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Facebooks Revenue Breakdown: Platform vs Ads
Facebook's Revenue Breakdown: Platform vs Ads
Understanding Facebook's revenue sources is crucial for marketers and advertisers who are considering utilizing its platform for their business needs. Facebook, the world's largest social network, generates a significant portion of its revenue through both ad revenue and platform service fees. In this article, we will explore the breakdown between these two revenue streams, using data from Facebook's S-1 filing, a document that details the company's financial health and performance.
Ad Revenue Dominance
2011: Ad revenue was a dominant force in Facebook's earnings, with a significant jump compared to the previous year. Ad revenue reached $3,200 million in 2011, which was a major 42% increase from $1,900 million in 2010. This boost was largely due to a 42% increase in the number of ad units delivered and a 18% rise in the average cost per ad unit. These figures reflect the growing popularity and trust advertisers place in Facebook for reaching their target audience.
Revenue Mix Over the Years
The 2011 revenue mix showed that 85% of Facebook's revenue came from advertising, a drop from 95% in 2010 and a stark contrast to the 100% figure in 2009 when Facebook was primarily an advertising-driven platform. This shift is indicative of the growing importance of platform fees in the company's overall revenue stream.
Platform Service Fees
In 2011, the revenue from platform service fees, a category that would eventually evolve into the payments revenue category, was $557 million, a substantial increase from the $106 million seen in 2010. These platform service fees refer to charges for services provided by Facebook to third-party developers, such as those offered by Zynga, which generates 12% of Facebook's business. Zynga's contributions to Facebook's revenue are substantial, but it is important to note that this figure is not directly part of the ad or platform fee revenue; it represents the contribution of Facebook's app ecosystem to the platform's overall revenue.
Sources and Further Reading
For more detailed information and the official sources of these statistics, please refer to Facebook's S-1 filing on EDGAR.
Conclusion
Facebook has transitioned from a fully ad-reliant company to a more diversified revenue model, with ad revenue still dominating but platform fees starting to play a significant role. This shift reflects the growing complexity and integration of Facebook's business model, driven by the increasing diversity of services offered to both users and businesses on its platform.