Internationally, revenue from social networks will grow an impressive 43.1 percent year-over-year in 2012, putting the total amount of income generated by sites like Facebook, Twitter, and LinkedIn at $16.9 billion.
Gartner predicts social media revenue will reach $34 billion by 2016, up from $11.8 billion in 2011. Advertising and social gaming account for about 90 percent of total social revenue, says the IT research and advisory company.
In their Forecast: Social Media Revenue, Worldwide, 2011-2016 report, Gartner analysts project $8.8 billion and $6.2 billion in 2012 global social media revenue from advertising and social gaming, respectively.
“Usage of online social media has matured, and more than one billion people worldwide will use social networks this year,” said 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.”
Facebook has yet to report their Q2 2012 earnings (due out today), though major gaming company Zynga made waves by reporting their third quarterly loss since going public. Wednesday, Zynga said they’ve been fighting increasing operating costs and sharply lowered their annual earnings estimates. As a result, shares nosedived 34 percent after hours.
Zynga have actually been trying to get away from their Facebook dependency and recently started offering access to some games on their own website. Typically, Facebook takes about a 30 percent cut for games on their site. While advertising does account for the bulk of their revenue, Facebook may need to consider cutting gaming companies some slack if they want to build that revenue channel.
Advertising revenue will continue to grow, though Facebook investors will be looking for a multi-faceted approach to social revenue. In May this year, BIA Kelsey released their Local Media Forecast, specific to social advertising revenue in the United States. They predict a compound annual growth rate of 21 percent, increasing from $3.8 billion in 2011 to $9.8 billion in 2016 in the U.S. alone.
“Better performance, coupled with richer formats and creative elements, like video, will be the principal social ad market growth drivers,” said Jed Williams, analyst and program director, Social Local Media, BIA/Kelsey, at the time. “Social advertising’s local business penetration will steadily increase as SMBs’ understanding of social media deepens, and as the networks continually improve the ease of onboarding and campaign management. Facebook opening its Ads API to more partners, including those that work with SMBs, and Twitter’s self-serve platform will help to ‘democratize’ social ads, which will ultimately lead to more local growth.”
More recently, BIA Kelsey predicted a 13 percent increase in local digital advertising revenues by the end of 2012. Mobile search is set to grow by 77 percent, online video by 52 percent, and social by 26 percent, ClickZ reported.
Many sites that offer premium services for an additional charge saw a decline in their subscriptions revenue ratio, said a press release on the Gartner Inc. report. Revenue from subscriptions is expected to reach just $278 million this year. Gartner Inc. reports they’ve seen only limited success with paid subscription models as a social revenue driver.
In the “Other” category, the sale of virtual goods (outside of gaming) is the largest revenue earner. Gartner Inc. expects new revenue opportunities to arise as mobile and TV platforms integrate with social networks.
“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,” Gupta said. “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.”