A separate recent study agrees with Gartner's strong growth forecast. The recently released Global Facebook Advertising Report compiled by TBG Digital and verified by the University of Cambridge estimated that the social network has enjoyed a growth in CPM (cost per thousand impressions) of 58 per cent over the past year. The study was based on 406 billion impressions in more than 190 countries for 276 clients from Q2 2011 to Q2 2012.
Gartner derived its advertising revenue numbers by estimating an average number of page views per week for social-media users based on their activity levels, arriving at page views per annum. The research firm then multiplied this total with the current estimate of click-through-rate (CTR) and the CPC (cost per click) rate for historical years to arrive at ad revenue. Gaming revenue was estimated using details published by Zynga, Gree, DeNA, Tencent and a few other social-gaming developers.
The report's author, Neha Gupta, senior research analyst at Gartner, told Campaign Asia-Pacific that for the purposes of the report, social media was defined as websites where content is created, consumed or shared for purposes that are primarily related to community and social activities. This includes platforms such as Facebook, YouTube, QZone, RenRen, Kaixin, 51.com, and so on. However, platforms with social elements that are not dedicated to social media, such as Google Talk and Groupon, were excluded.
"Usage of online social media has matured, and more than 1 billion people worldwide will use social networks this year," Gupta said. "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."
Gartner expects the number of social-media users will continue to increase at a moderate pace. New forms of media and entertainment will keep users engaged on social-media sites and attract new ones. Rising competition among social-media players, each vying for consumers' leisure time and attention, will lead to the rise of new forms of social media (web-based and mobile).
Marketers are allocating a higher percentage of their advertising budget to social-networking sites. This is mainly driven by the fact that these sites offer a large pool of engaged users who spend considerable time on these sites, which increases the potential CTRs.
"Social-media sites are becoming more innovative in their ad products to attract marketers," said Gupta. "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."
Gartner analysts said that social-media sites will continue to incorporate gaming techniques on their networks, driven by the monetisation opportunities that it presents. In-game sales of virtual goods will continue to be the primary source of revenue.
Major console-game publishers have recently entered the social-gaming arena and are adding momentum to the social-gaming industry by utilising their intellectual properties. Gartner expects this trend to have a favourable impact on social-gaming revenue as consumers 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.
Gartner also expects that the number of users paying for professional or premium networking accounts will continue to grow. However, social sites are moving toward lower subscription fees and shifting focus to other sources of revenue, such as advertisement-based sales. This is corroborated by the fact that many of the professional sites (including LinkedIn and Xing) that charge for premium services observed a decline in their subscriptions revenue ratio. Apart from a few exceptions, Gartner continues to see limited success with the premium subscription models.
The sale of virtual goods outside of social gaming is the largest revenue earner in the "other" category. The trend to sell high-value advisory services—such as public relations and reputation management—to brands so that they can better manage their presence on social networks is on the rise and is expected to continue.
Payments on social-media sites will increase, providing increased revenue opportunities for social-media sites to serve as payment platforms for transactions of digital content (to pay for applications, such as part of Facebook), as part of social gaming (for example, FarmVille), or to make a person-to-person (P2P) payment to another user of the network site. New revenue opportunities for social media will also arise as both mobile and TV platforms integrate with social networking as a core service.
"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."
Simon Kemp, managing director of We Are Social, a consultancy based in Singapore, said that he expected social media advertising investments to continue to rise, "reflecting a similar growth pattern to that of pay-per-click search advertising".
"An increasing number of smaller-scale advertisers will recognise and harness the shorter-term benefits of activities like Facebook banner ads, and the sheer volume of these smaller investments will add up to a significant sum on a global level," Kemp said. "However, we expect more savvy marketers to supplement social advertising with more community-driven initiatives that drive meaningful conversations. As a result, these marketers will shift a sizable proportion of their spend into activities that make better use of the interactive and participative elements of social media. Social media will become more about the 'social', and less about the 'media'."
