Précis A new forecast from Gartner states that advertising is the main way that social media platforms will make money in 2012.
What? Gartner, the IT research and advisory firm, has produced a forecast for social media revenues worldwide for 2011–2016. It predicts that worldwide social media revenue will reach US$34 billion by 2016, up from US$11.8 billion in 2011, with revenues from advertising and gaming accounting for about 90 per cent of this.
In 2012 alone, social media revenues are expected to reach US$16.9 billion. This predicts a 43 per cent rise in revenues from 2011. Gartner flagged advertising and gaming as areas that would have particularly high levels of growth, whilst subscription products, such as Spotify, will be more sluggish.
So what? The research suggests that consumers, understandably, continue to be attracted to free content over pay-to-use services. Advertising and gaming will make up the vast majority of this revenue because advertising allows services to be provided for free and gaming platforms have successfully had payment as part of their business model from the very beginning.
As a result of this, social media businesses will continue to innovate and develop new technology to incorporate and increase the effectiveness of advertising on their products. Their aim will be to increase the number of users who respond to adverts, or ‘click through’, to drive revenue generation. This trend has led some social media providers that have traditionally offered a premium paid-for service, such as LinkedIn, to vary their business model and look to advertising to grow their revenue.
Social media companies will be encouraged by this forecast in what is a maturing market. In the coming years, the most successful will continue to innovate to attract customers with ‘free’ services, whilst at the same time converting this into revenue.