The Battle for Social Ad Revenue – The Potential Winners and Losers

Social ads battle

As the dust settles from Twitter’s recent IPO, one of the surprising outcomes was the news the microblogging platform is on track to post global ad revenue figures of $1 billion by the end of this year.

In the U.S. alone, Twitter’s ad revenue showed an increase of 93 percent over the same period the previous year, with $277 million posted for the first three quarters in 2013.

With mobile becoming ever more pervasive as the browser of choice for Twitter users, and mobile ads growing less intrusive and more natural, it’s clear that Twitter has moved from the social network that has a “monetization problem” to one that’s set to give the likes of Facebook and LinkedIn a run for their revenue money.

But will it be the “winner” in the upcoming social ads battle?

Why Social Ads Are Big News

With social media finally becoming a staple in the marketing and advertising departments at businesses, reliance on traditional advertising has begun to swing to digital channels.

While media buy and print/television/radio advertising remains important, budgets are increasingly being allocated to digital spend.

As these budgets shift and consumers turn to social media to not only research products and brands, but either buy directly from a social media-led offer or click through to a landing page, the networks are looking at ways to take advantage of this shift and be the go-to ad partner for businesses and marketers.

Social ad budgets in the US

It’s not surprising that the bean counters over at Facebook, Google, Twitter and the rest are so keen to attract advertisers to their platforms—by 2017, it’s predicted that social media ad spend worldwide will exceed $10 billion.

Add in mobile spend and it’s a piece of the pie that will literally cost the networks millions if they’re not part of it.

Social Ad Spend And Revenue By Network

If you look back at how the networks fared in 2013, there’s one clear winner and that’s Google. A study by eMarketer at the beginning of this year predicts Google to account for a third of all online advertising, easily outstripping its nearest competitor, Facebook.

Digital ad revenue

While Facebook shows a strong second with almost $6.5 billion in online ad revenue, both Twitter and LinkedIn trail with a distant $0.6 billion and $0.4 billion respectively. Yet that doesn’t really tell the full story.

Google’s online ad revenue is made up of multiple factors and platforms. For example, while the majority of its revenue still comes from AdWords and AdSense, there’s also the revenue from advertisers on its YouTube property.

Speaking of YouTube, Google launched a Paid Channel option for any user with over 10,000 subscribers, where channel owners could charge subscribers $0.99 or more per month for access. Google is reported to receive around 45 percent of channel subscription costs, adding to its online revenue stream.

Compare the “Big Four” social networks—Twitter, Facebook, LinkedIn and Google+— and Google has a clear advantage by the number of revenue streams it earns from. Add in the recent +Post Ads announcement that meshes Google+ content with Google’s ad network, and it would seem they have the social ad market sewn up.

However, the others are starting to make inroads into this advantage, certainly by number of additional revenue streams if not quite actual revenue yet.

Twitter Revenue Potential

As mentioned earlier, the microblogging platform has (perhaps) surprised many, by sharing some excellent revenue figures. Advertising revenue has increased 124 percent on a year-over-year basis; advertising revenue makes up 91 percent of total revenue, an increase of 4 percent; and gross margins increased.

While operating losses increased and data licensing revenue decreased, Twitter is still in good shape to make a healthy profit in 2014 and beyond from social ads, especially given its acquisitions of companies like Bluefin Labs and Trendrr, with the potential of social ads making their way into TV engagement via Twitter.

Facebook Revenue Potential

The first major network to successfully transition to an IPO, Facebook has used both the money from that as well as increasing focus on its developer labs to continuously introduce new social ad revenue.

While the company has received criticism over its mobile experience versus the desktop one, Facebook has still made great strides in revenue from this part of its social monetization strategy.

While it’s still a ways behind Google—but then again, who isn’t?—Facebook’s mobile ad revenue has tripled in the last year, making it the most impressive when it comes to growth in this vertical.

Additionally, with news that ads from Instagram (Facebook’s first major acquisition) aren’t being received as negatively as Facebook may have feared, the potential for revenue from this channel is something to keep an eye on.

LinkedIn Revenue Potential

While Facebook, Twitter and Google are natural fits for social ads with their consumer-led audience, LinkedIn has always stood apart as a professional business network.

As such, it’s been one of the bigger success stories for social media/network revenue, although its most recent financial reports show one of its first declines in year-on-year reporting.

