Social advertising, gaming spur massive growth in social media revenues

Worldwide social media revenues are on track to reach US$10.3-billion this year, a massive 41.4% increase from the US$7.3-billion achieved in 2010. That’s according renowned research firm Gartner.

According to the Connecticut-based firm, the biggest growth area is, unsurprisingly, in advertising. Interestingly, however, the next biggest area of revenue growth is in social gaming.

Social media advertising revenue, which includes display advertising and digital video commercials on any device including PCs, mobile and media tablets is forecast to total US$5.5-billion in 2011, and grow to US$8.2-billion in 2012

Social gaming revenue, meanwhile, is on track to reach US$3.2 billion in 2011 and grow to US$4.5 billion in 2012.

Gartner defines social gaming revenue where “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).”

Neha Gupta, a senior analyst at Gartner, says that there is likely to be a shift in the nature of social advertising.

Marketers, she says, “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”.

“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.”

The proliferation of revenue from social gaming, she says, is largely because social networks have evolved into “platforms for social gaming by publishing APIs that help build an ecosystem of developers and publishers”.

The dominant monetisation models for social games are ad-led and “freemium” models.

The least profitable area of social media revenue comes from subscriptions. This is down to the fact that most social networks can only get away with charging for premium services.

Sites like LinkedIn, Xing in Germany and Viadeo in France, for instance, charge a subscription fee from their users for enhanced services, such as an expanded profile view.

To calculate social media revenue, Gartner analysts defines “social media” as including websites where:

1. content is created, consumed, promoted, distributed, discovered or shared for purposes which are primarily related to communities and social activities, rather than functional, task-oriented objectives;
2. content usually takes the form of words, pictures or videos;
3. the web site may be a closed or an open platform; and
4. the flow of expression can be unidirectional or multidirectional.