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How Facebook Makes Money Off Your Data

In 2017, nearly 90% of Facebook's revenue came from digital ads. Collecting user data is critical to its ability to keep those ads going.
Posted at 8:31 PM, Aug 21, 2019

Facebook has recently announced a new data privacy tool that it says will better protect users' data. You've probably heard that before. But how much does it really change?

Here's the thing: Facebook's a business. And its entire business model conflicts with the very idea of safeguarding user data. We're going to break down how Facebook makes money off of *you*.

Even if you've set your profile and posts to "private," Facebook still has access, and, more importantly, authority, to trade your personal data. That's something you consent to — maybe unintentionally — when you check "I Agree" to its terms of service.

Basically, all the data you put into the site — contact information, your list of friends on Facebook and even private messages — is available to advertisers, who use it to create "data banks." Facebook says it makes that data anonymous, so advertisers buy sets of data based on demographics. They can narrow that data down into subcategories based on their branding goals. And they can even use it to make custom ads ... and pay Facebook to show those to the users the advertisers want to reach.

The Cambridge Analytica scandal in 2018 caught Facebook red-handed. It was making money off of user data while exposing 87 million users' information to hackers.

In March, CEO Mark Zuckerberg reached out to the world on none other than Facebook to address the challenges the social media site faced when it came to privacy concerns. He said: "I believe a privacy-focused communications platform will become even more important than today's open platforms. Privacy gives people the freedom to be themselves and connect more naturally, which is why we build social networks."

But the small gestures Facebook has made to reassure you it's protecting your privacy are just gestures, not an overhaul of its business model. 

In 2017, nearly 90% of Facebook's $40 billion in revenue came from digital advertisements. Just in North America, one of its largest markets, Facebook was making about $84 off of each user. Collecting user data is critical to its ability to serve those targeted ads. That means your posts, private messages, contact information and friend lists are subject to being shared across the globe.

According to The New York Times, Facebook gave *several* *multinational* companies access to user data. It gave Amazon names and contact information. It gave Bing users' friends, regardless of whether users had given it permission to do so. And it gave Netflix and Spotify access to users' messages.

Facebook said it stopped selling access to user data years ago, but some of it was still shared last summer. The company later said sharing that user data "helped" its users see recommendations from their Facebook friends on other websites.

To be fair, Facebook has a business model that has worked for the company thus far. That business model is just based on gathering and sharing users' personal data. And given the company's massive revenue, unless it makes a radical decision to change the model, your "private" data may not be so private. And if you're a Facebook user, it's up to you whether or not you're OK with that.