Global social media revenue to hit $16.9B in 2012

Gartner study finds advertising likely to still be largest contributor although social games revenue fast catching up, but market still in "early stages" in terms of generating revenue.
Written by Kevin Kwang, Contributor

Global revenue from social media is expected to spike 43.1 percent from 2011 on the back of growing maturity among social media users and continued strong contribution from advertising and, increasingly, social games, according to Gartner.

In a new study released on Thursday, the research firm said worldwide social media revenue is forecasted to reach US$16.9 billion in 2012, which is up 43.1 percent from 2011's US$11.8 billion. Advertising remains the main revenue driver, and is expected to reach US$8.8 billion at the end of the year, it added.

Social games, though, has been growing rapidly with revenue more than doubling between 2010 and 2011, and is projected to hit US$6.2 billion in 2012. Revenue from subscriptions will amount to US$278 million, it stated.

Delving deeper, the report noted that marketers are allocating a higher percentage of their advertising budget to social networking sites mainly due to the large pool of engaged users who spend considerable time on these sites, which 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," Gartner stated.

Neha Gupta, senior research analyst at Gartner, then suggested social networking sites to deploy data analytic technologies that give marketers a more accurate insight to trends in accordance with consumers' needs and preferences.

Social media sites will also look to incorporate more games on their networks given the monetization opportunities these present, the report said. With major console games publishers entering the social games arena and utilizing their intellectual property assets, this will have a "favorable impact" on social games revenue as consumers are likely to be attracted to familiar games titles, it added.

On the whole, Gupta said: "Usage of online social media has matured, and more than one billion people worldwide will use social networks this year. 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."

She added that while new revenue opportunities will exist in social media, no new services are expected to bring "significant fresh revenue" to the industry by 2016 and advertising will continue to be the biggest impact on revenue.

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