You're the product: Facebook's business model explained

March 20, 2018

Do you prefer organic food? Did you study in Mexico? Do you like red shoes? Such bits of information about Facebook users may seem insignificant in isolation but, once harvested on a grand scale, make the internet giant billions. Here's how:

'If you're not paying, you're the product'

Newbies signing up for Facebook are greeted with the promise that the social network is "free, and always will be".

But if users don't pay, then how does Facebook generate its massive profits, nearly $16 billion last year, up 56 percent from 2016? The answer is: via advertising, which at the last count made up a whopping 98.5 percent of the company's total revenue.

Facebook puts into practice what marketing specialists have long summed up in the slogan: "If you're not paying, you're the product."

The "product", in this case, is all the personal data that users hand over to Facebook every time they react to a post by clicking "like", add an emoji, post something themselves, or launch a search on the site.

Data, that treasure trove

This mass of information is invaluable for because they can use it to "target" people with messages that are more likely to get their attention because many of their tastes are already known.

This is a big selling point for Facebook, which gives advertisers detailed instructions on how to identify and target their preferred group.

"Find people based on traits such as age, gender, relationship status, education, workplace, job titles and more," is one approach suggested by the company. "Find people based on what they're into, such as hobbies, favourite entertainment and more", is another.

"Two billion people use Facebook every month. With our powerful audience selection tools, you can target the people who are right for your business," Facebook says.

It's all legal

Facebook's business model is perfectly legal: The network does not itself market any of the data, but instead sells access to the data to third parties, which often don't read or respect the terms and conditions of use.

This can lead to allegations of . The Cambridge Analytica firm is accused of misusing data of 50 million Facebook users for Donald Trump's presidential campaign, in violation of Facebook's policies.

Facebook also only uses what users freely divulge about themselves.

"Facebook does not look for anything beyond what you yourself have put on the web, and that's the user's responsibility," said Gaspard Koenig, head of GenerationLibre, a French think tank.

"But it's all done in a way that can't change those terms of use," he said.

Facebook does allow users to restrict advertisers' access to their in the Settings page of their account. This will not remove all ads, just the ones specifically targeted at them.

Explore further: UK lawmaker: Facebook misled Parliament over data leak risk

Related Stories

UK lawmaker: Facebook misled Parliament over data leak risk

March 18, 2018

A British lawmaker accused Facebook on Sunday of misleading officials by downplaying the risk of users' data being shared without their consent, after a former employee of data firm Cambridge Analytica says his company harvested ...

Facebook to give relief groups data on users' needs

November 29, 2017

Facebook is giving disaster-relief organizations such as the Red Cross access to data on what users need and where they are as part of an expansion of tools available for relief and charitable giving.

Recommended for you

After a reset, Сuriosity is operating normally

February 23, 2019

NASA's Curiosity rover is busy making new discoveries on Mars. The rover has been climbing Mount Sharp since 2014 and recently reached a clay region that may offer new clues about the ancient Martian environment's potential ...

Study: With Twitter, race of the messenger matters

February 23, 2019

When NFL player Colin Kaepernick took a knee during the national anthem to protest police brutality and racial injustice, the ensuing debate took traditional and social media by storm. University of Kansas researchers have ...

Researchers engineer a tougher fiber

February 22, 2019

North Carolina State University researchers have developed a fiber that combines the elasticity of rubber with the strength of a metal, resulting in a tougher material that could be incorporated into soft robotics, packaging ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.