Facebook Business Model: How Meta Is Transforming The Future

The Facebook business model is based on the hidden revenue business model pattern. In other words, the customer doesn’t pay for using the service. Facebook’s revenue comes from businesses that advertise on the platform.

Gary Fox

Facebook Business Model: How Meta Is Transforming The Future

The Facebook business model is based on the hidden revenue business model pattern. In other words, the customer doesn’t pay for using the service. Facebook’s revenue comes from businesses that advertise on the platform.

Facebook, now a part of Meta Platforms, Inc., is one of the most influential global social networking services. It was founded on connecting people; its platform enables users to share content, engage in conversations, and maintain relationships regardless of geographical boundaries. Despite controversies around privacy and misinformation, Facebook’s role in digital communication is unparalleled.

Facebook’s journey began in 2004, in a Harvard dorm room, when Mark Zuckerberg and his college roommates came up with the idea of providing a platform for students to put their profiles online. Initially restricted to Harvard students, it rapidly expanded to other universities and eventually to the public. The platform’s user base grew exponentially, reaching one billion users by 2012.

Key milestones include its IPO in 2012, which was one of the largest in technology history, and the strategic acquisitions of Instagram in 2012 and WhatsApp in 2014. These acquisitions not only expanded Facebook’s digital empire but also diversified its user engagement strategies.

The company’s rebranding to Meta Platforms, Inc., in 2021 marked a strategic shift towards building a more immersive digital experience, dubbed the “metaverse.” This vision aims to create a virtual space for users to interact through avatars, transcending the traditional boundaries of social media. The Meta business model therefore is predicated on more immersive digital experiences. This is reflected in some of the strategic acquisitions that reinforce the new Meta business model.

Company name: Facebook Inc
Ticker symbol: FB
Annual revenue: 2023: $134.9 Billion
Profit | Net Income: 2023: $39 Billion
Link: Facebook
Year founded: 2004
Founders: Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes.
Launch date:
Company CEO: Mark Zuckerberg
Headquarters: Menio Park, California, USA
Number of employees: (Dec, 2023) 67,317
Type of business: Public

Globe
Facebook 2
Tik Tok
Social
Social Media 2
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Pinterest
Youtube
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Who Owns Facebook (Meta)

As of the latest data, Facebook, under Meta Platforms, Inc., is a publicly traded company. Mark Zuckerberg is the CEO and holding a significant portion of voting power due to the company’s dual-class stock structure.

Other shares are owned by institutional investors, including mutual funds, pension funds, and retail investors. Due to trading, the exact percentage and distribution shifts with market conditions.

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How Facebook works

The Facebook business model primarily revolves around advertising revenue. The platform collects data on user activities, preferences, and interactions to deliver targeted advertisements. This model leverages user-profiles and how the daya their share. Data is the likes, content (including text and images) that is then analysed using sophisticated algorithms to specifically target users with ads.

Additionally, Facebook offers various business tools, including marketplace functionalities, business pages, and advertising insights. These services provide businesses with different types of data on customer engagement and trends and information on the potential size and reach of an audience for advertising.

The recent transition towards building the metaverse adds a new dimension to the Facebook business model by adding virtual reality (VR) and augmented reality (AR) technologies. This evolution fits a broader trend where digital and physical realities are converging, opening up new revenue streams through virtual goods, services, and experiences.

Oculus (now Meta Quest), is a part of Facebook Technologies under Meta Platforms, Inc., focuses on developing virtual reality (VR) hardware and software, notably the Oculus Quest series. These products provide deeply immersive VR experiences, revolutionizing not just gaming but also social media interactions and professional training across various sectors. Although Meta doesn’t break down Oculus’ revenue separately, the VR market is showing robust growth. This trend is expected to continue as VR technology gains wider adoption in everyday and professional use, highlighting its significant future potential.

