Tuesday, October 11, 2011

Social Media Revenue Growing Substantially

Despite a faltering global economy revenue in the social media sector is continuing to see explosive growth, increasing by more than 40 percent in the past year to more than $10 billion.

And that trend is expected to continue as more and more stream online, signing up for services and joining sites. This increase in viewership is expected to cause advertising rates to increase, pushing revenue even higher. Analysts expect that by 2013 social media revenue will surpass $50 billion annually.

The key for social media content producers, however, is developing new and different models to capture as much of this revenue as possible. So far, advertising accounts for more than half of all revenue generated by social media. This number is expected to grow, as is its share.

It is interesting to note, with approximately 1 billion people using social media, that still represents just 1/6 of the possible audience. As social media claims more and more of the viewing audience it is only logical to expect revenue increase. The key will be determining what news way can be designed to capture the largest piece if the pie.

Social gaming revenue is on pace to reach $3.2 billion in 2011 and grow to $4.5 billion in 2012. Social gaming includes revenue that social networking sites earn directly from users who play games that are developed in-house, and the revenue earned by allowing game developers/publishers to use their sites as a platform to let users play with friends on the network. It includes revenue earned from "virtual wallets" within games (such as when users spend virtual money on in-game items like swords or tanks, or to create virtual armies).

“We have seen social networks take a platform-oriented approach to game monetization. That is, the social networks have evolved into platforms for social gaming by publishing APIs that help build an ecosystem of developers and publishers,” Ms. Gupta said. “The dominant monetization models for social games are ad-led and ‘freemium’ models. The free-to-play games are funded either through advertising (wall advertisements and in-game branding) or through in-game monetary transactions that enable users to ‘level up’ or buy virtual goods.”

Social media subscription revenue is forecast to reach $236 mn in 2011 and total $313 million in 2012. Few social sites charge subscription revenue, mostly for premium services. Some professional sites such as LinkedIn, Xing in Germany and Vladeo in France, charge a subscription fee from their users for enhanced services, such as an expanded profile view.

Click here to read more about social media revenue.

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