Wednesday, 12 October 2011 16:56

Social media revenues rising, but challenges ahead

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Social media companies should build new business models to tap into increased usage and levels of engagement by a maturing user base, according to one major research firm, which reports that worldwide social media subscription revenues will reach $236 million by the end of this year.


In its latest report on the social media market, Gartner says that, from a revenue perspective, the social media market is still in its early stages, even though it has a large number of users who, in some cases, are exhibiting 'increasingly mature usage patterns.'

According to Gartner senior research analyst Neha Gupta, market participants need to 'build new business models to tap into this increased usage and users' increased level of engagement.'

While social media subscription revenue is forecast to reach $236 million in 2011 and total $313 million in 2012, Gupta says that few social sites charge subscription revenue, mostly for premium services. 'Some professional sites such as LinkedIn, Xing in Germany and Vladeo in France, charge a subscription fee from their users for enhanced services, such as an expanded profile view.'

Gartner reports that worldwide social media revenue is on track to reach US$10.3 billion in 2011, a 41.4 percent increase from 2010 revenue of $7.3 billion. The firm also says that worldwide social media revenue is forecast for consistent growth with 2012 revenue totalling $14.9 billion, and the market is projected to reach $29.1 billion in 2015.

And, Gupta says that advertising revenue is, and will remain, the 'largest contributor to overall social media revenue.' Gartner forecasts that social media advertising revenue will total $5.5 billion in 2011, and grow to $8.2 billion in 2012, which includes display advertising and digital video commercials on any device including PCs, mobile and media tablets.

'Marketers will begin to transition from 'onetime placement and click of ads' toward 'ongoing engagement' with the Internet user and will therefore allocate a higher percentage of their advertising budget to social networking sites,' Gupta says.

'This is mainly because social networking sites, with the help of social analytics firms, are able to unlock the interconnected data structures of users '” mapping lists of friends, their comments and messages, photos and all their social connections, contact information and associated media.'

Gartner also looked at the social gaming market and reports that social gaming revenue is on pace to reach $3.2 billion in 2011 and grow to $4.5 billion in 2012.

As defined by Gartner, the social gaming includes revenue that social networking sites earn directly from users who play games that are developed in-house, and the revenue earned by allowing game developers/publishers to use their sites as a platform to let users play with friends on the network. It includes revenue earned from "virtual wallets" within games (such as when users spend virtual money on in-game items like swords or tanks, or to create virtual armies).

'We have seen social networks take a platform-oriented approach to game monetization. That is, the social networks have evolved into platforms for social gaming by publishing APIs that help build an ecosystem of developers and publishers,' Gupta observes.

'The dominant monetization models for social games are ad-led and 'freemium' models. The free-to-play games are funded either through advertising (wall advertisements and in-game branding) or through in-game monetary transactions that enable users to 'level up' or buy virtual goods.'

Additional information is available in the Gartner report 'Forecast: Social Media Revenue, Worldwide, 2010-2015" at http://www.gartner.com/resId=1802617, and the report 'Market Insight: Social Media Market Tops $7 Billion, Driven by Advertising' at http://www.gartner.com/resId=1807917.

 


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Peter Dinham

Peter Dinham - retired and is a "volunteer" writer for iTWire. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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