In its latest report on social media, research and analyst firm Gartner forecasts revenues will reach US$16.9 billion this year, up 43.1 percent from 2011 with revenues of US$11.8 billion, and more than one billion people worldwide will have used social networks by the end of the year.
However, while Gartner says that usage of online social media has matured, and more than one billion people worldwide will use social networks, senior research analyst, Neha Gupta, says that 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."
Gartner reveals that advertising is, and will continue to be, the largest contributor to overall social media revenue, with the firm projecting advertising revenues will reach US$8.8 billion this year. Revenues from other areas including social gaming revenue, which more than doubled between 2010 and 2011, is forecast by Gartner to reach US$6.2 billion in 2012, along with revenue from social media subscriptions, expected to total US$278 million this year.
And, Gupta says that rising competition among social media players, each vying for consumers' leisure time and attention, will lead to the rise of new forms of social media, such as Web-based and mobile. "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.”
Gartner says that marketers are allocating a higher percentage of their advertising budget to social networking sites, mainly driven by the fact that these sites offer a large pool of engaged users who spend considerable time on these sites. “This increases the potential click-through rates (CTRs). Social media sites enable marketers to target ads to discrete consumer segments by unlocking the interconnected data structures of users that include lists of friends, their comments and messages, photos and all their social connections, contact information and associated media.
"Social media sites are becoming more innovative in their ad products to attract marketers," Ms. Gupta said. "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."
Gartner analysts’ predict that social media sites will continue to incorporate gaming techniques on their networks, driven by the monetisation opportunities that it presents.
The analysts’ says the sale of virtual goods will remain the primary source of revenue and that major console gaming publishers have recently entered the social gaming arena and are adding momentum to the social gaming industry by utilising their intellectual properties.
According to Gupta, this trend to have a favourable impact on social gaming revenue will continue, as consumers are likely to be attracted to familiar gaming titles, with some of the big social developers such as Zynga, GREE and DeNA already having moved to an open-platform strategy, enhancing user convenience and choice.
Gupta predicts that the growth in users paying for professional networking accounts will continue to grow, although she points out that social sites are moving toward lower subscription fees and shifting focus to other sources of revenue, such as advertisement-based sales. “This is corroborated by the fact that many of the professional sites (including LinkedIn and Xing) that charge for premium services observed a decline in the subscriptions revenue ratio. Apart from a few exceptions, Gartner continues to see limited success with the premium subscription models.”
Gartner also reports that the sale of virtual goods outside of social gaming is the largest revenue earner in the "other" category, with the trend to sell high-value advisory services — such as public relations and reputation management - to brands so that they can “better manage their presence on social networks” on the rise and expected to continue.
“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 (to pay for applications, such as part of Facebook), as part of social gaming (for example, FarmVille), or to make a person-to-person (P2P) payment to another user of the network site,” Guipta observes.
“New revenue opportunities for social media will also arise as both mobile and TV platforms integrate with social networking as a core service.”
According to Gupta, new revenue opportunities will exist in social media, but she says that no new services will be able to bring “significant fresh revenue to social media by 2016." "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 customised basis. In the meantime, however, they should also continue to exploit other channels of revenue like mobile advertising and social commerce."