As social media dominates more and more of the internet, the companies behind some of the most popular networks are unsurprisingly looking at how to maximise their revenue. Research company Gartner have published some very interesting analysis on how social media makes money.

They say: “Advertising is, and will continue to be, the largest contributor to overall social media revenue and is projected to total $8.8 billion in 2012.”

Additionally, social gaming (yes, that means Farmville,) is expected to generate $6.2 billion this year, doubling the revenue from 2011. Gartner also expect revenue from subscriptions to reach $278 million, a pretty staggering number given how most people expect social networking to be free.

Gartner’s senior analyst Neha Gupta though thinks that revenue streams are only heading in one direction – up:

“Although the number of social media users is large, and in some cases increasingly mature in their usage patterns, the market is still in its early stages from a revenue perspective.”

A lot of the upturn can be attribute to the fact that marketers increasingly see the social space as a useful place in which to spend their budget. They want to capture the eyeballs, and money, of an engaged user base that has a potentially high clickthrough rate i.e. if you advertise a product in social networks , people are engaged on the network for long enough to click through and see your product.

Gaming techniques are going to be more and more prevalent in social media sites too, according to the research, as they offer a wide range of monetization strategies. Additionally, household console names are moving into the social gaming space, which is likely to attract more revenue as people know the brands, and major social game developers are also moving to an open-platform strategy, making social gaming more accessible for users.

Gartner also predicts that users will increasingly pay for premium social networks too, for example premium LinkedIn accounts. However, they do concede that this particular model is likely to have more limited success.

Overall though, the picture is looking bright for social networking, especially if they can monetize the mobile space:
“New revenue opportunities will exist in social media, but no new services will be able to bring significant fresh revenue to social media by 2016,” said Ms. Gupta. “The biggest impact of growth in social media is on the advertisers. In the short and medium terms, social media sites should deploy data analytic techniques that interrogate social networks to give marketers a more accurate picture of trends about consumers’ needs and preferences on a customized basis.