how much money does facebook make from ads

in this series of videos I will explain,the advertising business models of the,gigantic tech companies how they compete,with each other and how their products,and acquisitions fit into their overall,strategies it's like a mini course the,goal is that at the end you understand,all the mechanics underlying the core,businesses of some of the biggest tech,companies in the world this first,episode is about Google versus Facebook,it's the basics do click that subscribe,button under the video in order to be,notified about the next ones so welcome,to the advertising wars advertising,business is what turned Google and,Facebook into such incredibly huge,companies together they represent about,20% of the global advertising spending,more than 50% if you consider only,digital advertising and up to 60% of,that in the u.s. Google is the biggest,one and advertising still represents,around ninety percent of its revenue,despite all its numerous other projects,Facebook is about three times smaller,than Google but it's still growing and,approaching half of Google's revenue in,the United States but how exactly do,they work and is Facebook a threat to,Google in order to understand that we,need to understand how this advertising,works in the first place around 70% of,Google's revenue comes from AdWords,about 20% from Adsense and the rest from,other Google's projects first of all,what's AdWords and how is it different,from Adsense,as you'll see it's important to,understand this before we talk about,Facebook and everything else put,yourself in the shoes of any company a,small business or a large one it doesn't,matter when you are a company you need,to find clients and that's why you,invest in advertising you pay to show,your products to people that might,potentially be interested in buying it,and obviously the key here is targeting,if you don't target well you will end up,spending a lot of money to show your,product to many people who don't care at,all and that's where Google AdWords,becomes extremely powerful,let's see you as an individual you're,going to Los Angeles and you're looking,for a hotel so you'll go on Google and,search for,Hotel Los Angeles and then you'll see,this result by booking comm which is an,ad,so booking.com paid Google to show this,advertising to people who would type,exactly that Hotel Los Angeles and it,makes sense if that's what you're typing,then you're most likely really looking,for a hotel in Los Angeles so this,result is extremely accurate it's not,invasive since your intent is likely to,buy what you're searching for and in,order to appear on top of these search,results companies bid various amounts of,money on specific keywords they,pay-per-click basically when you click,on that link that company will pay,anywhere from a few cents up to fifty,dollars for the most competitive,industries to Google and so that company,can set the maximum amount that it's,ready to pay for each specific keyword,or a set of keywords then Google uses,its complex algorithm called ad rank to,decide which ads of which company will,appear for which keyword let's,oversimplify it to help you understand,for example let's say that you sell a,product for $200 and your cost to,produce it is hundred dollars now let's,say that you dedicate a budget of $40,for advertising in order to keep a,margin of $60 so $60 would be your,profit on one sale of this product it,means that those $40 for the advertising,budget have to generate enough clicks in,order to generate at least one sale of,your product this is what we call,conversion rate let's imagine that these,forty dollars generate 40 clicks on your,ads and one sale out of them so one sale,out of 40 is a 2.5 conversion rate in,this case your cost per click will be $1,so if you find a specific keyword that,generates a 2.5 conversion rate you can,set a maximum bid of $1.00 for that,click and once you'll get 40 clicks,you'll get one sale all fitting in your,budget Congrats you found a great spot,from here it's all about optimization,and competition you need to find the,most converting keywords and bid the,right price for them compared to your,competition it becomes quite complex and,that's why there are count,as independent agencies around the world,who help businesses make the most out of,AdWords that's why Google AdWords is,extremely powerful when it comes to,targeting businesses can find out the,exact keywords that people type when,they are looking for a certain product,or service it's not invasive that's how,they can target those which are on the,verge of making a purchase now let's,compare that to Facebook when you're,browsing the newsfeed you're not,actively looking to buy something but,you still see a lot of ads with products,that you might be interested in and more,and more businesses are paying facebook,for these ads so it's taking some market,share away from Google so how does that,work well Facebook is also excellent at,targeting but in a different way instead,of targeting by intent like Google does,with AdWords Facebook is targeting by,profile let's say young females from 25,to 32 years old living in big cities,married,what can you target them with well for,example with baby products but it,doesn't stop here the main strengths of,Facebook besides knowing these,characteristics about you is to know,exactly what you like how well because,you told Facebook that by clicking on,like so advertisers can narrow down,their targeting on Facebook to people,who like certain Facebook pages now,think about all the pages that you liked,and what does it say about you maybe you,liked the page about science the,official Airbnb page,udemy page etc well advertisers can use,that information to target you with,their products however these ads are,still invasive compared to Google even,if they're supposed to be well targeted,nothing says that you want to buy,anything at any given moment but the,format on the other hand is much better,than Google Google AdWords only show ads,as short texts but on Facebook this can,be images and videos in addition to text,and it's been proven that all sorts of,pictures beat everything else they grab,people's attention but of course the,advertiser has to be creative to come up,with the best illustrations and since we,spend an,outrageously huge amount of time on,Facebook advertisers have plenty of,opportunities to show us their ads on,the newsfeed Google is obviously aware,of this problem and that's why they are,integrating small images to their search,results as well when it comes to,e-commerce e-commerce just works,perfectly with Google AdWords let's say,you want to buy a camera and you type by,camera on Google you'll see a lot of,results of different cameras from,various websites who paid for these,shopping ads and you'll see the images,of this cameras which attract the eye,therefore it all depends on the product,or service that you sell either Google,Ads Google Shopping or Facebook ads will,be more adapted and more efficient at,the end they both achieve the same goal,which is selling your products but in a,different way the question is which type,of ads will work best for you in terms,of budget and conversion rate so,advertisers go where their potential,clients go which brings me to the,question is Facebook a threat to Google,well it's definitely a huge competitor,it's taken market share but it's not an,existential threat as long as Google is,still the dominant search engine in the,world as long as you'll go to google.com,to search for stuff on it Google will be,fine finally both of them have their,advertising networks,google has Adsense and Facebook has the,audience network these are all the,websites that are partners of Facebook,or Google and that display ads on their,pages Google has the largest network in,the world with billions of page views,and Facebook is still behind but it's,growing here ads are visual and they can,be of any shape it's basically all the,kinds of ad banners that you see on,websites the best use of these ads is,for a retargeting purposes let's say you,visit that website to buy a camera this,website will track your visit by,installing a cookie on your computer,later when you'll go on a different,website you might see the ad from that,previous camera website somewhere on it,I'm sure you uncounted this regularly so,how does this happen well a company pays,Google to show a specific visual add to,all the people who have visited its,website on the other websites of Google,Adsense Network and it's also possible,to target this website's / theme or even,by domain name so Facebook and Google,definitely compete head-on even though,their approaches are different the money,goes where the eyeballs go where the,lower price per click goes and where the,best conversion rate goes that's why,they're advertising war continuous on,mobile since most of the eyeballs and,attention shifted to mobile screens in,the recent years Facebook has an,advantage here because using Facebook on,mobile is extremely convenient and,people spend too much time there but,Google search is not that obvious,anymore on mobile,since the nature of mobile applications,makes it less relevant instead of going,on Google to search for something you,already have many specific apps that,will respond to what you're looking for,but Google is a genius company so don't,worry about them this was an,introduction to the Google and Facebook,ads but there is much more to their war,than what I've covered in this episode,in the next videos we will keep,exploring the different facets of the,advertising wars between tech giants,like Facebook Google Amazon Bing,snapchat and many others we'll also,explore their strategies and,acquisitions such as YouTube oculus rift,Google home Amazon Alexa and all the,others that are designed to expand the,ecosystems of their parent companies to,stay relevant,you

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