We are living in an era of social networking. The addiction of ‘sharing’ everything via online social platforms has been fuelling the rapid growth of social media industry. A recent report from Strategy Analytics cites that the figure of total social media users worldwide have crossed 2 billion mark last year (2014) globally, of which Facebook Inc. (NASDAQ:FB) alone accounts for 68%.
Few major highlights of the report are:
- Marketers spent nearly $15.3 billion on social media advertisings in 2014, an increase of 41% as compared to the last year. This is equal to 11% of the total digital ad spend globally.
- Facebook accounted for three quarters of social network ad spend; Twitter Inc. (NYSE:TWTR) accounted for 8 percent. Strategy Analytics estimates the social ad spend to grow by 29% in 2015.
- Of the total social media users in the world, 46% of users reside in the Asia-Pacific region. China alone accounts for 25% of the global users at 495 million users.
- In North America, 25% of its total population are social media users, followed by Western Europe at 55%.
- The United States have the largest share of the global social media network ad spend at 41%, totalling to $6.2 billion in 2014. This indicates an increase of 35% year-over-year.
- The US has the highest ad spend per network user at $31.37; an Strategy Analytics projects it to grow 27% reaching $39.84 in 2015.
- The United Kingdom followed US in global digital ad spend at 8.2%, while China was third at 8%.
The absence of the social media giant in China has played a pivotal role for local players like QZone and Tencent Weibo to gain a strong foothold in the ever expanding Chinese digital advertising market.
However, on the global level, Facebook remains unbeatable. Over the time, this networking platform has evolved to become a one-stop platform for almost everything one can think off. Be it the acquisition of popular messaging platform Whatsapp or separating its own messenger as a stand-alone app, integrating money transfer feature in messenger or stepping into eCommerce industry after acquiring TheFind– Facebook has been rolling out new features and services constantly to strengthen its dominance over the internet.
Smartphones fuel social media engagement
The rapid adoption of smartphones has accelerated the growth of social media networking platforms, directly affecting the global digital ad spend. Out of the 2 billion social media users, almost 1.7 billion users access social media from their smartphones. It has also been reported that almost 42% of the world’s population has internet access, as in January 2015, indicating a jump from 35% in the last year.
Research specialist Gartner,Inc. estimates the shipment of mobile devices to touch nearly 2 billion in 2015, indicating a 3.5% growth in the mobile phone market. By far, it is the mobile market that has seen the maximum growth. As low priced smartphones, below sub-$200 are gaining traction, the first-time mobile users are now opting for smartphones directly instead of graduating from feature phones. New players like Xiaomi- the Apple of China- has already sold over 56.5 million smartphones in 2014, while Lenovo sold over 84 million mobile phones during the same time. The strong sales of Moto G and Moto E are also testimony to the low-cost,power-packed smartphone sales.
With the internet penetration increasing, thanks to 3G and 4G networks in Tier-II and Tier-III cities, world’s half population are glued to social networking sites via their smartphones.
Global Ad Spend (online and Offline)
The global ad spend, both online and offline, is estimated to touch $667.65 billion in 2018, of which digital ad spending will account for one-third of total spending. Expenditure on ads related to the internet medium, which includes smartphones, tablets and computers, is expected to reach $170.50 billion in 2015 but only at the cost of a fall in the share of expenditure on radio ads, magazines, and newspaper ads. By 2018, the digital ad spending is expected to reach $204.01 billion .
Mobile ads are the main driving force
Mobile ads will be the main driving force for the increase in digital ad spending. It is expected that mobile ads will form 10% of the total expenditure on ads in 2015 and more than 37% of the digital ad spend. After 5 years of traditional mobile advertising methods, marketers are now focusing more on optimized and targeted ads. These targeted ads, also termed as Native Ads, promise the highest ROI at present. International Advertising Bureau(IAB) estimated the native ad industry was worth $331 million in 2014 and is predicted to be a billion dollar opportunity for publishers in near future.
In an interest to reach out to the larger chunk of audience, marketers look up to the networking platform Facebook that has the largest user-base. However, Facebook advocates mostly paid-ads on its platform. In fact, organic reach on Facebook has come to become nil in January 2015.
It has been reported that social media lead Facebook has 526 million mobile-only monthly active users and 30% of its total users log-in ONLY through a mobile device. With almost 60.3% Facebook sharing happening over mobile phones, it is more than evident that to redirect targeted ads, it is mobile advertisement that needs immediate attention. Similarly, micro-blogging platform Twitter has 80% of Twitter activities happening on mobile phones.
Is digital ad spend dependent on Networking only?
According to Advertising Expenditure Forecast by ZenithOptimedia, mobile advertising, programmatic buying and social media is to drive 17% of growth in digital ad spend in 2015. The global ad spend is estimated to grow by 4.9% in 2015 and 6% in 2016. The global ad spend in the last year was 5.1% due to the Winter Olympics, World Cup and US mid-term elections. However, in 2015 there are no such international event that can push the digital ad spend. Hence, this year there will a slight dip, which will again pick up in 2016 which has events lined up – The Summer Olympics, US Presidential Elections and UEFA European Football Championship. It is expected that ad spend will grow by 5.6% in 2016 but will again dip in 2017 at 5.2% considering that there are no events in then.
Social media engagement will continue to propel the ascend of global ad spend as marketers are now focusing on programmatic advertising to generate more revenue.