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Advertising on Facebook - How does Facebook help in doing business?

Facebook makes most of its money through ads and at the same time, helps brands expand and choose their target audience. How does that work?
Gehad Hussein | 22.12.2011
Facebook has become the biggest social network with masses of shared content and over 500 million users in 2011.

And till now, one can use it for free. How does Facebook make money then? Here is a summary on how advertising is being dealt with within the Facebook Corporation and how ordinary users can affect what ads they are exposed to.

From the beginning, the people who built Facebook wanted it to be free for everyone. It now costs over a billion dollars a year to run Facebook, and delivering ads is how Facebook pays for this.

What are Facebook ads?
Answer: Facebook strives to show relevant and interesting advertisements to their users and their friends. Here are the facts about Facebook Ads:
- Ads can appear in the right-hand column of pages throughout Facebook. Ads are eligible to appear on many types of pages, including apps, photos, groups, pages, profiles (timelines), and the home page.
- The content of a Facebook Ad is sometimes paired with news about social actions (e.g., liking a Page) that the user's friends have taken.
- Friends might see news about the social actions users have taken in Facebook Ads. This news will only be shown to confirmed friends and will adhere to applicable privacy settings the user has set for their account.
- Facebook doesn't sell user information to advertisers.
- Facebook actively enforces policies that help protect the user's experience with third-party applications and ad networks.

There are three steps on how advertisement is being dealt with:
1. A business creates an ad:
Let's say a gym opens in your neighborhood. The owner creates an ad to get people to come in for a free workout.

2. Facebook gets paid to deliver the ad:
The owner sends the ad to Facebook and describes who should see it: people who live nearby and like running.

3. The right people see the ad:
Facebook only shows you the ad if you live in town and like to run. That's how advertisers reach you without knowing who you are.

As for users: Unlike ads on television, you can impact the ads you see on Facebook. Spot something that doesn't interest you? Click the X and it's gone.

What are Sponsored Stories?
Sponsored Stories are stories that are eligible to appear in a user's News Feed. These show up on the right-hand column of pages on Facebook. The types of stories that can be surfaced include: Page likes, Page posts, Page post likes, check-ins, app shares, apps used and games played, and domain stories.

Can a user block Facebook Ads or opt out of ads showing on my account?
It's not possible to block Facebook Ads from showing on pages within your account.

Why does a user see particular ads on Facebook?
Facebook ads may be targeted by the user's location, sex, age, relationship status, professional or educational history, or interests listed in his/her profile (timeline) and the Pages and groups they're connected to. Including more content on their profile (timeline) that relates to their interests may improve the relevance or focus of the Facebook Ads they're seeing. Facebook is constantly working to improve their systems to show users the most interesting ads based on the information they've provided.

What's Facebook's philosophy on personal information and ads?
Facebook strives to create relevant and interesting advertisements for user and their friends. Here are the facts about Facebook Ads:
- Facebook Ads are sometimes paired with news about social actions (e.g., liking a Page) that friends have taken.
- Users only appear in Facebook Ads to their confirmed friends. If a photo is used, it is their profile photo and not from their photo albums.
- Facebook doesn't sell user information to advertisers.
- Facebook enforces policies that help protect the user's experience with Apps by outside developers and ad networks.

Do advertisers have access to personal information?
No, Facebook's ad targeting is done anonymously by the Facebook system, without sharing personally identifiable information with advertisers. If advertisers select demographic targeting for their ads, the system automatically matches those ads to the appropriate audience. Advertisers only receive anonymous, aggregated reports to let them know that their ads were seen by the groups they targeted.

What happens when a user clicks Like in a Facebook Ad?
When a user clicks Like on an ad, they are making a connection with the business, brand, or product in that ad. For example, if a brand’s Facebook Page is being advertised in the ad and a user clicks the Like button, they are making a connection to that brand Page.
As with other connections, the connection will be displayed on the user's profile (timeline) and their friends may receive a News Feed story about the connection. The user may be displayed on the Page they connected to and in advertisements about that Page. The Page will also be able to post content into the user's News Feed and send them messages. Users may also share this connection with apps on the Facebook Platform.
Users always have control over their connections. They can unlike most content immediately, manage their connections on their profile, and restrict who they share with their connections.

What is the Nielsen partnership with Facebook and how does it affect me?
Nielsen has partnered with Facebook to develop an online system for advertisers to improve their measurement of advertising campaigns’ effectiveness and reach online. As a result, advertisers are able to better understand campaign performances across both a TV and online audience.
No personally identifiable or individual data is shared with Nielsen, and Nielsen does not have access to any individual's Facebook profile (timeline) data. Only aggregate, anonymous Facebook data is shared with Nielsen. Specifically, Nielsen receives “flat files” containing final, aggregated reports, with no individual-level data available. To provide an overview of the reach and frequency of a given ad campaign, the reports contain the standard age and gender buckets (e.g., males 18-24, females 50+) for which that ad campaign was targeted.