A new report by e-Marketer shows that US paid social network revenues have increased significantly in 2009, and are forecast to continue such growth well into the next decade.
While online ad services have been struggling of late, paid services including membership fees, premium features, and virtual goods have become significant revenue generators. This represents a significant change, since until recently, advertising was thought to be the major revenue source for social networks – where as now, a second major source has arisen.
In July 2009, Piper Jaffray conducted a study showing that US paid social networking site revenues would increase to as much as 1.4 billion USD in 2013. This is a drastic change from 2008, when paid social networking site revenues were shown to be as low as $502 million USD. In 2009, they increased to $632 million USD, and next year, they’re expected to hit $811 million USD.
According to e-Marketer, Piper Jaffray expects the bulk of this growth to come from a combination of new, paid services, from new and existing networks, while also coming from increased usage of premium services and established players including LinkedIn and Classmates.com.
E-Marketer goes further to note that though the revenues from advertising on social networking sites are currently much larger than any premium fees they might receive, this gap is likely to narrow in the coming years.
Emerging is the idea of a “freemium” model, which would allow the social networks to have a basic free version of their services supported by advertising, alongside premium services that can be accessed for a fee. It is thought by many to be the next big thing.
This is promising to be a key way for social networks to increase their revenues. In fact, nearly half of all social media leaders surveyed in February 2009 by Abrams Research said they considered “freemiums” the best way to monetize social media. Next to “freemiums”, targeted ads, polls and surveys, and developer tools were considered important, in decreasing scale.
According to e-Marketer, “Social networks that are currently free, such as Twitter and Facebook, will be able to create new revenue streams by targeting premium content at portions of their user bases that are willing to pay for such services. At the same time, services that operate on some form of paid model should be able to continue charging as long as they keep delivering value.”
Kaila Krayewski is a freelance journalist with a passion for all things internet. Having worked for nearly two years as the public relations manager for an internation search engine optimization company, and publishing hundreds of articles (how-to, informational, and otherwise) on SEO, she knows a thing or two about the field. Furthermore, having just started up her own website blondetraveler.com, she is doing her best to keep one step ahead of the search engines in order to keep the traffic flowing.
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