HOW DO SOCIAL MEDIA COMPANIES MAKE MONEY?

Many social media companies, such as Meta (formerly Facebook), Twitter, Tinder, and Snapchat, offer free apps and resources. However, Facebook is worth $911 billion. If the services of these companies are completely free, how then do these companies make money?

A major if not primary source of income for social media companies lies in advertisement. Social media companies sell advertisement space to websites, companies, products, etc. For example, Meta shows ads from advertisers all across its Facebook and Instagram apps and has a revenue which consists of nearly 97% advertising. Advertising has generated Meta $84.2 billion in 2020. Popular social media app Snapchat, aside from one percent of its revenue coming from Spectacles (physical smart glasses that can record videos), attributes the rest of its income to its advertisements. Snap Ads allow businesses and corporations to advertise by telling stories in the same way Snapchat users can. Corporations and businesses can use Sponsored Lenses and Geofilters in their advertisements on Snapchat, which create fun interactive filters users can enjoy. 

Advertisements are so lucrative across social media platforms because companies share personal data to help target the ads to specific audiences. Companies like Meta and Google don’t actually sell consumer data, but they do share them. By sharing your data with other companies, their advertising revenue increases greatly.  Additionally, directing specific ads to certain audiences increases the number of companies that place ads with social media companies, thereby increasing profit.  

Other sources of revenue for social media companies include subscriptions. For Tinder, subscriptions are their main source of income. The dating app Tinder is free to use, but there are subscription-based services that unlock certain benefits, such as Tinder Gold, Plus, and Premium. These subscriptions are very popular, and Tinder averaged 6.2 million subscribers in 2020 and brought in an income of $1.4 billion that same year. 

Yet, whether it's an advertisement, subscription, or physical product, social media users are integral to social media companies’ profits. If these platforms could not reach a wide array of users, their advertisements and services would be profitless. 

Works Cited 

Tim Peterson, & Peterson, T. P. T. (2021, May 13). Snapchat's sponsored lenses can now be targeted with guarantees, work as World Lenses. MarTech. Retrieved November 28, 2021, from https://martech.org/snapchats-sponsored-lenses-can-now-targeted-guarantees-work-world-lenses/.

Blake, S. (2021, June 4). Tinder revenue and Usage Statistics (2021). Mobile Marketing Reads. Retrieved November 28, 2021, from https://www.mobilemarketingreads.com/tinder-revenue-and-usage-statistics-2020/.

Carman, A. (2020, February 4). Tinder made $1.2 billion last year off people who can't stop swiping. The Verge. Retrieved November 28, 2021, from https://www.theverge.com/2020/2/4/21123057/tinder-1-billion-dollars-match-group-revenue-earnings.

Deutsch, A. L. (2021, May 19). Tinder to start swiping for cash? Investopedia. Retrieved November 28, 2021, from https://www.investopedia.com/articles/personal-finance/121714/how-tinder-makes-money.asp.

Does Facebook sell my information?: Facebook help center. Does Facebook sell my information? | Facebook Help Center. (n.d.). Retrieved November 28, 2021, from https://www.facebook.com/help/152637448140583.

Franek, K. (2021, April 4). How facebook makes money: Business model explained. KAMIL FRANEK | Business Analytics. Retrieved November 28, 2021, from https://www.kamilfranek.com/how-facebook-makes-money-business-model-explained/.

Johnston, M. (2021, November 20). How facebook (meta) makes money. Investopedia. Retrieved November 28, 2021, from https://www.investopedia.com/ask/answers/120114/how-does-facebook-fb-make-money.asp.

Johnston, M. (2021, October 2). How Snapchat makes money: Its main revenue engine is advertising. Investopedia. Retrieved November 28, 2021, from https://www.investopedia.com/articles/investing/061915/how-snapchat-makes-money.asp.

McFarlane, G. (2021, November 19). How facebook (meta), Twitter, social media make money from you. Investopedia. Retrieved November 28, 2021, from https://www.investopedia.com/stock-analysis/032114/how-facebook-twitter-social-media-make-money-you-twtr-lnkd-fb-goog.aspx.

Olya, G. (2021, May 31). Beware these 18 industries and companies selling your information. GOBankingRates. Retrieved November 28, 2021, from https://www.gobankingrates.com/saving-money/savings-advice/beware-industries-companies-selling-information/.

Published by Statista Research Department, & 1, N. (2021, November 1). Facebook: Quarterly segment revenue 2021. Statista. Retrieved November 28, 2021, from https://www.statista.com/statistics/277963/facebooks-quarterly-global-revenue-by-segment/.

Published by Statista Research Department, & 1, N. (2021, November 1). Snap revenue per quarter 2021. Statista. Retrieved November 28, 2021, from https://www.statista.com/statistics/552694/snapchat-quarterly-revenue/.

Strickland, J. (2009, July 10). How do social networking sites make money? HowStuffWorks. Retrieved November 28, 2021, from https://computer.howstuffworks.com/internet/social-networking/information/how-social-networking-sites-make-money.htm.

Tinder revenue and Usage Statistics (2021). Business of Apps. (2021, November 12). Retrieved November 28, 2021, from https://www.businessofapps.com/data/tinder-statistics/.