Good news for those who believe social media advertising revenues will be crushed by mobile: A researcher is estimating that the category will double by 2016 to become a $9.2 billion business, in the U.S. at least.
BIA/Kelsey projects a 19.2% annual growth rate for the next four years for social media ads. The researcher believes that so-called native ads like Facebook’s Sponsored Stories and Twitter’s Promoted Tweets will lead the growth.
Such native social advertising will grow from $1.5 billion in 2012 to $3.9 billion in 2016 for a 26% annual growth rate. BIA/Kelsey predicts that Facebook, Twitter and others including StumbleUpon and Tumblr will be able to command higher prices for the formats.
Even the oft-derided social display ads the ads you see on Facebook’s right-hand column or the banners on YouTube will also grow from $3 billion in 2012 to $5.4 billion in 2016, which amounts to a compound growth rate of 15.2%.
The report’s sunny take contrasts a bit with a pervasive belief that the growth of mobile will torpedo overall ad revenues. For instance, Facebook’s stock fell as low as $17.55 after the company went public at $38 as investors punished the company for its perceived lack of ability to monetize its growing mobile audience.
But even Google, which has anticipated the mobile revolution, has seen its average cost-per-click fall as mobile takes a bigger slice of the overall pie.
For its part, BIA/Kelsey estimates social-mobile ad revenues will jump from $500 million in 2012 to $1.5 billion in 2016 as the category grows at an annual compound rate of 28.5%. “We’re pretty clearly placing a bet that mobile ads will perform,” says Jed Williams, a senior analyst with BIA/Kelsey.
“Obviously, mobile ad economies are not very good, but as demand goes up, hopefully the prices will go up.” Early indications are that Facebook’s native mobile ads are performing well. The company’s ability to grow the business, though, will be constrained by screen size and a more limited tolerance for ads, Williams says. But “a better, more robust ad unit can be a driver,” he says.