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Social media has grown like a weed on the consumer usage front but when it comes to revenue, social media hasn't yet found enough friends in the form of advertisers to cement its place as a digital marketing staple.

According to Forrester Research, however, that will all change by 2014. As our own Meghan Keane detailed, spending on social media marketing will grow to over $3bn by then, up from an estimated $716m this year, Forrester predicts.

While that's impressive growth, Forrester's predictions also demonstrate why the anticipated growth in spending on social media is a red herring: by 2014, 59% of the total online ad spend will go to SEO and PPC. That represents $31.5bn of the total online ad spending pie, or more than 10 times the size of the social media slice.

This is an important point that cannot be underestimated by digital marketers, entrepreneurs, executives and investors.

As great as social media is, here's the problem: while there's good reason to believe that social media has a bright future and a $3.1bn/year market is nothing to cough at, assuming Forrester's numbers are not going to be exceeded by a significant amount (say double or triple), social media will represent a limited market.

$3.1bn may sound like a lot of money but in the overall scheme of things, it isn't. Furthermore, and most importantly, given the structure of the social media market, it's questionable as to how much of that will be available to smaller players. Already, today's most prolific social media revenue generators (Facebook and MySpace) already account for the vast majority of social media spend and in fact, if projections of their 2009 revenues are accurate, almost all of the $716m Forrester sees being spent on social media this year will be attributable to Facebook and MySpace.

Marc Andreessen, who is on the board of Facebook, has gone so far as to state that Facebook could pull in a billion a year in revenue if it pressed monetization. Whether you believe him or not, it's clear that Facebook alone is currently a primary beneficiary of a significant chunk of the social media spend.

The key take-away from this for those looking for the greatest digital marketing opportunities over the next 5 years is that unless social media finds some business model steroids and there is a sudden fragmentation in a market that is today dominated by a handful of players, the slice of the ad spending pie that belongs to social media has already been saved for someone else.

So while social media is here to stay and there is some opportunity, if you're looking for the biggest opportunities in digital marketing, chances are you're going to find them in search. That you can take to the bank.

Photo credit: Sam Pullara via Flickr.

Patricio Robles

Published 9 July, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2392 more posts from this author

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Jamie Riddell

Social Media will never overtake ad spend. For a start for social media to perform it needs to be picked up in a 'viral' fashion which means from smallish investment the results can be huge.

Paid Search spending will remain huge as it is such a massive volume and business driver that you cannot achieve without ad spend. SEO will sit somewhere in the middle.

If billions of dollars are spent on social media they will be in the form of display/search advertising rather than 'social media strategies'.

about 7 years ago

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Dean Fankhauser

I really don't know why you bother trying to predict online ad spending in five years. It's a waste of time.

All it takes is for Facebook to come out with a new ad platform or the equivalent of an iPhone release and all your 'predictions' are out the window.

The chances of this happening? Very high!

SEO is becoming less relevant and PPC will be replaced by a social platform equivalent that is much more effective. That's not in five years, that's in the next 1-2 years.

about 7 years ago

Ben LaMothe

Ben LaMothe, Web & Social Media Strategist at Renaissance Creative

I agree, however I believe there's a caveat that hasn't been mentioned: real-time social media search. Combining the two will be a HUGE market. It will require Google to re-think their approach to search. Bing is trying to jump into the game early with the option to search Twitter, but it's got a long ways to go until it's serious. 

about 7 years ago

Brian Clifton

Brian Clifton, Author, CEO & Web Metrics Strategist at Advanced Web Metrics

You really cannot monetise social media in the same way you can with Adwords, Adsense, email marketing or banners (where the majority of online budgets are spent).

For that, you have to conclude that social media, is simply a place to display your brand. Unfortunately, that is what most marketers think of social media at present - "lots of eyeballs on Facebook, therefore we need our brand to be seen there. Lets setup a banner campaign for XYZ dollars".

Marketing with social media is a craft that is an extension of SEO (think "link bait" in a more subtle form) and just as difficult to monetise because there are no many factors that stretch across the business to take into account.

Brian Clifton

about 7 years ago

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Pete Healy

Tom Ollerton is right on the mark with his reminder that "the best results will be found in the mix," of which social media will be, well, just one more medium.  A powerful one, yes: Word-of-mouth turbocharged.  But so much of the froth and frenzy over social media in the past year ignores the ongoing reality that consumers engage with brands across a range of media and environments, online and offline.  Meaningful touchpoints must bridge and connect--at least until we're all chained to our screens 24/7--so social media "gurus" should be showing skeptical marketers how the medium can *integrate and amplify* their entire marketing mix.  I say this having directed the "Mentos+Diet Coke Geyser craze" in 2006-07.  (BTW, advances in mobile technology in the next 24 months will accelerate integration, from online to in-aisle at retail.)

about 7 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Tom.

This point of this post was not to suggest that ad spend be directed at PPCa nd SEO only; that doesn't make sense. It was this:

The key take-away from this for those looking for the greatest digital marketing opportunities over the next 5 years is that unless social media finds some business model steroids and there is a sudden fragmentation in a market that is today dominated by a handful of players, the slice of the ad spending pie that belongs to social media has already been saved for someone else.

