compensation
Based on Facebook’s total 2021 compensation expense and number of employees, the average compensation per employee was around $404,000. Of course, this includes Facebook’s senior executives and highest paid engineers, so median compensation is likely lower. But it shows the premium salaries Facebook pays to attract top tech talent.
Facebook also offers generous benefits like healthcare coverage, parental leave, retirement contributions, transportation stipends, and more. While compensation eats up a major chunk of Facebook’s budget, the company sees it as a strategic investment in the employees who design, code, and manage its products.
Research and development
The second biggest area where Facebook allocates money is research and development (R&D). This spending relates to technical innovation across Facebook’s apps, hardware, infrastructure, and other technologies. Major R&D investments go towards developing new products like metaverse virtual reality headsets, as well as improving existing software and features.
In 2021, Facebook spent $19.2 billion on research and development. This accounted for 24% of Facebook’s total costs and expenses. R&D spend declined slightly from 2020 to 2021. But over the last 5 years, Facebook’s R&D expenditures have increased over 3X from under $6 billion in 2016.
R&D as a percent of revenue
R&D spending as a percentage of Facebook’s total revenue has also risen substantially. In 2016, Facebook’s R&D was just 15% of revenue. By 2021, R&D jumped to 20% of Facebook’s $117 billion in revenue. This shows the company’s increased focus on technical innovation to drive future growth.
Major R&D investments likely include artificial intelligence, virtual and augmented reality, computer vision, neural networks, blockchain, privacy technologies, and hardware like VR headsets and smart glasses.
General and administrative
Beyond compensation and R&D, Facebook also spends considerably on general and administrative expenses. This category includes legal, human resources, finance, office facilities, content monitoring, and other operational costs.
In 2021, Facebook had $4.9 billion of G&A expenditures, making up 6% of total costs and expenses. G&A spending has risen over the past 5 years in line with the continued expansion of Facebook’s workforce and office facilities.
Legal costs
A major component of Facebook’s G&A expenses is legal costs. As a large public company facing regulatory scrutiny over its data privacy practices and social impact, Facebook frequently has to defend itself legally. The company maintains extensive in-house legal staff as well as relationships with external law firms.
Facebook does not break out exactly how much it spends on legal specifically. But its increased G&A expenditures in recent years suggest legal costs are likely rising.
Marketing and sales
Contrary to popular belief, Facebook does spend money on marketing its products and platforms. The company advertises on TV, digital platforms like Google and Twitter, conferences, and more. However, marketing and sales makes up a relatively modest portion of Facebook’s operating budget.
In 2021, Facebook spent $4.2 billion on marketing and sales activities. This equaled 5% of the company’s total costs and expenses for the year. Marketing costs declined by 11% from 2020 as the company optimized its sales organization.
Lower sales costs
Compared to other large consumer tech companies, Facebook has generally low sales and marketing costs. For example, in 2020, Apple spent $5.5 billion on sales and marketing versus revenue of $275 billion – over 2X as much as a percentage than Facebook. This shows the strength of Facebook’s self-service ad model compared to other tech giants.
Facebook primarily relies on its own platforms to promote its products and services. The company can advertise new features on users’ feeds or through in-app notifications. This efficient user-based and viral marketing makes paid advertising campaigns less crucial for Facebook’s growth.
Network infrastructure
Delivering Facebook’s apps and services to billions of users worldwide requires massive investments in technical infrastructure. This includes data centers, servers, network equipment, broadband capacity, and more.
In 2021, Facebook spent $4.1 billion on network infrastructure, representing 5% of the company’s total costs. Infrastructure is Facebook’s fourth largest operating expense area.
Capital expenditures
Some infrastructure investments like data centers are accounted for as capital expenditures (capex) rather than regular operating expenses. In 2021, Facebook spent $19 billion on capex like facilities, servers, and network equipment.
Together, the company’s infrastructure-related operating expenditures and capital investments total over $20 billion per year and growing.
Content costs
Expense related to content on Facebook’s platforms makes up a fraction of the company’s overall costs. But content investments are becoming more key as Facebook pushes into video, gaming, virtual reality, and other content-centric spaces.
In 2021, Facebook had $1.7 billion in content-related costs. This includes payments to partners for video and gaming content, as well as the operational costs of content review and monitoring.
Metaverse content
Facebook CEO Mark Zuckerberg has identified the “metaverse” – a virtual reality version of the internet – as the company’s new frontier. As Facebook builds out its metaverse offering, the company is likely to ramp up spending on custom virtual reality content and experiences.
Major platforms like Roblox and Fortnite show that metaverse content can quickly become very expensive to produce at scale. So Facebook’s content costs seem poised for substantial growth in the coming years.
Conclusion
In summary, Facebook dedicates the bulk of its spending to compensating employees, funding R&D, scaling infrastructure, and general operations. The company runs an extremely profitable advertising platform, but also continues investing heavily in future technologies like AI and VR. As Facebook evolves into Meta and builds out its vision of the metaverse, expenses in areas like content will likely expand. But the company’s core strengths in self-service ads and viral growth should allow it to support these ambitious investments through massive cash flows from existing social platforms like Facebook and Instagram.
| Expense | 2021 Spending (Billions) | Percent of Total Expenses |
| Employee compensation | $25.5 | 31% |
| Research and development | $19.2 | 24% |
| General and administrative | $4.9 | 6% |
| Marketing and sales | $4.2 | 5% |
| Network infrastructure | $4.1 | 5% |
| Content costs | $1.7 | 2% |