How Facebook (Meta) Makes Money

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

Meta Platforms Inc. (META), 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. The company is starting to put increased focus on its augmented- and virtual-reality products and services as part of its plan to build out the metaverse.

On Oct. 28, 2021, Facebook Inc. changed its name to Meta. It changed its ticker to META on June 9, 2022.

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), (AMZN), and Twitter Inc. (TWTR).

Key Takeaways

  • Meta Platforms Inc. sells ads on social media websites and mobile applications and also sells augmented- and virtual-reality products and services.
  • Advertising sales are the primary source of Meta’s revenue.
  • Meta’s main social media platform, Facebook, reported that it lost daily active users in the fourth quarter (Q4) of fiscal year (FY) 2021. It was the first time in the company’s history that the number of daily active users has fallen.
  • Reality Labs is Meta's augmented and virtual reality technologies sector, which features products such as the Oculus VR headset.
  • Meta discloses data about the diversity and inclusion of its general management and employees.

Meta’s Financials

Meta posted a net income of $10.285 billion on $33.671 billion in total revenue for the fourth quarter (Q4) of its 2021 fiscal year (FY), the three-month period ended Dec. 31, 2021. Approximately 97% ($32.639/$33.671) of the quarter's total revenue, or $32.639 billion, was advertising revenue. The remaining revenue contributors were the company’s Reality Labs segment and other sources.

Revenue grew 20% year over year (YOY) in Q4 FY 2021, decelerating from the 35% YOY pace of growth in the previous quarter, Q3 FY 2021. Net income fell by 8% YOY in the fourth quarter, compared with a rise of 17% YOY in the previous quarter. Meta’s total operating income, used as a profit metric for its business segments, was $12.585 billion, down 1% compared with the year-ago quarter.

Meta’s Business Segments

As of Q4 FY 2021, Meta now breaks down its financial results into the following two segments: Family of Apps (FoA), which includes the company’s main social media platform, Facebook, as well as Instagram, Messenger, WhatsApp, and other services; and Reality Labs (RL), which includes the company’s augmented- and virtual-reality products and services. Meta reports revenue and operating income for both of these segments.

Before this change, the company only provided a breakdown of revenue for Advertising and Other revenue. It still provides this breakdown under the umbrella of the FoA segment.

Family of Apps (FoA)

The Family of Apps (FoA) segment captures all of the revenue that Meta generates from selling advertising to marketers, which comprises nearly all of the company’s total revenue. Ads are displayed on Meta’s main social networking site, Facebook, 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.

The FoA segment posted $32.794 billion in revenue in Q4 FY 2021, comprising more than 97% of the company’s total revenue. Revenue for the segment was up by approximately 19.9% compared with the year-ago quarter's revenue of $27.355 billion. The segment posted $15.889 billion in operating income, comprising all of the company’s operating income for the quarter. Operating income rose 6.8% YOY.

Reality Labs

The Reality Labs segment is composed of Meta’s augmented- and virtual-reality hardware, software, and content. Augmented and virtual reality are technologies that are key to the company’s plan of building out the virtual world called the metaverse. This segment includes the company’s Oculus virtual-reality headset.

The Reality Labs segment reported revenue of $877 million in Q4 FY 2021, accounting for about 3% of company revenue. Revenue was for the segment increased 22.3% compared with the year-ago quarter. The segment reported an operating loss of $3.3 billion in the fourth quarter, thus reducing the company’s overall operating income. The operating loss was significantly larger than the operating loss of $2.099 billion that the segment reported in the year-ago quarter.

Meta’s Recent Developments

On Feb. 2, 2022, Meta, in a slide presentation of its results for Q4 FY 2021, indicated that its daily active users (DAUs) declined slightly compared with the previous quarter. It marked the first time in company history that DAUs have fallen.

Meta also provided revenue guidance in its Q4 earnings press release. The company projected that its revenue for Q1 FY 2022 would be in the range of $27 billion to $29 billion. While that represents 3% to 11% YOY growth, it also represents a decline from Q4 revenue of $33.671 billion. The company said that its Q1 results would be impacted by several headwinds, including changes made by Apple to its iOS early last year that force apps to obtain permission from iPhone users before they are allowed to track those users to offer targeted advertisements.

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 that 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          
General Management ✔ (U.S. Only)      
Employees ✔ (U.S. Only)      

How Does Facebook (Meta) Make Money From Ads?

Meta, formerly known as Facebook, primarily earns revenues by selling advertising space on its social media platforms, such as Facebook and Instagram. The cost of advertising varies and is based on an ad auction system. Marketers set a budget for advertising and Meta counters with how many impressions the company can get for their proposed budget. Meta also makes money by selling virtual-reality hardware and software as well as social media subscriptions. Although users can access Meta social media platforms at no cost, some may subscribe to exclusive features for a fee.

How Much Money Does Meta Make Per Day?

Meta reported total revenues for 2021 as $117.929 billion, which equates to approximately $323.09 million earned per day ($117.929 billion/365 days).

How Much Does Facebook Make Per User?

Meta reported Facebook and Messenger's annual revenue per user (ARPU) as $40.96 for 2021. In other words, it earned $40.96 per user in 2021. Also reported was Facebook's daily active users (DAU), approximately 1.93 billion as of December 31, 2021.

The Bottom Line

Meta, the parent company to flagship brand and former namesake Facebook, boasted fourth quarter 2021 revenues of $33.67 billion, with approximately 97% derived from advertising. It operates and reports revenues for its Family of Apps (FoA) segment—which accounts for advertising dollars from its social media sites—the augmented and virtual reality brand Reality Labs (RL) segment, and other sources. Meta relies on Reality Labs to build out its virtual universe, the metaverse. Although Meta expects healthy returns in 2022, recent developments, such as Apple's operating system release, threaten ad revenues.

Article Sources
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  2. Meta Investor Relations. "Meta Platforms, Inc. to Change Ticker Symbol to 'META' on June 9."

  3. Meta Investor Relations. "Meta Reports Fourth Quarter and Full Year 2021 Results."

  4. Meta. "Meta Earnings Presentation Q4 2021," Page 13.

  5. Meta Investor Relations. "Facebook Reports Third Quarter 2021 Results."

  6. Meta. "Reality Labs."

  7. Meta. "Meta Q4 2021 Earnings Call Transcript," Page 10.

  8. Meta. "Meta Business Help Center."

  9. Meta. "Meta Reports Fourth Quarter and Full Year 2021 Results," Page 1.

  10. Meta. "Form 10-K."

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