How Facebook (Meta) Makes Money

Facebook (Meta) generates most of its revenue from selling advertising space

Meta Inc. (FB), the company that owns Facebook, primarily makes money by selling advertising space on its various social media platforms. Those platforms include websites and mobile applications that allow users the ability to connect and communicate with family and friends. The company's sites and apps include social networking site Facebook, photo- and video-sharing app Instagram, and messaging apps Messenger and WhatsApp. Meta also provides an ecosystem that allows users to connect through its Oculus virtual reality products.

On Oct. 28, 2021, Facebook Inc. changed its name to Meta Inc. It will change its ticker from FB to MRVS effective Dec. 1, 2021.

Meta competes with other companies that sell advertising to marketers, as well as companies that provide platforms for communicating and sharing content among users’ various social networks. Major competitors include Apple Inc. (AAPL), Alphabet Inc.’s (GOOGL) Google and YouTube, Tencent Music Entertainment Group (TME), Amazon.com AMZN), and Twitter Inc. (TWTR).

Key Takeaways

  • Meta sells ads on social media websites and mobile applications.
  • Ad sales are the primary source of Meta's revenue.
  • At the end of October, the company rebranded from Facebook to Meta as part of a new focus on building the "metaverse".
  • Starting in Q4 FY 2021, Meta will introduce a new reportable segment called Facebook Reality Labs, focused on augmented and virtual reality products and services.

Meta's Financials

Meta posted a net income of $9.2 billion on $29.0 billion in total revenue for a net profit margin of 31.7% in Q3 of its 2021 fiscal year (FY), the three-month period ended Sept. 30, 2021. As much as 44% or $12.7 billion in revenue came from the U.S. and Canada. The other 56% came from other regions across the globe.

Annual revenue grew 35.1% year over year (YOY) in Q3 FY 2021, marking a deceleration from the 55.6% YOY rise in revenue in the previous quarter. Quarterly net income rose 17.2% YOY in Q3 FY 2021. Growth in net income also decelerated compared to the previous quarter.

Meta's Business Segments

Meta breaks down its revenue into two separate segments: Advertising and Other revenue. The company does not do a separate breakdown for net income. Facebook announced in its third quarter earnings press release that beginning in the fourth quarter it will break out results for a new reporting segment called Facebook Reality Labs. This new segment will be focused on augmented and virtual reality related hardware, software, and content. Meta's other main business segment will be named Family of Apps, which includes the Facebook social media platform, Instagram, Messenger, WhatsApp, and other services.

Advertising

Meta generates substantially all of its revenue from selling advertising to marketers. Ads are displayed on Meta's main social networking site, as well as Instagram, Messenger, and other third-party affiliated websites or mobile applications. Marketers pay for ads based on the number of impressions delivered or the number of actions, such as clicks, undertaken by users.

Meta posted $28.3 billion in advertising revenue in Q3 FY 2021, comprising 97% of the company's total revenue. Ad revenue was up 33.2% compared to the year-ago quarter.

Other Revenue

Revenue from this segment is generated through the delivery of consumer hardware devices and net fees Meta receives from developers using its payments infrastructure, as well as from various other sources.

Meta posted $734 million in other revenue in Q3 FY 2021, representing the remaining 3% of total revenue for the quarter. Revenue for the segment rose 194.8% in Q3 FY 2021 compared to the year-ago quarter.

Meta's Recent Developments


On Oct. 28, 2021, CEO Mark Zuckerberg announced the rebranding of Facebook to Meta. The rebranding of the company symbolizes a new focus on building what Zuckerberg calls the "metaverse", an expansive virtual world comprised of virtual communities where people can connect and even develop and grow businesses.

On Oct. 5, 2021, former Meta employee and whistleblower Frances Haugen testified for several hours before the U.S. Senate subcommittee on Consumer Protection, Product Safety, and Data Security. Haugen provided extensive documentation about Meta to the subcommittee and alleged that the company was more concerned about profits than the safety and mental health of its users.

On Oct. 4, 2021, Meta filed a motion urging the U.S. District Court for the District of Columbia to dismiss the Federal Trade Commission's (FTC) latest, revised antitrust lawsuit. Meta argues that the complaint lacks evidence that the company violated any antitrust laws. The FTC's original lawsuit, filed late last year, was later thrown out by a judge.

How Meta Reports Diversity and Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Meta and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Meta releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Meta discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Meta breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.

Meta Diversity & Inclusiveness Reporting
  Race Gender Ability Veteran Status Sexual Orientation
Board of Directors          
C-Suite          
General Management ✔ (U.S. Only)      
Employees ✔ (U.S. Only)      

Article Sources

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  2. Meta Newsroom. "Introducing Meta: A Social Technology Company." Accessed Oct 29, 2021.

  3. Meta Inc. "Form 10-Q for the quarterly period ended September 30, 2021," Page 38. Accessed Oct. 29, 2021.

  4. Meta Inc. "Form 10-Q for the quarterly period ended September 30, 2021," Page 14. Accessed Oct. 29, 2021.

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  6. Meta Inc. "Facebook Reports Third Quarter 2021 Results." Accessed Oct. 29, 2021.

  7. Facebook Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 64. Accessed Jan. 29, 2021.

  8. Meta Inc. "Form 10-Q for the quarterly period ended September 30, 2021," Page 39. Accessed Oct. 29, 2021.

  9. Meta Inc. "Introducing Meta: A Social Technology Company." Accessed Oct. 28, 2021.

  10. The Wall Street Journal. "Who Is Facebook Whistleblower Frances Haugen? What to Know After Her Senate Testimony." Accessed Oct. 29, 2021.

  11. The New York Times. "Facebook urges court to dismiss latest F.T.C. antitrust suit." Accessed Oct. 29, 2021.