How does social media generate revenue?
What do people who own social media platforms gain from it and how? Where do they get the revenue from? I know that ads make up some part of it but is the revenue generated from ads enough?
Ads and selling your personal data. In twitter’s case elon musk also uses it to influence politics and amplify his own opinion.
Some also have subscriptions.
selling your personal data
The major tech companies like Google, Facebook, etc don't sell user data. That's a common misconception. The data is what makes the company valuable - nobody else has it. It wouldn't make sense for them to sell it, because they'd lose their competitive advantage over other companies.
Advertisers can target ads based on the data, but the advertiser never actually sees user data.
Yea, I mostly meant selling your data to advertisers, but in the case of big companies the ad platform is ofcourse internal.
It's not a misconception, it's just how people say what's happening. They're basically selling their ability to make a profile of you based on your data. It's just colloquially said as "selling your data."
This is 100% correct but just wanted to say when I see an admin account with the little red A. I always think it's the Scarlett Letter and giggle.
Around 97% of Meta's revenue is from ads. 2.2% is from Reality Labs - things like Meta Quest headsets and Meta Ray Ban smart glasses. The remaining <0.7% is small things like fees from Facebook Marketplace (for orders that are shipped), a cut of credits for Facebook games (apparently that's still a thing?), etc.
Meta is a public company so all this data is public. See slide #4 in the most recent earnings presentation slides here: https://investor.atmeta.com/investor-events/event-details/2025/Q4-2024-Earnings-Call/default.aspx
Thanks for posting this. That’s disgusting how much it’s gone up in a year.
For what it's worth, Q4 always has higher ad revenue because of Black Friday and Christmas.
I think the cost per ad went up too (that's also in the presentation). Google and Facebook both mostly use an auction system for ads, so the price is based on the market. Out of all the possible ads a user can see (active ads targeting their demographic), the one with the highest bid will be shown.
Ads are a bigger business than you might expect. Get enough eyeballs in one place and brands will be tripping over themselves to give you money just to mention their name. Take the superbowl for example. It's usually the most viewed event every year in the US, so naturally there is a tradition of advertisers pulling out all the stops and making high-budget bombastic commercials for that specific occasion. You can imagine how attractive it is for brands to want to put their ads on big social media sites, where psychological tricks are used to capture as much attention as possible at all times, instead of just once per year.
Then there's the user data angle. The big sites all have millions of users who constantly give away personal information without even being prompted, and that makes it really easy for the companies who run them to analyze what makes each user tick and serve ads to the people who are most likely to click on them. This elevates the rate brands are willing to pay even further.
Those two things, along with a suite of anti-competitive practices, are enough to get sites to the point of being mostly profitable. Venture capital and hype-based market speculation get them the rest of the way.
Take the superbowl for example. It's usually the most viewed event every year in the US
Interesting that you mention the superbowl, since one of the techniques that sales reps at large digital ad networks (like Google and Facebook) use to sell ads to large advertisers is comparing it to the superbowl.
This year's superbowl had a viewership of around 127 million people. In comparison, 194 million Americans use Facebook at least once per day and 267 million use Google, so your ads on those platforms will have a wider potential audience than the superbowl, while being much more cost effective since you can run the ad just to a more specific audience rather than having to run the ad to every single person watching TV at that time.
If you're really curious about this you can look into Meta's shareholder statements. They're a publicly traded company so these documents are available for everyone to see. But, yeah, long story short, it's ads. Things like sponsored content (paying to push posts to people) is essentially just the platform itself doing it instead of using a third party.
For companies that aren't publicly traded it's trickier. A lot of privately traded companies are being propped up by VC funding. Many times they'll operate at a loss to gain more users then worry about how to become profitable later. Bluesky is definitely such an example right now. They don't run ads and don't get money from users.
ads
How do ads generate enough revenue to sustain themselves?
Advertising is one of the four fundamental forces of the universe. Once you start charging for ads, you can basically shape the universe to your will.
most businesses have to run ads to turn a profit. part of the equation of every sale you make comes down to a finely balanced cost of ads vs the profit on sales of the product or service, if the cost of advertising is higher than the product, it's a product that basically just won't enter the market (yay capitalism). so ads companies like google or facebook are essentially forcing most businesses around the globe to pay them a percentage on each and every product or service sold.
Attention. Ads are shown to the viewer, engagement with content tracks your likes and dislikes to sell to data brokers, inpost sponsors let the creator make money directly same with affiliate links, engaging with creators on multiple plstforms.
The amount of money Meta makes from ads is absurd! You would not believe how much companies are paying each day.
First the learn about who you are so they can provide accurate demographics to target with ads. Advertiser's pay heaps to be able to hyper specifically target ads.
Then they scape messages and information from their uses to build datasets which they sell.
Then there is premium subscriptions for business accounts.
In Asia they have in app shopping where the social media site gets a cut of every purchase.