Last week, Gartner released a report estimating social media revenue will reach $16.9 billion this year, up 43.1% from $11.8 billion a year ago. The numbers represent a huge shift in advertising, with marketers allocating a higher percentage of their ad budgets to social networking sites.
Social networking sites offer marketers a large pool of consumers — consumers that are highly engaged and influential. Gartner notes, “And those consumers share a tremendous amount of information about themselves and their interests on those sites, which enables marketers to finely target ads to distinct customer segments.”
In fact, comScore research shows social networking sites reach 82% of the world’s online population — representing 1.2 billion users worldwide – making marketing to consumers via social networking sites imperative. In order for marketers to reach this massive audience, both Facebook and Twitter have diversified their ad products.
Facebook, for example, recently announced it’s newest ad product, Sponsored Stories, which pull in actions consumers have taken around a brand and leverage them to create “stories” that are contextually relevant and highly targeted. These “stories” are then broadcast across Facebook into the Timelines, Newsfeeds, and Tickers of friends. According to TBG’s Global Facebook Advertising Report, “Sponsored Stories that appeared in the news feeds of mobile users had a click-through rate of 1.14%, nearly double the 0.59% rate for ads in the news feed of desktop users…and advertisers are willing to pay higher rates because the ads work,” says the report.
In addition, the TGB report also shows that both CPM and CTR for Facebook ads have increased. “Across Facebook’s various ad formats, the CPM over the last four quarters (that is, the year ended June 30) increased 58% compared with the same period a year earlier. Click-through rates rose 11%, which compares to a 6% last quarter,” says TBG.
Coincidentally, Facebook Inc. announced its second quarter earnings a day after the Gartner report was released, and further validated the climbing social ad revenue. During Facebook’s earnings call, COO Sheryl Sandberg, stated “In Q2, Facebook reported its advertising revenue at $992 million – about 84% of its total revenue as of Q2, and a 28% increase from the same quarter last year.”
The underlying message: marketers are willing to spend the money for effective advertising. And, according to Facebook, Sponsored Stories are leading the charge by pulling in contextually relevant information and targeting relevant audiences with their new ads. Due to their Consumer to Consumer (C2C) nature, Sponsored Stories are seeing a 53% higher CTR than standard ads. Since Sponsored Stories are fueled by earned media (what consumers are saying organically), then marketers must implement strategies to encourage C2C sharing of content around their brands to drive more effective paid media.
To learn more about Facebook’s Sponsored Stories, check out our newest white paper on What Facebook’s Open Graph Means to Marketers.