Facebook (Meta) generates most of its revenue from selling advertising space.
Meta Inc. (FB), 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.
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), Amazon.com AMZN), and Twitter Inc. (TWTR).
Meta's Financials
Meta posted a net income of $9.2 billion on $29.0 billion in total revenue for a net profit margin of 31.7% in Q3 of its 2021 fiscal year (FY), the three-month period ended Sept. 30, 2021. As much as 44% or $12.7 billion in revenue came from the U.S. and Canada. The other 56% came from other regions across the globe.
Annual revenue grew 35.1% year over year (YOY) in Q3 FY 2021, marking a deceleration from the 55.6% YOY rise in revenue in the previous quarter. Quarterly net income rose 17.2% YOY in Q3 FY 2021. Growth in net income also decelerated compared to the previous quarter.
Meta Revenue Breakdown
Meta's Business Segments
Meta breaks down its revenue into two separate segments: Advertising and Other revenue. The company does not do a separate breakdown for net income. Facebook announced in its third quarter earnings press release that beginning in the fourth quarter it will break out results for a new reporting segment called Facebook Reality Labs. This new segment will be focused on augmented and virtual reality related hardware, software, and content. Meta's other main business segment will be named Family of Apps, which includes the Facebook social media platform, Instagram, Messenger, WhatsApp, and other services.
Advertising
Meta generates substantially all of its revenue from selling advertising to marketers. Ads are displayed on Meta's main social networking site, 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.
Meta posted $28.3 billion in advertising revenue in Q3 FY 2021, comprising 97% of the company's total revenue. Ad revenue was up 33.2% compared to the year-ago quarter.
Other Revenue
Revenue from this segment is generated through the delivery of consumer hardware devices and net fees Meta receives from developers using its payments infrastructure, as well as from various other sources.
Meta posted $734 million in other revenue in Q3 FY 2021, representing the remaining 3% of total revenue for the quarter. Revenue for the segment rose 194.8% in Q3 FY 2021 compared to the year-ago quarter.