Social media revenue to reach $16.9B this year

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

Technology trends and news by Krystal Peak
July 25, 2012
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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)

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