In an age where online interactions have become an integral part of our daily lives, it’s no surprise that social media platforms have evolved beyond mere communication tools. They have transformed into powerful economic engines, utilizing ingenious strategies to not only connect people but also generate substantial revenue.
How Social Media Platforms Make Money?
Social media apps make money in many ways, such as through displaying ads, charging subscription fees, membership, selling their own product, selling user’s data, etc
Every social media app has its own monetising method. Facebook, Instagram, Snapchat, Twitter, Linkedin and Youtube rely primarily on displaying ads while Tinder focuses on selling membership.
You must have noticed ads coming in between feeds or stories. Social media apps charge money from the advertiser to display their product or service ads.
Social media users have increased a lot in the last few years, due to which companies are also shifting from traditional marketing to digital marketing.
Social media like Facebook, Instagram and Youtube have a large number of active users to whom it can show ads.
You will be surprised to know how much money social media apps are making by just showing ads.
Facebook and Instagram Revenue
Facebook generated $116.8 billion in revenue in 2021.
In 2020, about 97.9% of Facebook’s global revenue was generated from advertising, whereas only around 2% was generated by payments and other fees revenue.
Instagram generated an estimated $51.4 billion in revenue in 2022.
Instagram was responsible for 44% of Meta’s revenue in 2022 and is expected to surpass Facebook as Meta’s main revenue source by 2025.
Apart from selling ads, there are other ways too through which social media apps make money like by selling their own product or services, selling data of users to other companies, etc.
Let’s understand by taking an example of Facebook, Facebook collects all your data relating to your gender, studies, hobbies, preferences, religion, opinions, etc and categorizes you into a particular group.
For example, If you are interested in travelling, then Facebook shows you ads for hotel booking, trip packages, etc.
But this does not work as simply as you think, Facebook monitors every minor movement of yours on the app whether you are hitting like on any opinion, your scrolling pattern, etc.
Tinder which is also a social media app, you will be surprised to know when one journalist asked Tinder to send their collected data, Tinder sent her 800 pages of their data, including her deepest and darkest secrets.
We have seen multiple instances when the data of customers were leaked or breached.
Some examples of companies are:- 4.5 million of AirIndia users’ data were breached, 20 million customers’ data of big basket were allegedly sold on the dark web and many more.
Meta which is a parent company of Facebook, Instagram and Whatsapp has a lot of customer data.
Facebook, Instagram and WhatsApp share data with each other for better ad targeting. You must have noticed many times, what you searched on Facebook got a similar type of recommendation or ads on Instagram.
Advertiser loves to advertise on Facebook because it has lots of data and you can filter out the high-converting audience to show ads.
Facebook gives tremendous results to advertisers which attract more advertiser through which this social media app makes money.
But Facebook has also been caught in data selling. You may have heard about the “Facebook-Cambridge Analytica data scandal”.
In 2010, the personal data of millions of Facebook users was collected without their consent by British consulting firm Cambridge Analytica for political advertisement.
Later, Facebook CEO Mark Zuckerberg apologized in front of Congress and was fined $5 billion by the “Federal Trade Commission”.
Data is the new oil. If something is free, you’re not the customer, you’re the product. Now I think you must have understood the meaning of these two statements very well.
Facebook, Instagram and Youtube are free for us which means we are not the customers, we’re the product from which the app takes data and make money from advertiser.
All this is applicable to other social media companies too whether it is LinkedIn, youtube or any other. All do the same thing, collect the data and use it to sell ads.
How Tinder makes money?
Tinder works on a freemium model, where basic services are provided free of charge while advanced features are paid.
Tinder is an online dating app founded in 2012 in California, United states.
Tinder makes money by selling premium subscriptions which are Tinder+, Tinder Gold and Platinum.
But it doesn’t mean that they are not making money from free users, Tinder shows ads to the free user and make money from advertiser.
This is how these social media apps make money.
Tinder has a valuation of $42 billion and made $1.6 billion in revenue in 2021. It had 75 million monthly active users and 9.7 million subscribers in 2021.
It is growing on a rapid pace. India is a big market for Tinder.
The dark side of Tinder Genius Strategy to make money
In my point of view, Tinder is not designed to help you meet people and make relationships but it has used a genius strategy to monetize loneliness.
Every time someone finds a partner, they lost two customers which is bad for business.
When you install the app, In the beginning, you will get good reach but then gradually the reach will decrease which psychologically force you to buy premium membership and this cycle will remain to continue.
Tinder uses the strongest emotion of humans i.e. “love” to make money.
I’m not saying that it is bad but you should use it wisely otherwise, you will end up losing so much money and instead of reducing loneliness, it will increase it.
You can take inspiration from “Cricheroes”. Cricheroes has created an app where cricketers can network with each other.
Now, it is very difficult to make general social media apps and make money because Facebook and Instagram are already there and it is very difficult to beat them.
So, it is recommended to choose a niche(category) and make an app which attracts only those types of audience.
For the last few years, football has also become very popular in India.
You can make an app for footballers, where you can add features which will help them to network with other players and other statistical tools to improve their game.
You can sell cricket-related products to them by advertising and later when the system will become strong, your company can collect users’ data and attract advertisers to advertise.
But the most important thing is “ How I can make money from social media apps”.
Social networking site does not charge commission on the sale. It takes money for advertising, according to which it gives reach to the advertiser.
On Facebook, there is no minimum or maximum budget for advertising. You can start even with Rs 50 a day and can go up to lakhs a day.
You should learn from them and analyse them thoroughly before starting your own social media app.
Step 1: Brainstorm and select a profitable niche where advertisers can advertise high-ticket items and the audience should be passionate about that niche.
Step 2: After selecting the niche, network with your targeted audience and know their problem and how your app can solve that problem. Involve them in making the app by taking regular feedback.
Step 3: You need investment to make an app which is loaded with good features and tools to add value to the user. It is recommended to make a basic app in the beginning and attract some audience, then go to the big investors and show them the result, there is a good chance that they can invest in your app.
Also Read – Best Ways To Make Money Online
Frequently Asked Questions (FAQs)
Why do you need investors?
You need investors because it takes lots of money to make a good app and to market it.
Social media apps have mastered the art of turning our likes, shares, and posts into a goldmine through strategic monetization methods. By selling ads and leveraging user data, these platforms have revolutionized how businesses thrive in the digital age. Understanding how social media apps make money unveils the behind-the-scenes mechanics of our favourite virtual hangouts.
The article is written by our Guest Blogger – Sourav Sinha. He is an enthusiastic MBA student with a passion for crafting engaging articles in the realms of gift inspiration, social media insights, and cutting-edge technology. Find more articles from him on his Gifting Blog.