How Facebook Marketplace Makes Money? (Must Read)

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This article is about “How Meta (Facebook) are making money from the Marketplace, BUT, if you want to also learn how you can make money from the Facebook Marketplace watch this video.


1️⃣Advertising Revenue: The Backbone of Meta’s Earnings

Ad Space on Social Media Platforms:

Meta (formerly Facebook) leverages its extensive social media ecosystem to sell advertising space across various platforms:

Facebook: The flagship platform with billions of active users worldwide.

Instagram: A popular photo and video-sharing platform.

Messenger: The messaging app integrated with Facebook.

WhatsApp: A widely used messaging app (acquired by Facebook in 2014).

Advertisers can strategically choose where to display their ads based on their target audience and campaign objectives.

The Auction-Based Pricing System:

Meta employs an auction-based system to determine ad placement and pricing. Here’s how it works:

Ad Auctions:

When an eligible user matches the targeting criteria for an ad placement, an auction takes place.

Factors considered in the auction include:

Bid Amount: Advertisers set a maximum bid they’re willing to pay for their ad to be shown.

Relevance: How relevant the ad is to the user (based on user behavior, interests, and demographics).

Estimated Action Rates: The likelihood of the user taking the desired action (e.g., clicking, converting).

The winning ad (with the highest combination of bid, relevance, and estimated action rates) is displayed to the user.

Pricing and Charges:

Advertisers are charged based on the second-highest bid (not their actual bid) and the quality of their ad.

This ensures fair competition while optimizing user experience.

Advertisers can choose from different pricing models:

Cost Per Click (CPC): Pay when a user clicks on the ad.

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Cost Per Mille (CPM): Pay per 1,000 impressions (views) of the ad.

Cost Per Action (CPA): Pay when a specific action (e.g., app install, purchase) occurs.

Why It Matters:

Meta’s ad space is valuable due to its massive user base and engagement levels.

The auction-based system ensures fair competition among advertisers while optimizing user experience.


In summary, Meta’s advertising revenue model relies on effective ad placements, user engagement, and a dynamic pricing system

2️⃣Targeted Advertising on Meta

Audience Segmentation:

Meta provides powerful tools for audience segmentation:

Demographics: Advertisers can target users based on age, gender, language, education level, and relationship status.

Location: Specify cities, regions, or entire countries for precise targeting.

Interests and Behaviors: Reach users based on their hobbies, interests, online behavior, and activities.

Life Events: Target users experiencing recent life changes (e.g., moving, getting married).

Connections: Advertise to users connected to specific pages, apps, or events.

Lookalike Audiences: Create audiences similar to existing customers.

Custom Audiences:

Advertisers can upload their own customer lists (email addresses, phone numbers) to create custom audiences.

Meta matches these lists with user profiles and shows ads specifically to the specified audience.

Custom audiences are valuable for retargeting and loyalty campaigns.

Behavioral Targeting:

Meta tracks user behavior across its platforms (Facebook, Instagram, etc.).

Advertisers can target users based on their online actions:

Website Visits: Show ads to users who visited a specific website.

App Activity: Target users who interacted with a particular app.

Purchase Behavior: Reach users who made specific purchases.

Engagement: Target users who engaged with specific content (e.g., watched a video, liked a page).

Behavioral targeting ensures relevant ads are shown to interested users.

Dynamic Ads:

Meta’s dynamic ads automatically display personalized content based on user behavior.

For example, if a user viewed a specific product on an e-commerce website, dynamic ads can show that product in their Facebook feed.

3️⃣Appeal for Advertisers

Vast User Reach:

With billions of active users, Meta offers unparalleled reach.

Advertisers can tap into diverse global audiences.

Granular Targeting:

Precisely define your audience, minimizing wasted impressions.

Reach users who are genuinely interested in your products or services.


Users spend significant time on Meta’s platforms.

Ads have high visibility and engagement potential.


Targeted ads lead to better ROI compared to broad campaigns.

Spend your budget efficiently by reaching the right people.

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Re-engage users who showed interest but didn’t convert.

Remind them of your brand or product.

In summary, Meta’s targeted advertising capabilities empower marketers to reach the right audience with relevant messages, maximizing the impact of their campaigns. 🌟💼

Learn more about Facebook’s advertising options here .


4️⃣Reality Labs and Augmented/Virtual Reality

Meta’s Focus on AR/VR:

Meta has made significant investments in augmented reality (AR) and virtual reality (VR) technologies.

The company envisions a future where the digital and physical worlds seamlessly blend, creating a shared space called the metaverse.

Oculus VR Headset and Beyond:

Oculus, a subsidiary of Meta, is a key player in the VR space.

The Oculus VR headset series offers immersive experiences for gaming, entertainment, and social interactions.

Other related offerings include:

Oculus Quest: A standalone VR headset with no wires or external sensors.

