Global social network advertising revenue will top $5.5 billion this year, sneak past $8 billion in 2012, and approach $10 billion by 2013, according to a new forecast from eMarketer.
U.S. social ad revenues will make up just under half of these amounts, coming to $2.74 billion this year and $4.81 billion in 2013, making it the single biggest national contributor of social ad revenues.
The 2013 figure predicted by eMarketer actually constitutes something of a slowdown in the growth rate for social ad revenues, not just in percentage terms but in dollars added as well. After adding $2.5 billion from 2011-2012, the amount of dollars added falls to $1.95 billion in 2012-2013 -- which seems to suggest that social media advertising may already be approaching maturity.
This slowdown is also reflected in social media advertising's share of total ad dollars in the U.S.: eMarketer has social network ad revenues growing from 6.3% in 2009 to 7.7% in 2010, 8.8% in 2011, 10.6% in 2012, and 11.7% in 2013. In other words, after adding 1.8% share in 2012, social media will add 1.1% in 2013. In global terms, in 2013 social network ad spending will make up 9.4% of total online ad spending.
As might be expected, most of this spending at home and abroad will go to Facebook, trailed at a considerable distance by Twitter and others. However the eMarketer forecast also takes a closer look at advertising revenues for LinkedIn, the first major social network to go public, which needs to demonstrate sustained growth to justify bets placed by early investors.
According to eMarketer, total LinkedIn ad revenues will increase from $140.8 million this year to $200.9 million in 2012 and $249.6 million in 2013. Again, this represents something of a slowdown, as the incremental dollar additions are smaller than the $61.5 million added from 2010-2011.
COMMENTARY: My prediction: LinkedIn will NOT do $200.9 million in 2012. eMarketer also forecasted that Twitter will do only about $140 million in 2011, down from $150 million. They also forecasted that Twitter would do $400 million by the end of 2013, but I find that hard to believe. Both Facebook and Twitter are having a hell of a time selling marketers that their platform as an effective advertising channel.
Facebook has been working on improving its offerings for advertisers by rolling out Timeline and Page Insights dashboard for analytics, as it tries to generate enough revenue to justify its slowly decaying $80-billion market value. In a nutshell, the giant social network is trying to convince advertisers to pay more attention to the engagement that their users and customers have with their brands when they are on the site, rather than simply counting click-throughs from ads and links. It’s a message that suits Facebook’s interests, but it is facing resistance from advertisers.
A general slowdown in hiring is already beginning, and I just don't see much hiring in 2012 unless Congress acts quickly to advance President's $400 billion jobs bill. Anyway, I don't think the Feds will plank down funding for digital media jobs. They are most into "shovel-ready" jobs, primarily construction work repairing America's deterioating infrastructure: roads to bridges. However, I don't see that jobs bill going through, maybe a really watered-down version, and it will be gridlock as usual, anything to make Obama look bad in 2012, and not many new jobs will be created.
Many social media startups that had contemplated floating an IPO in 2011, are having second thoughts due to volatility in the stock markets, sovereign debt problems, and general uneasiness about the state of the global economy. Without an IPO, investors will not have an opportunity to cash out and founders will be unable to raise capital for growth. If investors can't cash out, there's going to be less incentive for them to invest in no social media startups. As a consequence, there is going to be a lot less social media hiring. Social media hiring is hot right now, but 2011 will be the high point.
According to eMarketer, Growth in social media users has already peaked in the U.S., Canada, the U.K. and the EU. Most of the growth will occur internationally.
The number of Facebook users in the U.S. has already reached the saturation point, and moving forward the social media giant's growth will come internationally from India, Asia and South America.
In a blog post dated March 20, 2011, I commented that Facebook's ad-supported revenue model had reached a critical inflection point in 2010, and that Facebook would begin to see a slowdown in user growth and advertising revenues. We are now clearly showing hints of that slowdown.
It's also my feeling that social media has already reached a valuation peak. Social media valuations have been driven by investor exhuberance, hype, the Facebook Halo Effect and a whole lot of future potential. Secondary market brokers SecondMarket and SharesPost have driven valuations of social media startups like Facebook, Twitter, LinkedIn and others to unsustainable highs. The following graph shows that social media is now entering a "valuation trough" or low-point. In my opinion, 2012 will be a big test for many social media startups. As quickly as it grew, social media will undergo industry consolidation beginning in 2012. We won't see a return to growth until after 2012.
Courtesy of an article dated October 6, 2011 appearing in MediaPost Publications' The Social Graf and an article dated May 29, 2011 appearing in Joakim Nilsson blog
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