Social ad spend expected to reach nearly $10B in 2016

A report from BIA/Kelsey forecasts social ad spending to grow by 21% a year

As a testament to the fact that social media is hotter than ever, social ad spending is predicted to reach $9.8 billion by 2016, according to a forecast released Tuesday by BIA/Kelsey.

To put that into perspective, $3.8 billion was spent on social advertising in 2011, which means the jump to $9.8 billion in 2016 represents a 21% compound annual growth rate.  On the local level, social ad spend is expected to grow to $3.1 billion in 2016 from $840 million in 2011, which represents a CAGR of 29.8%.

“Better performance, coupled with richer formats and creative elements, like video, will be the principal social ad market growth drivers,” said Jed Williams, analyst and program director of Social Local Media for BIA/Kelsey, in a statement. “Social advertising’s local business penetration will steadily increase as SMBs’ understanding of social media deepens, and as the networks continually improve the ease of onboarding and campaign management.”

Social ad spending is expected to reach $4.8 billion in 2012, and will jump to $5.9 billion by 2013, with display remaining the dominant format.  By 2016, $9.6 billion of the total $9.8 billion spent will be for social display ads, with $630 million going toward non-display ads.

But is growth in social ad spending slowing down?  In 2010, $2.1 billion was spent on social advertising.  BIA/Kelsey predicted last year that social ad spending will reach $8.3 billion in 2015, representing a 31.6% CAGR.  What’s with the 10% drop in the growth rate?

“This is a natural byproduct of the growth of the social advertising market,” explained Jed Williams, BIA/Kelsey’s lead social media analyst. “With the market being bigger overall, revenues will accelerate at a decelerated rate compared to prior waves, where growth was more volatile. So, the rate of social ad spend may slow, even as the total revenues coming from social advertising increase.”

So while spending is indeed slowing with the maturation of the social ad market, social advertising won’t cool any time soon.