How Facebook Makes Money

The Facebook business model generates revenue primarily through advertising, offering businesses a platform to reach a vast and engaged audience. Its sophisticated targeting capabilities enable advertisers to tailor their messages to specific demographics, interests, and behaviours, enhancing the effectiveness of their campaigns.

Other revenue streams the Facebook business model generates include payments and other fees associated with its various platforms and services. As the company expands its offerings in the metaverse, new monetisation strategies are expected to emerge, potentially reshaping the digital economy landscape.

Net income was substantially increased from $23,200 million in 2022 to $39,098 million in 2023.

How Many Users Does Facebook have?

20141.40 billion
20151.59 billion
20161.86 billion
20172.13 billion
20182.32 billion
20192.50 billion
20202.80 billion
20212.91 billion
20222.96 billion
20233.05 billion
2024* (projected)3.07 billion
Facebook’s monthly active users

Facebook Competitors

  • Amazon (advertising)
  • Apple
  • Google (advertising)
  • Linkedin
  • Microsoft
  • Pinterest
  • Tencent (social media)
  • TikTok
  • Twitter
  • YouTube
Facebook Revenue And Profits

The Facebook business model and its revenue and profit results

Facebook Business Model Canvas

Detailed below is the Facebook business model canvas showing all nine sections of the business model.

Facebook Business Model Canvas

Facebook Customer Segments

The Facebook business model focuses on the mass market that collectively contributes to the platform’s vast network ecosystem.

  • Individual Users: Seek social connectivity, entertainment, and information exchange. They form the core of Facebook’s user base, contributing to the platform’s rich data reservoir.
  • Advertisers: From small businesses to large corporations, advertisers utilize Facebook’s targeted advertising capabilities to reach potential customers effectively.
  • Developers and Businesses: Leverage Facebook’s platforms for app development, integration, and business growth through various tools and services provided by the company.
  • Content Creators: Use the platform to distribute content, engage with followers, and monetize their presence through ad revenues and partnerships.

Value Propositions

The Facebook business model is based on a number of value propositions that appeal to users and advertisers.

  • Connectivity and Community: Offers users a platform to connect with friends, family, and communities, fostering social interactions and engagement.
  • Targeted Advertising: Provides advertisers with precision targeting options based on extensive user data, maximizing ad effectiveness and ROI.
  • Platform for Growth: Enables businesses and developers to build, grow, and monetize their applications and services through integration with Facebook’s ecosystem.
  • Content Distribution: Empowers content creators with tools to reach wide audiences, engage followers, and generate revenue.

Channels

Facebook engages with its customer segments through multiple channels such as smart devices e.g. iPhones as well as browsers.

  • Social Networking Site & Apps: The primary interface for user interaction, content sharing, and engagement.
  • Advertising Platform: A suite of tools and services for advertisers to create, manage, and track ad campaigns.
  • Developer Tools: APIs and SDKs that enable third-party developers to build and integrate apps with Facebook’s platform.

Customer Relationships

Facebook business model depends on maintaining trust across the different stakeholders. However, it has often been accused of following its own agenda and lacking in transparency.

  • Personalization: Tailoring user experiences through algorithmic content curation and targeted advertisements.
  • Community Support: Offering support channels, forums, and resources for users, advertisers, and developers to resolve issues and enhance their platform experience.
  • Engagement Tools: Providing features and updates that encourage user interaction, content creation, and platform loyalty.

Key Activities

Important activities essential to the Facebook business model include:

  • Platform Development: Continuous enhancement of the user interface, features, and functionalities.
  • Data Processing: Managing and analyzing vast amounts of user data for targeted advertising and content personalization.
  • Market Expansion: Strategies aimed at growing the user base and entering new markets.

Key Partners

The Facebook business model relies on collaborating with a range of partners, which is vital for the success of its business model

  • Advertisers and Marketers: Collaborate to develop effective advertising solutions.
  • Developers and Businesses: Partner to expand the ecosystem and offer integrated services.
  • Content Creators: Work together to enrich the platform’s content diversity and quality.

