Social Media Advertising Spending to Grow 432 Percent by 2014

Social media may be booming as a platform but actual revenue is still small compared to the number of users. A new forecast from research firm Forrester Research plots a good-looking future though, with social marketing spending rising to $3.1 billion in 2014, becoming the third largest form of online marketing after search and display advertising.

Social marketing will also see the biggest growth with a compound annual growth rate (CAGR) of 34 percent for the next five years, double the average growth rate for overall online marketing spending. Advertising spending in social media will be an estimated $716 million in 2009, a distant fourth and only surpassing mobile advertising, which will generate an estimated $391 million. That is expected to change in the coming years, reaching $3.1 billion in 2014, but still far behind search advertising with an estimated $31 billion spending in 2014 and display ads which will generate almost $17 billion.

While social media spending may be the fastest growing, the biggest markets will also see considerable increase, with search advertising spending doubling in the next five years, with a CAGR of 15 percent. Display advertising will also see healthy growth, more than doubling in size, with a CAGR of 17 percent, so it's no surprise that Google, the biggest player in online advertising, is increasingly focusing on this type of advertising. Display advertising has been a weak point for the company historically, but it hopes to become a much bigger player especially after the $3.1 billion acquisition of Double Click.

Things don't look so good for the advertising market as a whole, which is expected to shrink, and offline advertisers will increasingly move online with Internet advertising making up 21 percent of the overall advertising budgets, up from 12 percent today.