However, LinkedIn knows it needs to expand beyond premium accounts and services for recruiters for its monetization and has begun to implement a series of changes to focus on that. Its new focus on content is a clear shift in how it wants to double its ad revenue in the next two years.

Additionally, the introduction of a LinkedIn Advertising API will make it easier for brands and agencies to advertise on the network. That’s not even taking into account its mobile plans, with an aggressive update of its app to make the mobile experience as seamless as the desktop one.

Who Will The Social Ad Winners Be?

Just looking at the (current) top four—Twitter, Google+, Facebook and LinkedIn—and the smart money would be on both Twitter and Facebook to make the most progress.

Acquisitions and channel partners, as well as their plans for mobile advertising to continue to add to the revenue stream, should see Twitter and Facebook eat further into Google’s current dominance.

While there’s no doubt that Google+ is increasing in user numbers, how social ads will play into the experience remains to be seen. LinkedIn, meanwhile, still needs to make the experience sticky enough to keep users engaged.

And what about other platforms?

Pandora, for example, continues to see growth in its ad revenue—and with other networks globally enjoying large, engaged user bases expanding their geographic audience, it can’t be too long before the current top four look very different.


A version of this post originally appeared on OPENForum.

image: LaDonna Coy
image: Business Insider
image: eMarketer/Mashable

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  1. James_Madison says

    Great insights, Danny, thanks. I’m curious, do you feel the visual networks like Pinterest, Instagram (which you mentioned) and others like them have a better chance of social ad success due to the rich media they already produce?

  2. says

    StumbleUpon seemed like they should have been able to have a decent chance, but there’s a serious disconnect between the topic of the ads being served and those subscribed to by the users receiving them. This Get Satisfaction discussion explains it more in depth:

    That said, I never see StumbleUpon mentioned in any kinds of these posts, though they’ve had an advertising platform for quite a bit. Perhaps StumbleUpon doesn’t release any of their numbers to journalists.

  3. says

    I suppose we shouldn’t be surprised at this, but the speed at which social media advertising has been embraced is astounding. Do you wonder how quickly it will peak?  What you’ve observed is right in line with what we’re seeing as well.  We are just wrapping up a study in which 91% of participants plan to spend the same or more on social media ads in 2014 than they did in 2013. For those who don’t have social media advertising in their mix, you have to wonder why.Thanks for providing this data and your insights.

  4. says

    @Jerry Rackley  Hey there Jerry,
    Great to see you here, mate, and appreciate the thoughts. I think what’s happening is brands are finally seeing Facebook’s main weakness for the majority of advertisers – that the Facebook model perhaps isn’t as robust or effective as competitor platforms (Google and their ad network springs to mind).
    They still see the value in reaching users on these networks, though, so now the rush is on to identify where the biggest bang for the buck is going to be.
    This video offers an interesting look at why Facebook is struggling to adopt a really strong monetization solution.

  5. says

    Nick Cobb Great point about SU, Nick. I’ve actually used their platform back in the day (but it may have changed since then). The thing I found was the culture of SU actually worked against the ads – users aren’t looking to stay on a site for a while, instead looking for quick hits and new content.
    This doesn’t gel well with the CTA timescale needed to often create a really strong need to stay on a site – so perhaps that’s why SU often gets bypassed?

  6. says

    James_Madison The rich media definitely adds to the visual punch, James. What will be important is how brands maintain the culture of these networks and how invasive the ads appear. This is why Google+ and Facebook are increasing emphasis on how media looks when shared on their networks – it’ll be interesting to see if they can replicate the experience of a Pinterest.

  7. HowToSellHairX says

    First of all, I love your blog. It gives me inspiration. But what I fail to understand is the – missing- link between the pie chart where FB get 57% and the other chart where google gets nearly the whole advertisement  market. Shouldn´t Google be in the Pie chart also

  8. says

    HowToSellHairX They’re two different stats. The pie chart refers to ad spend, and Facebook still (currently) leads the way – Google falls into the “other” category. The second chart refers to revenue, and Google definitely leads in that respect.
    Hope that helps, and thanks for the question!

  9. Luksebastian says

    Great article, Danny! If you are looking for the best results on CPA CPC CPL and CPM campaigns, I recommend Increase your revenue and get worldwide reach!