November 26, 2012
By Judith Aquino,

Social Media Ad Revenue to Reach $9.2 Billion by 2016

According to a report issued today from research firm BIA/Kelsey, U.S. social media advertising revenue is on track to reach $9.2 billion in 2016, up from $4.6 billion in 2012, representing a compound annual growth rate of 19.2 percent.

The bulk of that spending will involve social display advertising, which BIA/Kelsey expects to grow from $3 billion currently to $5.4 billion in 2016, representing a compound annual growth rate of 15.2 percent.

The local segment of U.S. social media advertising revenue will grow from $1.1 billion in 2012 to $3 billion in 2016, representing a 28 percent compound annual growth rate.

"The year 2012 can be viewed as social advertising's coming of age," said Jed Williams, program director of social local media at BIA/Kelsey, in a statement. "The continued development of native ads, such as Facebook's Sponsored Stories and Twitter's Promoted Tweets, and the acceleration of mobile monetization will be the primary drivers of social advertising growth through 2016."

To draw in more ad dollars, Twitter and Facebook have been ramping up their offerings. Spending on native social advertising, such as ads integrated into newsfeeds or content streams, is expected to grow from $1.5 billion in 2012 to $3.9 billion in 2016, according to BIA/Kelsey.

Earlier this year, Twitter rolled out targeted ads based on interests or hobbies that users share on their Twitter streams. Just in time for the holidays, Twitter also announced a promotion last week designed to bring at least 10,000 new small businesses into its advertising program.

As for Facebook, the giant social network has been increasingly adding Sponsored Stories to its 1 billion users' newsfeeds and recently announced plans to develop an external ad network that would allow the company to use its data about users' likes and dislikes to show people ads outside of Facebook.

The report also identifies mobile as a key growth area for social media. BIA/Kelsey estimates social-mobile ad revenue will increase from $500 million in 2012 to $1.5 billion in 2016, representing a compound annual growth rate of 28.5 percent. A variety of forces, including rapid social-mobile consumer usage growth, active experimentation by vendors, and deep integration of native ad units on the platform, will drive this growth, according to the research firm.