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Social Media Gets a $9 Billion Injection of Ad Revenue

1 Aug, 2012 By: Doug McPherson

STAMFORD, Conn. – Social media is raking in the advertising dough. Gartner, the IT research company, reports that advertising will add nearly $9 billion to social media global revenue of nearly $17 billion this year. That’s up from $11.8 billion in 2011 – a 43-percent jump.

Gartner reports that revenue from social media subscriptions is expected to total $278 million this year, while social gaming revenue, which more than doubled between 2010 and 2011, is expected to reach $6.2 billion in 2012.

The report notes that as many of the professional sites, including LinkedIn and Xing, that charge for premium services observed a decline in the subscription revenue ratio, social sites are moving toward lower subscription fees and shifting focus to other sources of revenue, such as advertisement-based sales. However, the report also predicts the growth in users paying for professional networking accounts will continue.

Gartner analysts predict consumers will keep joining social networking sites at a “moderate” pace because of new features, applications and experiences holding the interest of old members and drawing the interest of new users.

Neha Gupta, senior research analyst at Gartner, contends social media sites are becoming more innovative in their ad products to attract marketers. “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,” Gupta says.

As the competition between sites like Facebook, LinkedIn, Twitter and new players increases, new forms of Web-based and mobile social media will rise, Gartner predicted.
Gartner also reports that usage of online social media has matured, and more than 1 billion people worldwide will use social networks this year.

“Although the number of social media users is large, and in some cases increasingly mature in their usage patterns, the market is still in its early stages from a revenue perspective,” Gupta says.

Marketers are setting aside a higher percentage of their ad budgets to social networking sites, which are driven by the large pool of engaged users who spend considerable time on them, thereby increasing the potential click-through rates.

In terms of new revenue channels, Gartner predicts payments on social media sites will increase, providing increased revenue opportunities to social media sites to serve as a payment platform for transactions of digital content, such as paying for applications, as part of social gaming or to make a person-to-person payment to another user of the network site. The sale of virtual goods will remain the primary source of revenue, the report predicted.

“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,” Gupta says. “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.”

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