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How Does Facebook Make So Much Money Anyway?

Last summer, right after the 15 July coup attempt in Turkey, I deleted my Facebook account. The idea of deleting my account was something I had in mind for a while, long before that summer. Yet the problem was that I had a huge amount of friends and contacts on the platform; so initially, I really did not want to disappear out of the blue. The tipping point, however, was not the coup itself after all, but what I learned about Facebook afterwards…

Of course, Facebook is a business like any other. Their platform brings people together and makes it very easy to communicate with others. That’s the core of social media—connecting people. But the thing is that simply connecting people wouldn’t really make money, it’d just cost you money. Just the electricity bill required to power all the computers that run Facebook’s code must be astronomical. Additionally, their army of software engineers, support staff, and corporate managers must be paid too. Add to all of that the marketing expenses and R&D project costs.

Well, seeing that Facebook is not going bankrupt, we know that they are making at least as much money as their expenses. I went on and checked their latest annual earnings report. In millions, except percentages and per share amounts, the first table begins, and I can already see some figures in thousands.

What instantly drew my attention were the figures related to revenues. There are two entries under it for 2016: ‘Advertising,’ which was 26.885 billion dollars, and ‘Payments and other fees,’ which was 753 million dollars.

Let’s start with the smaller one, payments and other fees. The name is a bit vague, as there was no clear definition what this figure consisted of. Digging into their 2015 annual report, I found two relevant sentences.

“We have mandated the use of our Payments infrastructure for game applications on Facebook, and fees related to Payments are generated almost exclusively from games,”


“Our other fees revenue, which has not been significant in recent periods, consists primarily of revenue from our ad serving and measurement products and the delivery of virtual reality platform devices.”

This figure is apparently a combination of the money people spend on games, post promotions, and metrics tools. It is no secret that Rostra spends a bit of money every now and then to promote and boost posts, but this figure is truly small. Yet it seems that, at scale, it does form a significant chunk of their revenue.

For the main part of their revenues, they receive money directly from advertisers who wish to publish content specifically as advertisements and promoted products. The distinction between an advertisement and a promoted post lies at the product. If there is something for sale, then it’s counted as an advertisement.

You know how the old saying goes, “If you are not paying for it, you’re not the customer; you’re the product being sold.”

Even public goods, which are technically free to use for everybody, are paid for by taxes. Facebook’s front page, however, really makes that quote count: “It’s free and always will be.” Seeing that they made almost 27 billion dollars on advertising alone, you can see that it’s not particularly free. The payment you make is with your personal information. Divide that 26.885 by 1.860, the most recent amount of reported active users in billions, and you get 14.45 dollars. That’s how much a single person is worth to Facebook on average, per year.

Facebook collects data extensively from everything that you give them. One thing that a lot of people don’t know about is the ‘Advert Preferences’ page.

The ‘Lifestyle and Culture’ tab specifically is the one that tells tells the most about you as a person—you can check yours right now. Before I deleted my account, I went through this and found out that Facebook knows that I’m in a long-distance relationship, that I’m away from my family, and that I was on a trip one week ago, and on another one two weeks ago.

Those are all very astute observations, Facebook. Just by tracing my location through my phone’s GPS, it was able to figure all of those out. I didn’t have to post pictures from my travels for Facebook to know these things; there was literally zero active participation by me in that timeframe, other than texting people on Messenger.

To advertisers, this is all very valuable information. They can market postcards for my parents or chocolates for my girlfriend—which would be vegan, as they definitely know that my girlfriend is vegan too.

Conventionally, advertising agencies publish ads on television and print media, where the adverts are seen indiscriminately by anybody who consumed that media. Of course, there was some level of filtering, as someone who reads Popular Science has different interests than someone who reads the Economist. The Internet was similar on that end as well, but things started shifting as collecting personal data en masse became easier and easier online.

Nowadays, the extreme amount of data available to advertisers at a personal level has made it such that you can show your products only to people that will actually buy them. No matter how niche that hand-forged brass butter knife or the book on cooking with your car engine is, you will manage to find a buyer for it—on demand, for an affordable price. This is how Facebook makes fifteen bucks per user.

This sounds all well and good, as after all, people who want to buy products are extremely efficiently matched with people who want to sell products. Optimising this system of matching supply with demand creates an active economy, and encourages growth. Yet the question I had in mind while deleting my account still stands: “At what cost?”

The effect that Facebook has on people’s lives is not limited to showing ads on their feeds. Although that’s how the company makes money, with all the information they have on you, they also get to decide what you see while you’re on the website.

You see, Facebook didn’t just know that I was on a holiday, it also observed that I was in favour of democracy and free speech, and that I would lean towards the agenda of the Democratic Party in the US. By showing people content related to their political views, it forces users into bubbles of their own making, while streamlining the process itself into an invisible convenience.

Facebook wouldn’t have anywhere near as many addicted users if it showed you what you don’t want to see. I certainly wouldn’t be happy if my feed was filled with articles from Breitbart or FOX News.

The company is sitting on the biggest trove of personal data ever established, and even if you trust Zuckerberg with your life, who is to prevent governments or malicious institutions from accessing this data? How would we ever know, unless a whistleblower speaks out, about the misuse of this data for purposes other than advertising? Who stops Facebook from forcing you into a bubble of misinformation? Can Facebook be prevented from turning into the greatest tool for political power and manipulation? Will Facebook ever be litigated by governments for being too addictive and harmful, just like tobacco and alcohol?

I don’t believe that any of those questions have an answer I’d like to hear. That’s why I had trouble staying on Facebook. Especially because I’m a Turkish citizen, I do not feel comfortable with a single company aggregating this much personal data. At any moment, this company could collaborate with the government and make a list of people who are a threat to the stability of the regime. Really though, I’d really like to think that I’m not in that list.

Facebook makes billions in net income and their figures keep increasing, but I simply wonder… would they be filing bankruptcy if we could somehow account for the moral hazards and damage they cause to society?

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