Rising disposable income will encourage consumers to purchase optional services, boosting revenue
Los Angeles, CA (PRWEB) April 10, 2012
The Social Networking Sites (SNS) industry is benefiting from an increasing consumer base. According to Comscore, an online audience measurement company, such sites accounted for one in 12 minutes spent online in 2007 while they now account for one out of each six minutes (as of June 2011, most recent data available). Additionally, according to IBISWorld industry analyst Agata Kaczanowska, “social networking sites attract a growing share of total advertising revenue because they can measure the effectiveness of advertising and can leverage significant consumer information to accurately target such advertising, thus boosting its effectiveness.” As the industry leverages its consumer information, revenue is expected to grow at a 35.8% annualized five-year rate to $4.8 billion in 2012. This is including high growth in 2012 due to increasing disposable income, which is expected to boost consumer spending on discretionary services like subscriptions or add-ons.
Five years ago, SNS were much smaller and unable to monetize their services. During this time, the industry invested significantly in targeted advertising services and consumer controls. As the number of subscribers grew, the amount of revenue per subscriber also increased while costs per subscriber contracted. Industry profit, as measured by earnings before interest and taxes (EBIT), is expected to expand in 2012. “As profit and the amount of time spent on SNS escalate,” says Kaczanowska, “new companies are looking to enter the industry.” The number of enterprises in the Social Networking Sites industry is estimated to grow 30.3% on average annually over five years to 3,357 SNS in 2012. Enterprise growth is forecast to increase slightly in the next five years due to a growing array of specialized networking sites and more relaxed spending environment than in the past five years. The industry’s major players, Facebook and LinkedIn, dominate the industry in terms of revenue and market share concentration.
As more SNS develop a way to leverage their consumer base, they will generate higher consumer and advertising revenue. Growing advertising spending and positive disposable income growth are forecast to benefit the industry in the next five years. However, the industry will be growing from a higher base in the next five years. For more information, visit IBISWorld’s Social Networking Sites report in the US industry page.
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IBISWorld industry Report Key Topics
This industry includes social networking website publishers and developers. The industry does not include general publishers of internet content, online dating websites, online forums, online video games or other social game developers.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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