Ads to fuel social media growth: study

NEW YORK: Global social media revenues are due to reach $16.9bn this year, with advertising and gaming retaining their role as the channel's main sources of income, according to a study.

Gartner, the insights provider, predicted in a report that platforms in this burgeoning sector would collectively enjoy growth of 43.1% on an annual basis in 2012, having generated $11.8bn in 2011.

This marks an improvement on the organisation's previous forecast, published last October, when it indicated that figures for the year should come in at $10.3bn and then grow to $14.9bn this year.

"Usage of online social media has matured, and more than 1bn people worldwide will use social networks this year," Neha Gupta, a senior research analyst at Gartner, said.

"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."

Advertising will remain the primary contributor of income to the rapidly-developing industry, yielding $8.8bn in 2012. Gartner's estimates in October pegged adspend levels for 2011 at $5.5bn.

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

Elsewhere, social gaming returns are anticipated to more than double to $6.2bn, benefitting leading firms including Zynga, GREE and DeNA, which are increasingly taking an "open platform" approach.

By contrast, subscriptions will deliver a modest $278m in 2012. While professional networks like LinkedIn and Xing have begun exploring such models, Gartner expected "limited success" to result.

Given that the expansion in popular uptake is also set to moderate, the creation of additional forms of media and entertainment could be vital to retaining current users and securing new ones.

"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," said Gupta. "The biggest impact of growth in social media is on the advertisers."

A longer term forecast released by Gartner in June suggested this channel would be worth some $34bn by 2016.

Data sourced from Gartner; additional content by Warc staff, 26 July 2012

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