Is there no such thing as a free lunch? Oh, but if you consider free lunch supported by brand advertisements on the menu and on the main entree, then we may just have ourselves a winner. Gartner says social media will be a US$ 16.9 billion industry this year, with more than half of revenues coming from advertising. Are our favorite networks like Facebook, Twitter and Google+ earning their billions at our expense?
TechCrunch says we're not just social media users. Rather, we're also products that social networks sell to advertisers and commercial entities in exchange for advertising dollars. Gartner estimates 2012 revenues to include US$ 8.8 billion in advertising -- half of the total earnings of social networks this year. Subscriptions and in-app content are an additional source of income, but none as large as advertising.
Social games will account for US$ 6.2 billion of this market, while subscription services will gain a smaller share, at US$ 278 million.
Growth Slows Down
The US$ 16.9 billion revenue figure is a 43% growth from 2011 revenues by social media companies, during which services like Facebook and Twitter earned US$ 11.8 billion. However, Gartner predicts that growth would likely only grow at a "moderate pace" from this point onward as the number of social media users starts to plateau.
For now, what's important is that social media companies can adapt to the times, including the changing trends in access and user experience. Social media companies' mobile strategies will play a big part in their success, given the growing importance of mobile devices -- like smartphones, tablets and embedded devices -- in the enterprise and consumer setting.
Who's Big Brother Now?
This means more users respond to these newer types of advertising. Brands and companies are most likely to take heed.
Aside from ad revenues, virtual goods, subscriptions and ad-free professional accounts are other possible sources of income. But analysts agree that advertising is currently ruling this business. "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," said senior research analyst Neha Gupta. "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."
It's no secret that social networks and social media outfits usually bootstrap their way to growth and cash in from market intelligence along the way. As subscriptions and content sales only make up a small part of this market, should fledgling social networks take heed?