Montag, 2. November 2015

How social media makes money

In our post “Facebook ist unehrlich und schleimig” we talked about how Google and Facebook use our personal information and the consequences of this act. We felt astonished by the fact that they make profit despite all their registration processes are for free. So how do these companies exactly make money? 

According to Investopedia, a website dedicated to educate the world about finance, there are 277 million users on LinkedIn and and as many on Twitter, 1.2 billions on Facebook and 540 millions on Google+. Since the registration on all of this sites is free, the profits for these companies resulting from their registrated users should be zero. Ultimately 277 million twitter users times zero equals zero. However, according to Investopedia: ”if you are not paying for the product, the product is you”. But what does that exactly mean? 

The mechanism behind Facebook is all about the likes. Every user on Facebook posts a status update, comments and likes different photos, status updates of his/her friends and facebook pages of all kind of companies, music and movie stars, lifestyle habits, electronic equipment and so on. It is also possible to interact with other users or directly with the companies. This interaction is the primary reason why Facebook, Twitter and other social media sites exist, but it is also their main way to make profit. All the shared personal information is collected by the social media networks in order to create a database system of information about the likes/dislikes of their users which they sell to different clients who use this information for their advertising campaigns. This clients then have the choice between different advertising services such as: 
  • Boost the posts 
  • Promote the page 
  • Redirect people to the website 
  • Increase conversations on the website 
  • Get downloads of an App
  • Increase engagement in an App 
  • Raise attendance at an event 
  • Get people to claim an offer 
  • Get more views on videos 

On Facebook the first step in this process is defining the audience you want to reach, then calculating the potential reached persons and how much this order will cost you. Now it is clear why Facebook wants everyone to join their network. The higher the number of users, the more attractive gets the advertising and the more are advertisers willing to pay for it. And obviously in the end the profit will also be bigger for Facebook themselves. No wonder Facebook bought the company “WhatsApp” for $19 billions, which has 400 million users and therefore a lot of aditional information worth selling to advertising companies.

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