Cost Structure

The Facebook business model includes a variety of costs including:

  • Operational Costs: Significant investments in technology infrastructure, data centers, and connectivity.
  • Research and Development: Continuous expenditure on innovation, product development, and enhancement.
  • Marketing and Sales: Costs associated with user acquisition, brand promotion, and advertising market development.

For the full year 2023, Meta Platforms, Inc. reported total costs and expenses of $88,151 million. This figure, as a percentage of the total revenue of $134,902 million, amounts to approximately 65.34%.

Facebook SWOT Analysis

This SWOT analysis captures the strategic landscape in which Facebook operates and highlights its internal strengths and weaknesses, and the external opportunities and threats. This serves as a foundation for understanding Facebook’s strategic positioning and potential pathways for growth and innovation.

Facebook

Strengths

  1. Extensive User Base: Facebook’s vast global user base facilitates unparalleled reach and network effects.
  2. Advanced Data Analytics: Sophisticated data analytics empower targeted advertising and personalized user experiences.
  3. Diverse Revenue Streams: A broad array of revenue streams, including advertising, virtual reality, and digital payments, underpins financial stability.

Weaknesses

  1. Privacy Concerns: Persistent privacy concerns and regulatory scrutiny may impact user trust and engagement.
  2. Platform Saturation: Challenges in user growth in saturated markets due to the maturation of the social media landscape.
  3. Dependence on Advertising: Heavy reliance on advertising revenue makes Facebook vulnerable to market fluctuations and advertising trends.

Opportunities

  1. Expansion into Emerging Markets: Potential for growth in emerging markets where internet penetration is increasing.
  2. Innovation in Technology: Opportunities to lead in emerging technologies like virtual reality, augmented reality, and blockchain.
  3. E-commerce Integration: Enhanced e-commerce capabilities can increase revenue streams through the integration of shopping and payment features on its platforms.

Threats

  1. Regulatory Challenges: Increasing global regulatory pressures and potential antitrust actions pose significant risks.
  2. Competition: Intensifying competition from emerging social platforms and changes in consumer preferences can impact user engagement.
  3. Data Security: Ongoing threats related to data breaches and cybersecurity risks could undermine user confidence and operational integrity.

Facebook / Meta Sustainability

Sustainability

These points encapsulate Meta’s approach to sustainability, highlighting their commitment to renewable energy, emissions reduction, circular economy practices, and collaborative efforts to achieve a more sustainable future.

Meta Sustainability Initiatives

  1. Achieved Net Zero Emissions: As of 2020, Meta’s global operations have reached net zero emissions and are powered by 100% renewable energy.
  2. Net Zero Across Value Chain by 2030: Meta aims to achieve net zero emissions across its value chain and become water positive by 2030.
  3. Renewable Energy Commitments: Meta is one of the largest corporate buyers of renewable energy globally, with a portfolio exceeding 10,000 MW, aiming to reduce GHG emissions significantly.
  4. Data Center Sustainability: Focuses on using less energy and water, enhancing efficiency, and incorporating renewable energy, circularity, and low-carbon alternatives.
  5. Supplier Engagement for Net Zero: Works closely with suppliers to set their own net zero targets, focusing on Scope 1, 2, and 3 emissions.
  6. Circular Economy and Product Lifecycle: Integrates circular practices in facilities and hardware, aiming for product circularity and reduced environmental impact.
  7. Employee and Community Engagement: Engages employees in sustainability efforts and collaborates with partners on carbon removal and water restoration projects.
  8. Innovation and Transparency: Commits to continuous innovation in sustainability practices and transparent reporting of progress and challenges.

Meta’s Issues Related To Sustainability

  • Managing e-waste and ensuring responsible disposal and recycling of electronic components remain challenging.
  • Achieving sustainability in the global supply chain poses ongoing challenges due to complexity and scale.
  • Balancing rapid technological advancement with environmental sustainability, especially in the context of energy use and resource consumption.

