Growing advertising spending and disposable income will benefit the industry
New York, NY (PRWEB) June 28, 2014
The Social Networking Sites (SNS) industry is benefiting from an increasing consumer base, as more Americans conduct services online. Additionally, SNS attract a growing share of advertising revenue, as they measure the effectiveness of advertising and leverage significant consumer information to accurately target such advertising, thus boosting its effectiveness. As the Social Networking Sites industry leverages its consumer information, revenue is expected to grow at a 36.1% annualized five-year rate to $8.6 billion in 2014. This growth includes a 27.6% spurt in 2014 due to increasing disposable income, which is expected to boost consumer spending on discretionary services like subscriptions or add-ons.
According to IBISWorld Industry Analyst Sarah Kahn, “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, is expected to expand to 6.2% of industry revenue in 2014.
“As profit and the amount of time spent on SNS escalate, new companies are looking to enter the industry,” says Kahn. The number of enterprises is expected to grow rapidly, as opportunities for growth present themselves on new platforms and devices, with increasingly specialized networking sites. As more SNS develop ways to leverage their consumer base, they will generate higher consumer and advertising revenue. Growing advertising spending and disposable income growth are expected to benefit the industry. However, the industry will be growing from a higher base in the next five years, and SNS are expected to focus on expansion in Asia and Latin America.
The vast amount of personal information shared on SNS has generated privacy issues, which have been exacerbated by revelations on government tracking of personal information on these networks. The growing practice of data licensing, through which operators themselves make their data available to industry partners, as well as the notoriously shadowy privacy settings of major industry players, are triggering concerns among users. This growing crisis of confidence is expected to compel industry players to strengthen their privacy protection regulations in the coming years.
For more information, visit IBISWorld’s Social Networking Sites in the US industry report page.
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IBISWorld industry Report Key Topics
The Social Networking Sites 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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