We all know that social media is hot. Increasingly, however, it’s becoming big money. A new study by Gartner, Inc. projects global social media revenue will reach $16.9 billion in 2012, up 43% from 2011. Advertising revenues will comprise a big chunk of this projected boon ($8.8 billion), followed by spending on social gaming ($6.2 billion). Marketers are attracted to social media networks for two main reasons: 1) their large and highly-engaged user bases suggest higher ad click-through-rates (CTRs), 2) marketers can tap into vast amounts of user data contained on these sites to deliver highly-targeted ads to numerous consumer segments.
Interestingly, according to Gartner, social media market is still in its relative infancy:
“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.”¹
Gupta’s reasoning is supported by recent disclosures from Facebook suggesting that users are now sharing over 8 billion pieces of content on the site each day, up from roughly twice the amount (4 billion) of daily shares a year ago. This is creating a virtuous cycle for social media advertisers: more data means more possibilities for ad targeting, which in turn leads to higher revenues for social media sites like Facebook.
In fact, Facebook’s worldwide CPM rate has increased 58% in the last year, and 25% in North America from Q1to Q2 2012, according to data from the Global Facebook Advertising Report Q2 2012 by TBG Digital.²
WIDGETS UPON WIDGETS
So the name of the game is big data. For social media sites, data=revenue. Social media companies like Facebook collect both onsite and offsite user data. Onsite data sharing is pretty straightforward-when I login to Facebook to update everyone on how much fun I had at the Springsteen concert, I’ve created one of the now 8+ billion pieces of content shared on the site each day.
To encourage offsite users to share content, social networks support free social sharing widgets to drive more content (data) to their sites. For example, if you are reading this blog and decide to share it on your Facebook page, you simply click on the Facebook share widget above, and a link to this post instantly appears on your Facebook page, along with any content (comments, etc) you add. Significantly, your fans will see the post in their newsfeeds and possibly (hopefully) share it, creating yet more on-site data/content.
Not surprisingly, the use of widgets is booming. Cloud-based data management platform Krux Digital has found that data collection via widgets has ballooned almost 800% since 2011.³
For most people, social media usage is not a one and done- they keep using it, creating a constant stream of data that builds on itself over time. For humans, knowledge is power. For social networks, content is power. Content is information. Almost every content action performed by a social media user adds information to the social network databases – data that can be sliced and diced for marketers to exploit.
It’s no wonder that, in a recent survey by AdAge and Citigroup, 72.9% of marketers said they expected their overall social media budget to increase over the next year.⁴
Frankly I’m surprised it’s not higher.
³ eMarketer, “Online Data Collection Explodes Year Over Year in US”
⁴ eMarketer, “What Are Marketers Spending on Social Media?”