Study predicts massive social media ad growth

A recent BIA/Kelsey study revealed that mobile ad spend is expected to reach $9.8 billion by 2016. This is a marked increase from the $3.8 billion seen in 2011, resulting in a 21 percent compound annual growth rate (CAGR).

The primary drivers for growth are predicted to be the changes in Facebook and Twitter's ad platforms to allow better opportunities for brands to reach consumers.

This is especially interesting given how subpar Facebook's marketing prowess has been in the past. Forrester Research analyst Nate Elliott recently wrote in his blog that he questions how useful Facebook actually is for marketers.

He notes that Facebook's ad offerings have failed to evolve over time, and that certain industries such as consumer electronics and financial services are no longer sure if Facebook is the best place to dedicate their social media budgets.

The site's struggle to find a way for brands to leverage its massive user base is concerning. In the past, it had charged marketers to host brand pages and even featured banners from MSN's ad network. Last year, Facebook made less than $4 in ad revenue per active user in 2011, and Elliott suggested that the social network's $1 billion investment in photo sharing app Instagram may have been better off allocated to a new marketing concept.

However, given Facebook's popularity and reach, it's unlikely that its scuffling marketing initiatives will hinder overall growth in the ad sector, as BIA/Kelsey predicts that non-display ad formats (such as Twitter's promoted products) will grow from $140 million in 2011 to $630 million in 2016 - a 35.2 percent CAGR.

Furthermore, local marketing in the U.S. is projected to rise from $840 million to $3.1 billion over that same time period, pointing to the importance of hyper-local search and being listed on Google Places.

"Better performance, coupled with richer formats and creative elements, like video, will be the principal social ad market growth drivers," said Jed Williams, analyst and program director for Social Local Media at BIA/Kelsey. "Social advertising's local business penetration will steadily increase as SMBs' understanding of social media deepens, and as the networks continually improve the ease of onboarding and campaign management. Facebook opening its Ads API to more partners, including those that work with SMBs, and Twitter's self-serve platform will help to 'democratize' social ads, which will ultimately lead to more local growth."