If you went to the store and bought $4.00 worth of goods, that’s not going to keep the place open for business. But when 1 billion people each spend $4.00, now you’re on to something.
Deloitte has just released the 10th edition of their “Predictions for the Technology, Media and Telecommunications” report and one of the questions is “Social Network Advertising: How Big Can it Get?”
The answer, they say is about 4 billion in 2011. That’s a combination of advertising, virtual goods and social network ecommerce. When you pull out only the advertising dollar, the ARPU (average revenue per user) drops to $3.50 which is still an expected rise over the $3.00 ARPU for 2010.
Deloitte says that even though social media advertising is growing incredibly fast, it still represents less than 1% of the total worldwide advertising dollar. Where things really get interesting is in the “other” categories such as virtual goods, where the growth rate is expected to top ad growth in social media.
They also point out that even though the ARPU numbers only tell half the story when compared to traditional search and display marketing.
“Thanks to a low cost base, social networks might still achieve impressive gross margins despite their relatively low revenue per user. . . A social network’s cost of content is close to zero since it merely provides the infrastructure, while its users and third party app developers provide all the content.”
Actually, there’s a third part to the story and that is the untested nature of social media advertising. Right now, we measure success with the tools used to define the success of any non-social media campaign and that’s probably not giving us the full picture. We simply haven’t been at this long enough to know the long term benefits of social media ad spending.
Deloitte’s prediction is that in the near future, social media advertising may take a backseat to other, more lucrative ways of using the medium to create revenue, ways we probably haven’t even begun to think about.