Advertising to drive social’s $16.9bn in revenue for 2012

Think General Motors’, now reversed, decision to pull its Facebook advertising had the industry rattled? Think again.

Social media is set to bring in US$16.9-billion in 2012, over half of which will come from advertising.

According to tech research company Gartner social revenue is up 43.1% from 2011 and advertising projected to contribute US$8.8-billion worth of that.

Social gaming is the other big winner. Revenue from the medium more than doubled between 2010 and 2011 and is expected to reach US$6.2-billion in 2012, while revenue from subscriptions is expected to total US$278-million this year.

Social networks will continue to incorporate gaming techniques on their networks, driven by the monetisation opportunities that it presents. The sale of virtual goods will remain the primary source of revenue. Major console gaming publishers have recently entered the social gaming arena, adding momentum to the social gaming industry. Gartner this will work in social gaming’s favour as people are likely to be attracted to familiar gaming titles. Some of the big social developers such as Zynga, GREE and DeNA have moved to an open-platform strategy, enhancing user convenience and choice.

“Usage of online social media has matured, and more than one billion people worldwide will use social networks this year,” says Neha Gupta, senior research analyst at Gartner. “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.”

The reason people are still throwing money at social media, says Gartner, is that social networks offer a large pool of engaged users who spend considerable time on them — this increases the potential click-through rates (CTRs). Social media sites enable people to target ads based on people’s friends, their comments and messages, photos and all their social connections, contact information and associated media.

“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,” says Gupta.

The company also reckons the number of people using social media will continue to grow, but at a moderate pace. Rising competition among social media players meanwhile, each vying for consumers’ leisure time and attention, will lead to the rise of new forms of social media (web-based and mobile).

The number of people paying for professional social networks will also continue to grow, although these social networks will lower their subscription fees.

According to Gupta:

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. 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.