I heard they make money through user clicks, I don’t remember giving any money to anyone. Is clicking ads like mining bitcoins?
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If I own a business and want to promote it, I can go to an entity that has an audience and pay them to advertise my product to their audience. The amount I pay depends on the size of the audience and the return I can get from this ad. That is the way ads have always worked (on TV, Radio, Billboards, and any other ones).
Enter Social Media. Now we have millions of people filling their profiles on Facebook, Instagram and Tiktok with personal information, their search and shopping history on Google Search, and overall giving all this data about their habits to these big tech companies. These companies use all this data to categorize all their audience and deliver a very advanced tool of advertising.
Want to advertise your italian restaurant to people in your neighborhood? Instead of setting up a billboard on a bus stop, for example, you can now show your ad to everyone from ages x to y that are followers of italian food related content and have passed by a 300meter radius from your business at lunchtime. (It can get way more specific than that).
The Social Media Company charges you depending on your strategy: clicks, closed sales, views, etc, and you can choose the way you’ll be charged and the amount. This is the advertisers end.
Everyone is the audience, everyone can be the advertiser, and the big tech make money from the advertisers trying to reach a specific part of the audience that had been categorized before by those clever algorithms.
Have you ever asked why Social Media is free? Your data usage is too valuable. You are the product.
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