Monetizing personal data

We all know that social networks and other companies have a business model based on people's personal data: they ask you your name, location, age, sex gender, things you do and things you like, etc. etc.

I wonder... how do they monetize this information?
Who buys that info and why?

I can imagine that Facebook also uses that data for selling targeted advertising within facebook, but i know it is not the main way they are monetizing it.
They sell it too, but i am curios to know who buys that data and why

I would want some examples possibly, or links to resources that explain this

 

Social Networks make most of their money through advertising (How does Twitter (TWTR) make money? (TWTR)). Advertising is the practice of paying money with the hope that a user will take an action that makes you more money than you spent on the ad.

Given this, there are several levels you can engage at.

1. Advertise to your users and sell your own products. You get 100% of the revenue from this, but have to build out all the infrastructure to manufacture the product.

2. Advertise to your users and sell someone else product. You can the percentage of revenue for advertising this product (let's say for sake of argument, 20%), but with very little cost because someone else is handling the manufacturing of that product.

With adblockers being used by 30% of users and growing, advertising may be heading for a crunch, and too much advertising on a webpage/inside an app will lead to a poor user experience. So, there's a third option.

3. Don't advertise, but enable advertisers to target your users somewhere else. This is what's known as "selling data", where you sell the targeting data necessary to identify that "User X" is "Interested in Cars". Then, when User X shows up on a website that has ads, the advertiser can shown them an ad suitable for someone interested in cars.

This has the lowest cost (both monetary and cost in user experience), but you may only earn 10% of the ad revenue from option 2. It's up to you to decide if the trade-off is worth it, and what business you want to be in.

Note: You can combine 2 & 3.

 

2) is Facebook advertising inside the same social network
3) basically Facebook also sells users' personal data to Google and other ad companies, right? So that they can use that data to target the people somewhere else

So it's just advertising.
I thought it was also that FB sells the data to market research agencies, that in turn are paid by companies that need to predict the success or failure of their next product.

 

They use that information to sell ads, for them, everything you do in their channels, is quantifiable information that can be used for marketing.