Oculus Rift: A PC-connected VR headset.

Oculus Go: A budget-friendly standalone headset (now discontinued).

Oculus Link: Allows Quest users to connect to a PC for more powerful VR experiences.

Revenue Diversification:

Hardware Sales: Meta generates revenue by selling Oculus VR headsets and accessories.

App Ecosystem: The Oculus Store hosts a variety of VR apps, games, and experiences. Meta takes a percentage of sales from developers.

Social VR: Meta aims to create a social metaverse where users can interact, work, and play. Social VR experiences could lead to increased engagement and ad opportunities.

Advertising Integration: As AR/VR adoption grows, Meta can integrate targeted advertising within these experiences.

Enterprise Solutions: Meta explores business applications for AR/VR, such as virtual meetings, training simulations, and design collaboration.

Challenges and Opportunities:

User Adoption: Widespread adoption of AR/VR remains a challenge, but Meta’s investments position it well for the future.

Privacy and Ethics: Balancing immersive experiences with user privacy and ethical considerations is crucial.

Developer Ecosystem: Nurturing a robust developer community is essential for creating compelling AR/VR content.

5️⃣Why It Matters: Revenue Diversification

Reducing Dependence on Ads:

By diversifying revenue streams, Meta is less reliant solely on advertising sales.

AR/VR hardware and services provide alternative income sources.

Metaverse Vision:

Meta’s focus on AR/VR aligns with its vision of a connected metaverse.

The metaverse could revolutionize how we work, socialize, and consume content.

In summary, Meta’s AR/VR initiatives contribute to revenue diversification and pave the way for a more immersive digital future. 🌟🔮

Learn more about Meta’s AR/VR efforts here .

6️⃣Challenges and Competition for Meta

1. Decline in Daily Active Users (DAUs)

In 2021, Meta experienced a historic decline in its daily active users (DAUs) for the first time in its 18-year history1.

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The number of DAUs dropped from 1.93 billion to 1.929 billion1.

This decline raised concerns about user engagement and interest in the platform.


Let’s take a closer look at some of Meta’s main competitors:


Owned by Meta, Instagram is a photo and video-sharing platform.

Despite being part of the same company, Instagram competes with Facebook for users’ attention and time spent on social media.

Instagram’s simplicity, visual appeal, and popularity among younger demographics make it a strong competitor.


Meta acquired WhatsApp for $19 billion in 2014.

WhatsApp is a widely used messaging app with a massive global user base.

It competes with other messaging apps and social platforms for communication and sharing.


Snapchat is a multimedia messaging app that allows users to share photos and videos that disappear after a few seconds.

It appeals to younger audiences and emphasizes privacy and ephemeral content.

Snapchat’s unique features and engagement with Gen Z users position it as a competitor.


Twitter is a microblogging platform where users share short messages (tweets).

It competes with Facebook in terms of user engagement and real-time content sharing.

Twitter’s focus on news, trends, and public conversations sets it apart.


LinkedIn, owned by Microsoft, is a professional networking site.

It caters to job seekers, professionals, and businesses.

While not directly competing with Facebook’s core features, LinkedIn’s influence in the professional networking space is significant.

Other Competitors:

Google and YouTube: Google’s social features and YouTube’s video content compete for user attention.

Tencent Music Entertainment Group: A major player in the Chinese market, especially in music streaming.

Amazon: While not a direct social media competitor, Amazon’s advertising and e-commerce presence overlap with Facebook’s interests.

X (formerly Twitter): Twitter’s real-time updates, trends, and public conversations provide an alternative to Facebook’s news feed.

In summary, Meta faces challenges related to user engagement and competition from various platforms. Its evolving focus on the metaverse and next-generation digital connections aims to address these challenges and shape its future growth23.

7️⃣Conclusion: Navigating Meta’s Future

Advertising Revenue: A Cornerstone

Advertising remains the lifeblood of Meta’s revenue model.

The company’s ability to monetize its vast user base through targeted ads is crucial.

The Metaverse Vision

Meta’s vision extends beyond social media platforms.

The metaverse, a digital universe where people interact, work, and create, is at the forefront.

Meta aims to redefine how we connect, collaborate, and experience the digital realm.

User Engagement and Trust

Meta’s commitment to user engagement is unwavering.

Building trust, fostering meaningful connections, and ensuring user satisfaction drive its strategies.

Challenges and Adaptation

Meta faces challenges, including user declines and competition.

However, its agility and willingness to adapt position it for future growth.

😊Your Role: Active Participation

Explore the Metaverse:

As Meta evolves, explore its AR/VR offerings and the emerging metaverse.

Participate in shaping this digital frontier.

Engage Responsibly:

As users, our interactions contribute to Meta’s success.

Leave honest feedback, connect with others, and embrace the evolving landscape.

Remember, Meta’s journey transcends social media—it’s about creating a connected, immersive digital experience for all.