How Facebook and other social networks monetize users’ data

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Sep. 26 2014, Updated 3:29 p.m. ET

Social networks are looking to capture as much user data as possible

The social networking business has shown strong growth in the last few years. Facebook (FB) has grown to a $200 billion company in less than a decade. The trend of social networks capturing as much user data as possible is catching up. Capturing user data helps these companies provide customized and relevant ads to users that, in turn, help them monetize those ads better.

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Another important way social networks capture data is through social logins, where users are asked sign in on a website through a social network. Social logins help users avoid the need to remember user IDs and passwords for each website. According to a report from Janrain and as the chart below shows, Facebook (FB) and Google+ are the top two social networks preferred by users for social logins, with market shares of 44% and 37%, respectively. Twitter (TWTR), Yahoo (YHOO), and LinkedIn (LNKD) are some of the smaller players in this market.

A number of data points social networks use

The easiest way for Facebook to capture users’ behavior and interests to provide relevant ads is to capture the number of “likes” and “shares” that each user does.

Google (GOOG)(GOOGL), on the other hand, uses the number of “+1s” for Google+. But Google has a number of other avenues, such as Gmail, YouTube, Android, and Google Play, from which it can take huge amounts of user data to judge users’ interests.

Similarly, for Twitter, the number of tweets and re-tweets provides shows its user information.

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