Local Social Spend Projected to Hit $2.95 Billion by 2016

Share this:

With Facebook and others ramping up their monetization efforts, local spend on social media in the U.S. is set to jump 170% by 2016, increasing from $1.1 billion in 2012 to $2.95 billion in 2016, according to the fall update to BIA/Kelsey’s Social Local Media Forecast. The numbers show a slight reduction in the firm’s earlier projections, which had put the compound annual growth rate (CAGR) for local social spend at 28.9% — a few ticks above the newer numbers.

Nevertheless, the fall revisions highlight the same conclusions — namely, that social will play an increasingly important role in the local marketing mix as the big players look to increase revenues. According to BIA/Kelsey’s projections, local social’s slice of the online/digital local media pie will nearly double by 2016, increasing from 4.6% to 7.7% in as many years. The numbers also show that local share of total social media advertising widening from about a quarter in 2012 to nearly a third in 2016.

Like other sectors, the growth in local comes as consumers, and advertisers, are moving to mobile. The report projects mobile social advertising will reach $1.47 billion by 2016, outpacing the growth of desktop advertising by 60% .

“The year 2012 can be viewed as social advertising’s ‘coming of age,’” Jed Williams, an analyst for the firm, said in the press release. “The continued development of native ads, such as Facebook’s Sponsored Stories and Twitter’s Promoted Tweets, and the acceleration of mobile monetization will be the primary drivers of social advertising growth through 2016.”

The report remains bullish on mobile, but attributes smaller-than-expected revenues to fundamental ecosystems issues affecting the wider industry. Mobile ads continue to see CPMs that are a fraction of those for desktop, but the overlay of social data on top of intent-driven local advertising could begin to bridge the gap. A handful of reports have surfaced over the past few months, showing marked increases in the performance of geotargeted mobile advertising over nontargeted ads.

Facebook saw big growth in mobile during Q3 2012, with mobile now accounting for 14% of total revenues. The company’s local ad strategy remains unclear, but it will likely continue to flesh out a so-far-unremarkable SMB strategy as investors zero in on mobile revenues as a key metric.

The big question for Facebook is whether it can convince the 8 million SMBs with active Facebook pages to spend money on the kind of social advertising that was previously free. The company recently announced “promoted posts” — a way for business to expand the reach of their content — in an attempt to capture some of the more-hesitant local marketers,  but the product has been met with mixed reviews. While the company has pushed a self-serve strategy, adoption of paid products among local advertisers will likely come through third-party channels.

Steven Jacobs is deputy editor at Street Fight.