It’s not difficult to understand the lure of social media advertising.
As brands look across a fractured media landscape, where few digital properties offer any scale, social networks offer them an interesting proposition.
- They have scale: enormous user bases and deep databases. Facebook, for example, now boasts more than 1 billion users globally. Twitter has 200 million.
- They have high engagement. According to Nielsen, Americans were spending an average of 12 hours per month on social networks as of July 2012. Americans between the ages of 18 and 24 spent more than 20 hours a month. According to Experian Marketing Services, the share of time spent on social media is fairly consistent internationally: U.S. users spent 27% of their time online on social media, in Australia the figure was 24%, and in the UK social media’s time-share was 22%.
- Potentially, social media gives brands a captive audience for their content. Theoretically, once a user opts to follow or like a brand on social media, the advertiser can spray these users with their content at-will. However, if content creation is handled deftly, then brands have a chance to achieve the holy grail of social advertising: consumers organically sharing and discussing your content. Social media has spurred a cottage industry that promises to help advertisers try to achieve this.
Pay To Play
Social advertising runs on a freemium model: you join for free and then only pay for premium services. It costs brands nothing to get their feet wet in social media — any business, large or small, can set up a free Facebook page or a Twitter account to get their skin in the game.
According to Nielsen’s report on social media advertising, nine out of 10 advertisers report using social media’s free tools.
However, Nielsen also reports that social media only represents 1% to 10% of ad budgets for a wide majority of advertisers, indicating that most advertisers stick to the free tools. (See chart above, right.)
Only when they really want to supercharge their efforts — and guarantee a certain audience — do they decide to pay up.
This gets to the heart of paid social media advertising: it is the promise of known eyeballs in an era of diffuse audiences.
Brands are paying to get their content or copy in front of a quantifiable audience, an increasingly rare feat in an era of scattered consumer attention.
The desire for guaranteed attention also helps to explain social media’s move away from traditional display ads — like Facebook’s right-rail ads — and toward so-called native ads that surface in a user’s stream, either as a tweet or a Facebook post.
A consensus seems to be forming around in-stream advertising as the most promising social advertising format.
The move toward native reinforces mobile’s increasingly central role in social media advertising. On mobile’s smaller screens, the stream is the experience.
(Click on the links for more detail on native ad formats in Facebook, Twitter, and Tumblr.)
So native social ads will play a substantial role in social advertising as sites capitalise on usage habit shifts. In-stream advertising, easily transferable across devices, will drive the change.
With this consensus emerging around social ad formats, what will the social ad market look like in the next few years?
BIA/Kelsey recently came out with a study that offers one view.
The research firm is forecasting $11 billion of social ad spend in 2017, up from $4.7 billion last year.
What’s interesting, however, is their predictions of how that ad spend will fall out.
They are forecasting that U.S. social ad spending on mobile will rise to $2.2 billion in 2017, up from $600 million last year. That would give it a 20 per cent share of the market.
However, given the shift in usage patterns that seems wildly pessimistic.
According to comScore, both Twitter and Facebook have passed the 50% mobile usage mark and, given the continued growth of mobile devices, it will only rise. Overall, mobile accounts for just under 40 per cent of time spent on social media, according to Nielsen.
Mobile accounted for 11% of Facebook’s ad revenue last year even though it didn’t release mobile ads till the tail end of the second quarter. By the fourth quarter, it was up to 23%. As we mentioned earlier, Twitter reported that its mobile ad revenue now regularly outpaces its desktop ad revenue. Finally, Tumblr is rolling out its first major ad product on mobile (even though it has the lowest mobile usage of all the services listed above).
Given the easy transferability of in-stream ads to mobile, it seems likely that mobile as a percentage of social ad revenue will track usage patterns fairly closely. In fact, social ads on mobile may be what helps push the mobile ad market over the top.
What more. it seems that social ads on mobile may be more effective than their desktop. According to social ad optimization platform TBG, Facebook’s mobile ads have the highest click-through-rates by a substantial margin.
With that said, it seems highly unlikely that mobile will account for only 20% of the social ad market come 2017, especially as usage habits continue to change.
BIA/Kelsey also forecasted out social ad spend by ad format. They predict that native social ads, which is to say in-stream, will rise to $4.6 billion in 2017, up from $1.6 billion last year. That would give it a 42 per cent share of the market.
However, this too seems a bit low, given the general apathy surrounding display ads—both their effectiveness and their aesthetic imposition. Furthermore, native in-stream ads are perfectly transferable across devices, whereas display ads can have issues on a smaller screen.
For now, the future of the social ad is mobile and in-stream.
THE BOTTOM LINE
- Social advertising is the promise of a known, engaged audience in a fragmented media landscape.
- A consensus seems to be forming around in-stream advertising as the most promising social advertising format.
- Mobile will play a substantial role in social advertising as sites capitalise on usage habit shifts. In-stream advertising, easily transferable across devices, will drive the change.
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