Social media revenue to reach $16.9B this year

Krystal Peak · July 25, 2012 · Short URL: https://vator.tv/n/28a7

Advertising is still the main source of social media revenue; social gaming dollars to hit $6.2B

Despite the efforts being made to really build commerce into social media and create it as a major monetizing tool, advertising will continue to be the main contributor of revenue for this year, according to new a forecast released by Gartner Wednesday. 

Global social media revenue is expected to reach $16.9 billion in 2012, up 43.1% from 2011 revenue of $11.8 billion. And advertising for this year will make up a whopping $8.8 billion of that revenue. 

Another big driver of revenue in the social world is gamins, between subscriptions and virtual goods, the social gaming revenue more than doubled between 2010 and 2011 and is expected to reach $6.2 billion in 2012.  

A smaller player in the social revenue is subscription services, like the premium fees paid for all-access to Spotify, is only expected to bring in a total of $278 million this year.

Gartner also anticipates that the number of social media users will still grow, but at a more moderate pace than the analysts have seen over the last two years.

Neha Gupta, senior research analyst at Gartner, explains that this slower growth is greatly due to the fact that social media has moved into a more mature phase with slower subscriber growth. 

The trick for most major social media sites and tools is not to focus on gaining a lot of users, Zynga, Facebook, Twitter and Pinterest have those numbers already, but rather to optimize the monetization with better advertising, more virtual goods sales, premium subscriptions and bringing in ecommerce options. 

Last week, a report from TBG pointed out the improvement in new ads on Facebook and their effectiveness were pointing to better CTRs. The Sponsored Stories and mobile ads were charging 53% more on its ads than a year ago because of the increased effectiveness and targeting. 

The report looked at 406 billion impressions, covering 190 countries and 276 clients to find that overall engagement also grew by 11% -- which was a stark contrast and reversed the decline experienced the previous quarter.

"Social media sites are becoming more innovative in their ad products to attract marketers," said Gupta. "Social networking sites should deploy data analytic technologies that interrogate social networks to give marketers a more accurate picture of trends in accordance with consumers' needs and preferences."

Gamification elements used in social media sites to increase interaction, time on the site and sharing have also resulted in better monetization since advertisers love to see that users are on a site for hours, not minutes, and have more time exposed to an ad or campaign. 

One other category of revenue opportunities that is much smaller but critical for those using it is “professional networking accounts.” Both LinkedIn and Xing have this service where people pay for premium accounts to gain access to professional channels for networking, recruiting and other business-related service. This is a very small segment for social media overall but could playa bigger role in more companies in the future. 

"New revenue opportunities will exist in social media, but no new services will be able to bring significant fresh revenue to social media by 2016," explained Gupta. "The biggest impact of growth in social media is on the advertisers. In the short and medium terms, social media sites should deploy data analytic techniques that interrogate social networks to give marketers a more accurate picture of trends about consumers' needs and preferences on a customized basis. In the meantime, however, they should also continue to exploit other channels of revenue like mobile advertising and social commerce."

(Image Source: Lauraleewalker)

Image Description

Krystal Peak

All author posts

Support VatorNews by Donating

Read more from our "Trends and news" series

More episodes

Related Companies, Investors, and Entrepreneurs

Zynga

Startup/Business

Joined Vator on

Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users.  Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist.  The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel.  Zynga is headquartered at the Chip Factory in San Francisco.  For more information, please visit www.zynga.com.

Twitter

Startup/Business

Joined Vator on

What is Twitter?

Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests. 

Where did the idea for Twitter come from?

Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.

How is Twitter built?

Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes. 

We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.

How do you make money from Twitter?

There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.

In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet. 

At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.

Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.

 

What's next for Twitter?

We continue to focus on building a product that provides value for users. 

We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.

Related News