Social media revenue has been projected to reach $16.9 billion (€13.7 billion) in 2012, up 43.1% from the year before.
Research firm Gartner claims advertising will continue to be the largest contributor
to social media revenue. Ad revenue is projected to total $8.8 billion in 2012. Social gaming revenue more than doubled between 2010 and 2011 and is expected to reach $6.2 billion in 2012, while revenue from subscriptions is expected to hit $278 million this year.
"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."
Gartner expects the number of social media users to increase at a moderate pace, with new forms of media and entertainment to keep users engaged, as well as attract new ones. However, 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, mainly driven by the fact that these sites offer a large pool of engaged users who spend considerable time on these sites - this increases the potential click-through rates (CTRs). Social media sites enable marketers to target ads to discrete consumer segments by unlocking the interconnected data structures of users that include lists of friends, their comments and messages, photos and all their social connections, contact information and associated media.
"Social media sites are becoming more innovative in their ad products to attract marketers," Gupta said. "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."
Gupta added that 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.
"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," he said.