With many social networks maturing over the past two years and investing in advertising platforms, it's only natural to see increases year-over-year in ad revenue. But with networks like Tumblr and Instagram joining the advertising game in late 2013, the social space is set for high growth in 2014 and beyond.
Marketing research firm eMarketer recently published revenue number for 2012 and 2013 while offering projections for 2014 and 2015. The data spans across LinkedIn, Twitter, Facebook, Social Gaming and "Other". The "Other" grouping takes into account smaller social networks.
As the data shows, 2013 saw an increase 42.9 percent across the industry, up from 30 percent in 2012. With an increase of almost 13 percent year-over-year, eMarketer is actually is predicting a decline in 2014 and 2015.
What Has Caused The Exponential Growth?
As social networks have moved off venture capitalist funding and have gone public or been purchased by a larger company, the pressure to generate revenue has become extremely important.
Originally, companies like Facebook and Twitter poured resources into new features and having enough servers to support their user base. But now that they are public, a significant amount of their manpower is dedicated to building a self-service media buying interface. Not to mention developing advertising opportunities that to not ruin the user experience.
We have seen similar processes being implemented by Instagram and Tumblr. After being purchase by Facebook and Yahoo respectively, both were pushed to monetize their traffic.
Why Are Declines Predicted in 2014 and 2015?
As companies continue to invest their marketing dollars in the social media space, they will need to be able to quantify their results. While it is well documented that the social space is not the best channel for lead generation or sales, marketing directors will need to understand why they need to keep allocating a percentage of their spend to social.
With the need for specialized talent, such as a community manager or social strategist on staff, the investment into social advertising goes past media spend. It will be important for each social channel to provide an advertising interface that includes a full suite of analytics.
Marketers will also need to be able to tie things like customer retention and customer service to their efforts. Over the years there have been conversations surrounding the value of a Like or follower. Conversations around this subject will need to continue to evolve so marketers can understand the value behind their efforts.
The key to growth may also be small and medium-sized businesses. While many large advertisers have been utilizing social media advertising for the past few years, mom-and-pop shops and regional companies have been slower to adapt.
Of course, we have to keep in mind the pie of advertising dollars is only so big. As the social media advertising space gets bigger and increase of $500,000 in advertising spend gets smaller and smaller.