If you're a digital marketer, entrepreneur, executive or investor looking for the greatest opportunities in which to invest your time, energy and money, social media isn't going to provide them although you might easily forget that if you fall for the hype of 'social media is the future' or 'look at the growth rate!'

about 7 years ago

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Rachael Alger

For the most part, I am in agreement with Dean.  Saying that Social Media has no further advertising aplication than we have currently is like saying that the old cathode ray tube tv is all that can be achieved.  It'll be exciting to see what emerges in the next 6 months to year.

about 7 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Rachael,

I did not state that "Social Media has no further advertising aplication than we have currently".

This is about the economics of opportunity. Even if you double Forrester's estimates and project a $6bn/year market for social media by 2014, any entrepreneur, executive, digital marketer or investor looking for the online ad market that offers the most opportunity is clearly going to discover that it's search-related.

Social media will advance and it's well on its way to establishing a nice niche but the size of the market and the structure of the market mean that those looking to invest time, energy and money should remember that the economics and structure of the search market provides better opportunities.

That is all.

about 7 years ago

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craigm

Dean can I have what you are smoking.

First you ask why anyone would "bother trying to predict online ad spending in five years. It's a waste of time."

But you then say:

"SEO is becoming less relevant and PPC will be replaced by a social platform equivalent that is much more effective. That's not in five years, that's in the next 1-2 years."

In the next 1-2 years?  In the next 1-2 years someone is going to invent something better than search engines, better than contextual advertising?

GoTo started punting PPC in 1998, and you'll find old SEOs who claim to have been optimising websites for ten years before that.

Despite this, something (not yet announced) will be conceived, proofed, funded, tested and rolled out on a global scale in 12-24 months and it will be so good that people will stop paying for adwords? 

And as for SEO becoming less relevant? Words simply fail me, and all I can say is I hope you don't work in a position that sees you advise companies on their digital strategy.

P.S. I won't even bother mocking your facebook prediction, suffice to say I need to wipe my dinner off my screen...  Its a shame Drama 2.0 became a porno king, I'd have loved to hear his take on this...

about 7 years ago

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Nancy1122

I completely agree with Brian... Marketing with social media is nothing but the modern generation offsprings of <a href="http://www.vastvision.com">seo</a>

about 7 years ago

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neilperkin

Interesting discussion. I wonder though how long we will keep thinking of social media as a 'channel' like this. With the increasing socialisation of all media, surely it will make less and less sense. I think this misses another point as well - the monetisation of social won't only be through advertising, but by content producers and marketers investing in the creation of social platforms.

about 7 years ago

david byrne

david byrne, new business consultant at Thirty3above Ltd

huh?

all it takes is one social site/network to "catch" everyone at one time.

The talking movie is a flash in the pan along with that hitler guy....

about 7 years ago

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Joan Stewart

New to marketing, but not business, I have found social marketing most definitely has a permanent place, and will develop to greater heights in the coming year.  Facebook, although you experience extremely slow growth, may be a logical step in marketing together with Digg and MyBlogLog. Twitter is really sociable, used for the occassional "broadcast", extremely time consuming, but necessary. The comments above are appreciated and most insightful, thanks.

about 7 years ago

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Pat McCann

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Great article Patricio and SPOT ON.

I love all these ads on Monster and Careerbuilder looking for a "Web 2.0" or "Social Media Expert" - and even funnier than some of these are big time, legit companies that are being FLEECED by consultants with the promise of big riches at the end of a Twitter feed or Facebook page.

Social Media will continue to grow (as you correctly stated) as part of a balanced marketing strategy.  But to invest lots of time, money and energy in these platforms, especially to the detriment of established channels like SEO and PPC makes no sense.

about 7 years ago

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mirc indir

Tom Ollerton is right on the mark with his reminder that "the best results will be found in the mix," of which social media will be, well, just one more medium.  A powerful one, yes: Word-of-mouth turbocharged.  But so much of the froth and frenzy over social media in the past year ignores the ongoing reality that consumers engage with brands across a range of media and environments, online and offline.Thankss

almost 7 years ago

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Dean

Craig M, I guess you have inside knowledge as to what Twitter, Facebook and Myspace are developing. I guess you believe they have been sitting, twiddling their thumbs for the last five years thinking they don't want a more substantial slice of the online advertising market. Are you that naive?

Do you really believe that predicting five years in advance in any industry, particularly the digital industry is wise and accurate? I definitely don't want whatever it is that you're smoking!

Clearly you work in the SEO/PPC industry and would rather cover your face with a pillow than admit that any technology and any digital industry is under threat at any given time with the flick of a switch. 

almost 7 years ago

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facilities manager jobs

This is looking like a great article well done you for reporting so well.regards

about 6 years ago

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Mystery Shopper

Too much importance has been given to social media, in my view this is mainly because results can be seen. Now, although results can be seen, this doesn't mean it's the right kind of result!

Great, a business can have 1000s of "likes" or "followers", but if these don't ultimately lead to sales then surely it's of no significance other than vanity?

MS

over 5 years ago

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David De Courson

We have tried both social media management, SEO and PPC and they have all provided results but some are easier to measure than others. Obviously the best has been PPC as it can be targeted so specifically through exact and negative match keywords (and of course using goal tracking software). However, it's unfortunately also the most expensive and not ideal when the cost per click goes up. SEO is gradually getting outdated - what will be next?

over 5 years ago

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