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Forrester: Social media spend set to soar - but there's a catch...

5th Mar 2013
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It’s a bleak picture for the European economy. A slow economic recovery is projected through 2017, but growth is not expected to reach 2007 levels during the next five years. Yet despite this, social media spend is expected to continue increasing into double-digit growth over the next five years.

Forrester recently predicted that by 2017, Western Europe social media spending will reach € 3.2bn. In a new blog post, analyst Jitender Miglani outlined the reasons why:

The continuous shift of ad spending from traditional media to online media: The megatrend of the past decade — advertising dollars shifting from offline to online media — is expected to continue in this decade as well. Internet advertising’s share of overall advertising spend grew from 1% in 2001 to 22% in 2012 for Western Europe. There still exists a significant gap between the time spent online by consumers and the share of online spend in overall advertising spend, but this gap will decrease over the next few years with the continued shift in spending.

Social media’s increasing share of online ad spend: Currently, display ad spending is nearly four times higher than social ad spending in Western Europe, and search advertising is eight times larger. However, social will experience faster growth than display or search in the coming years. Social’s share of overall online spending will increase as companies spend more to engage with consumers on social media platforms for marketing and sales initiatives.

The growth of the social media user population: The social media user population in Western Europe has grown nearly 2.5 times over the past four years. Although social media users are now expected to grow moderately over the next five years, the growth in their numbers will still be faster than the growth of the online population. The growth of the social media user population and an increase in the time spent by users on social media platforms will drive social spending upward.

The proliferation of connected devices: The connected devices landscape is changing. People connect to the Internet not just with their PCs/laptops, tablets, and smartphones but also via connected TVs, game consoles, Blu-ray Disc players, and even digital cameras. The spread of upcoming connected devices (watches, home appliances, and car electronics) will provide even more screens where social networks can interact with consumers. This will drive increased social media spending, but this likely won’t be visible until 2016 and later.

However, Miglani warned that despite the analyst firm’s predictions for social media spend, there is a catch.

“In light of the current debate on data privacy reforms in Europe, we expect tighter laws for data privacy on social networking sites to take effect by 2016. If such laws are enacted the way we expect, they could negatively affect social media spending by at least 400 million euros per year from 2016 onward,” he concluded. 

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