A few years have passed since the doomsayers first predicted that the social media bubble would burst, and so far their predictions have not to come to pass. Even if there have been more than a few casualties in the social media space – anyone remember Friendster or MySpace? - the sector as a whole has thrived and prospered.
With Facebook alone boasting more than 800 million users, it’s safe to say that social media has quickly gathered an enormous amount of critical mass for a medium that is barely a decade old in its present form. It’s not just that users are flocking to social media, but also that it is starting to generate big revenues for the companies that dominate the space.
eMarketer estimates that ad revenue from social networks would top US$5.5 billion in 2011 – a figure that will double by 2013. Most of the growth will be driven by the most popular social networking services, namely Facebook, Twitter and Linked-In. Facebook alone is expected to have generated $3.8 billion in revenues last year. This growth is taking place against the backdrop of a global media and advertising industry that is still feeling the pain of a worldwide economic crisis.
eMarketer’s stats show that social media ads accounted for 6.9% of worldwide digital ad spending last year and forecast that they will amount to about 9.4% of the total by 2013. This is clearly a platform that few advertisers can afford to ignore and one that will only grow in importance over the next few years as social media sites introduce a range of changes and enhancements to their business models.
For example, it is not yet clear what impact Google+ will have on the growth of the social media space. Google has added new features such as the Google+ Your Business tools and products to Google+ in recent months, and is likely to look at ways of pulling its search and social products more closely together in months to come.
In addition, Facebook is thought to be putting together a new Ad Sense-like product for advertisers, Linked-In has rolled out a number of new ad formats and Twitter is looking to debut a self-service platform for advertisers. Innovation is taking place at a rapid rate, and advertisers will need to keep up.
What all the stats and trends show very clearly is that social media is emerging as a platform in its own right, one that is generating enormous value because of the amount of people who are using social networking sites and tools to interact with each other. It’s a channel in flux, but one that has broken into the mainstream.
The value of social media lies in the connections that consumers forge with each other and with organisations, which means that advertisers cannot think of it as an add-on to their traditional online buys, but as a new space that demands new strategies.