US Social Media Ad Revenue To Double By 2016

US social media ad revenues are estimated to double over the next four years, with spend set to hit USD9.2bn in 2016 as brands increasingly turn to Facebook and Twitter for advertising.

The research, by BIA/Kelsey, differentiates between the traditional display ads that marketers can pay for on sites such as Facebook and what it calls ‘native ads’, in-house ad products that social media sites have developed themselves, such as Facebook’s Sponsored Stories and Twitter’s Promoted Tweets.

The report forecasts that demand for these native ads, as well as new mobile ad formats, will drive growth over the next four years. In particular, revenue growth for native ads will outstrip the wider market, with sales set to triple over the next four years to nearly USD4bn as premiums on in-house ad products increase.

“The year 2012 can be viewed as social advertising’s ‘coming of age’,” says BIA/Kelsey’s social local media programme director, Jed Williams. “The continued development of native ads, such as Facebook’s Sponsored Stories and Twitter’s Promoted Tweets, and the acceleration of mobile monetisation will be the primary drivers of social advertising growth through 2016.”

Mobile ad revenues are increasingly important for social media companies, with consumers increasingly accessing social networks on Smartphone's and tablets, rather than while sitting at desktop computers.

The report anticipates that mobile social ad revenues will grow from USD500m this year to USD1.5bn in 2016. An increasing willingness by advertisers to experiment with the platform will drive this increase, alongside the integration of native social ads and soaring consumer engagement on mobile.

Facebook reported strong growth on mobile in its latest earnings call, claiming that mobile accounted for 14% of its ad revenues in the last quarter and helping drive its overall ad revenues from UDD798m to USD1.09bn year on year.

Although Twitter does not break out revenue figures, numbers from eMarketer suggest that Twitter will rake in USD129.7m from mobile ad revenues this year, boosting overall ad turnover to USD288.3m. According to CEO Dick Costolo, around 84m of Twitter’s 140m users are now accessing the service on mobile, while Facebook CEO Mark Zuckerberg predicts that its mobile users will eventually outnumber its desktop users.

Despite the growth of native ads, display ads will continue to dominate revenues in social media, as in other online ad categories, boosted by demand for Facebook’s Marketplace Ads and the multiple display formats available on YouTube, which include video and traditional banner ads. The report forecasts that spending on these formats will increase 80% over the next few years to hit USD5.4bn by 2016. Meanwhile, localised social ad spend is also expected to see strong growth, with BIA/Kelsey estimating that revenues will nearly triple in the period, which predicts that revenues will hit USD3bn by 2016.