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Social network ad outlook modest, unclear

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New York—Social networks, while growing exponentially in terms of participants, are receiving only modest advertising revenue compared with other media, according to a report by professional services company Deloitte Touche Tohmatsu.

Deloitte predicted that social networks this year will surpass 1 billion unique members and deliver more than 2 trillion ads. However, according to the company, ad revenue of about $5 billion represents less than 1% of global ad spending. In addition, rates measured by cost-per-thousand impressions (CPM) will remain low, and subscriber growth rates may soon stagnate.

The company said that extracting useful insights from user data was imposing a drag on CPMs, and that “the billions of stated 'likes' may not all necessarily signal an intent to purchase.”

Deloitte added that social networks may generate better revenue as payment platforms, or as a “blended e-commerce department store model,” charging commissions on online sales.

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