Global Social Media Advertising Revenues 2012 – Forecast 2016, Strong growth expected

Social Media had impacted the business world where businesses across the world have been forced to improve their presence on the various social networking sites that had grown significantly in the recent few years by adding millions of users every year. There are more than billion social media users and most of the social networking sites like Facebook, Twitter, YouTube, etc. claim majority of their users to be active which forced businesses to invest in social media content, improve their presence on various social networking platforms and also increase their ad spends focusing on social networking advertising targeting their customers who are also active social media users. According to MDG Advertising, Social Networking sites including blogs is where online users spend most of their time (22.5%) and this is a significant change from earlier where most of the time was spent on email and games. According to research by Nielsen and NM Incite, Consumers utilize Social media to discover, research, and share information about brands and products and 60% of consumers learned about a specific brand or retailer through social networking sites. Most of the active social media users usually read product reviews online, and also 3 out of 5 create their own reviews of products and services which also highlight the fact that consumer-generated reviews and product ratings are the preferred sources of product information among social media users. NM Incite research also highlights that consumers actively use social networking sites to express their loyalty to their favorite brands and products, users are likely to trust the recommendations of their friends and family most and at least 41% say they share their brand experiences through social media to receive discounts.

eMarketer forecasts advertisers will spend $7.72 billion on social network advertising in 2012, including paid advertising on social sites and in social games and applications which is 48.5% YoY growth compared to 2011. But the YoY growth is expected to fall from 2013 and by 2014 the market is expected to reach nearly $12 billion in annual revenues worldwide. United States contribute more than half of the revenues and advertisers are expected to spend $3.63 billion advertising on social networks in the US, up from $2.54 billion in 2011 and continuing to climb to $5.59 billion by 2014. Facebook is expected to garner most of these social network ad revenues, taking in around seven in 10 of all US social networking ad dollars throughout the forecast period. Twitter’s share, by comparison, will rise from 5% to 8% between 2011 and 2014. According a study into Facebook advertising by TBG Digital, in conjunction with the University of Cambridge that analyzed over 406 billion ad impressions in over 190 countries, the average cost per thousand impressions (CPM) of a Facebook advert has increased by 58% in the second quarter of this year. This rise was not consistent across the world however. America saw a rise of 25%, Canada saw a rise of 21%, but the UK saw ad prices go up by just 7%.

Gartner forecasts Global social media revenue which is in early stages in terms of revenue perspective to reach $16.9 billion in 2012, up 43.1% from 2011 revenue of $11.8 billion. Advertising is expected to continue being the largest contributor to overall social media revenue and is expected to total $8.8 billion in 2012. Social gaming revenue which saw significant growth recently and more than doubled in the last two years is expected to reach $6.2 billion in 2012, while revenue from subscriptions is expected to total $278 million in 2012. As social networking sites have a significant number of engaged users who spend considerable time on these sites — this increases the potential click-through rates (CTRs), most of the marketers are allocating a higher percentage of their advertising budget to social networking sites. Another crucial factor is that since social networking sites are reducing their dependence on the subscriptions and are focusing more on alternative sources of revenue predominantly advertising revenues. Social media advertising revenues in the United States will grow from $3.8 billion in 2011 to $9.8 billion in 2016 (CAGR 21%) and also forecast a $4.8 billion social media ad spend in 2012, according to BIA/Kelsey’s U.S. Local Media Forecast (2011-2016).

Gartner further predicts a moderate growth in the number of social media users as growth in developed countries has almost reached maturity levels and further growth in users will be more from emerging markets. With more users coming from emerging markets social networking sites have to customize the existing platforms and develop new forms of media and entertainment to attract new users and keep existing users engaged on their sites. Competition among social media players is also on the rise, as the key players are competing for consumers' leisure time and attention which will also lead to the development of new forms of social media (Web based and mobile). Also social networking sites should focus on developing innovative advertising options and formats for the marketers. They need to develop and deploy data analytic technologies and integrate them into their networks so that marketers have a more accurate picture of trends, consumers' needs, preferences and return on investment statistics. Gartner also highlights that through Social media sites marketers can target ads to discrete consumer segments by unlocking the interconnected data structures of users that include lists of friends, their comments and messages, photos and all their social connections, contact information and associated media. Most of the marketers particularly in the Fortune 500 companies are not convinced about the social network advertising and its impact on their revenues. They are still looking at social networking sites as brand promotion and customer influence tools but not as revenue generating tool. The data clearly highlights the fact that social networking advertising is going to see significant growth this year and coming couple of years and the businesses of all sizes should allocate significant portions of their advertising budgets to this and also has to engage experts and professional ad agencies who have the necessary expertise to generate the necessary content and also make effective ads for the various social networking sites targeting the customers on these sites. 

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