Two students were discussing Facebook on Legon University Campus.
"How come a free social media website is multi-billions company?", asked the first student.
The second one answered that Facebook gets its billions of dollars through the internet. When you buy the internet to browse there are some percentages that go to Facebook.
I was so surprised to hear such statement from a university student. And this is the reason why I decided to write a bit about how facebook makes its money through what is called User/Customer Segmentation.
First of all, Facebook doesn't, in no case, take any percentage from your data bundle. Facebook gets its money at 99,99% by transforming its free users (1.79 billion) into a big ad market. Having this huge market, Facebook advertises for companies on its website site.
Let me explain further to give you a clearer picture. And I will show you how segmentation algorithms make Facebook ad platform a unique.
The power of Customer segmentation.
In 2010, the Facebook company had $65 billion value. The basic idea was to network people via the internet. The success made this company as some people say, the third populated country after India.
Mark Zuckerberg made this possible by turning this opportunity into a big ad business platform. Facebook's advertisement is not like the ones in the early nineties where ad messages target everyone. Unfortunately, in such cases, everyone will not have the desire to buy such products/services. This will necessary lead to the losses.
Facebook in a creative way succeeded to build a targeted ad platform through powerful user segmentation algorithms.
To advertise on Facebook you need to have an account on it. By doing so, you provide with Facebook most details about yourself. This gives Facebook all the information about their users.
After Facebook ad application is created. It will be used to advertise your product to those who(people who are probably to buy) might be interested. The Facebook ad uses segmentation algorithms. The algorithms allow Facebook to target, according to the user's characteristics. Facebook can cut off a portion of it users who belong to specific criteria. For example, Facebook can guess people who love football, and therefore display adverts about football matches to only them. Such portion of people is called a user segment.
Practical Example of how Facebook ad platform works.
The most powerful feature of Facebook Ads is the incredible targeting it allows you to do. Because users provide amounts of data about themselves. You can identify very tight groups of people to advertise to. Take advantage of this as much as possible. Your campaigns should include lots of highly targeted ads being shown to small subsets of people. Facebook will guide you through different target criteria as you create your campaign
This ad picture is giving us two dimensions with the indicators. For the location, we chose United States of America, Boston, MA. We've included cities within 10 miles, and the demographics men with age between 30-40. These two dimensions combined can reach up to 1,100 people.
Picture is from the Facebook marketing book of Dan Zarrella and Alison Zarrella page 232
Here Facebook ad proposed likes and interests dimensions. He chose marketing, marketing sales or advertising. Now, this campaign could reach up to 1,235,340 people in the United States of America.
Picture is from the Facebook marketing book of Dan Zarrella and Alison Zarrella page 234
Here, he had three advanced demographics dimensions where he chose all. Facebook target users who are not already connected to Dan Zarrella. He also targets users whose friends are connected to Dan Zarrella. His Facebook algorithm found 14,400 people who can receive the advert in the USA.
As Facebook is improving day by day we are in the era of individual targeting advertising. Here Facebook deploys post-mining. Facebook mines our posts to know what we like, dislike, what we want now. Facebook is capable of deploying web robot where it traces all our movement on the web.
Assuming that you will give a speech on a topic but you do not have much information about it. You turn to your Facebook friends to recommend some books on the topic. You Google the topic, browse the web to have more information about the topic. With the external data collected by robot combined with Facebook post-mining outcomes. If you are frequent on Facebook, Facebook will show you the ad book that deals with your topic in depth. What a magic? It's not magic, it's data driven science. Now, what remains is for you to order your book.
This data-driven ad is working very well. Amazon has developed a model that will help it to prepare an order before the person ordering. Amazon in 2015 has filed a patent to own this intellectual property.
Business owners must know that their business can survive if you know your users or customers. Knowing your customers help you design a growth strategy and detect innovative ideas. The only way to arrive is to becoming a data-driven company. Data is here to stay, if you ignore it, your company will surely suffer from it. It is a prophecy.
This article will help businesses and people willing to advertise on the Facebook to use very well Facebook ad platform. It will also help you to plan well your Facebook ads