Notable Problems in Media

  • Criticisms regarding the transparency and actual impact of Meta’s renewable energy and carbon offset programs.
  • Concerns over excessive water usage by data centers in water-stressed regions, highlighting the need for sustainable water management practices.

Improvements for Sustainability/Circularity

  • Enhance E-Waste Management: Meta could develop more comprehensive e-waste recycling and management programs to ensure responsible end-of-life handling of electronics.
  • Innovate in Energy Efficiency: Further investment in innovative cooling and energy-efficient technologies for data centers could reduce environmental impact.
  • Strengthen Supply Chain Sustainability: Implementing stricter environmental criteria and monitoring for all suppliers could enhance sustainability efforts.

Meta Sustainability Efforts

Reduce

Meta’s sustainability efforts are heavily focused on reducing environmental impact. The company’s transition to lower-carbon modes of transit, use of sustainable materials in products and packaging, and commitment to energy and water efficiency in data centers all demonstrate a concerted effort to minimize resource use.

Redesign

Meta’s operational and product design strategies highlight and prioritize emissions reductions and sustainability. However, how and what investments are being made to technologies are not disclosed.

Reuse

Meta has undertaken initiatives to extend the lifespan of their hardware by reusing components wherever possible, particularly in their data center production. Since 2021, they have validated the reliability and quality of reused components through a rigorous evaluation process, incorporating hundreds of new racks containing reused components within their fleet.

Repurpose

Specific initiatives focused on repurposing items for new functions are not extensively detailed.

Recover

Meta, in their reports, highlights the importance of a circular economy in their sustainability strategy, integrating practices such as recycling, refurbishing, and repairing electronic equipment to minimize waste and reduce the environmental impact. They prioritize using post-consumer recycled (PCR) plastics and recycled metals in their hardware and system designs, aiming to foster a more circular supply chain and reduce the embedded carbon in their hardware.

Upcycle

Does does not explicitly detail specific upcycling initiatives.

Recycle

Meta engages in recycling, particularly in managing electronic waste, through responsible takeback, reuse, and recycling of electronic equipment. The company’s Materials of Concern Standard and Electronics Reuse and Recycling Standard are designed to support safe and healthy environments for all individuals involved in manufacturing, using, or recycling Meta hardware. Note: more transparency is needed though.

Critical Evaluation of Meta Sustainable Initiatives

While Meta’s efforts in recycling, refurbishing, and extending the life of their hardware components are commendable, there is a need for a more comprehensive strategy towards the recovery of materials from end-of-life products:

  • Transparency and Scale: Meta could enhance transparency regarding the scale of its recovery efforts. Detailed data on the quantity of materials recovered, recycled, and reused could provide stakeholders with a clearer understanding of the impact of these initiatives.
  • Holistic Recovery Strategies: Meta’s focus on reusing components and extending server lifespan is a step in the right direction. However, a more holistic approach to material recovery, including detailed strategies for end-of-life product management, could further strengthen their circularity efforts. This includes expanding programs for all types of electronic waste and exploring new technologies for material recovery.
  • Supplier and Industry Collaboration: While Meta works with suppliers to minimize the use of hazardous substances and responsibly manage electronic waste, there’s room to leverage supplier relationships further to drive industry-wide improvements in material recovery. Collaborating with suppliers to develop innovative recycling technologies and processes can enhance the efficiency and effectiveness of recovery efforts.
  • Innovation in Recovery Technologies: Investing in and adopting advanced material recovery technologies could enable Meta to recover valuable materials from end-of-life products more effectively. This could include exploring new methods for separating and recycling complex materials found in electronic devices.
  1. Regulatory Challenges: Increasing global regulatory pressures and potential antitrust actions pose significant risks.
  2. Competition: Intensifying competition from emerging social platforms and changes in consumer preferences can impact user engagement.
  3. Data Security: Ongoing threats related to data breaches and cybersecurity risks could undermine user confidence and operational integrity.

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