Social network ad spending is taking a hit from the worldwide economic crisis and the ongoing challenge of developing effective ad models. Marketers will spend an estimated $2.35 billion to advertise on social networks worldwide in 2009, a 17% increase from 2008 levels. Though a double-digit increase during a recession is a good sign, the reality is that it is half of the growth rate eMarketer had previously projected. In 2013, spending will reach an estimated $3.5 billion.
These figures represent a significant downward revision from eMarketer’s last forecast, published in December 2007. Previously, eMarketer had projected that worldwide social network ad spending would reach $2.9 billion in 2009 and $4.1 billion in 2011. The new forecasts are down 23% and 44%, respectively, from those earlier projections.
The reasons for the revision are:
- The global economic crisis has affected ad spending, resulting in decreased budgets for experimental formats such as social network advertising.
- In the US—which will account for 55% of total social network ad spending worldwide in 2009—severe economic conditions are expected to curtail growth in social network spending to 10% in 2009, compared with 33% in 2008.
- Successful social network ad models are still developing. Many social networks are dependent on low-CPM ads placed by ad networks for the bulk of their revenues. Efforts to create unique ad formats for social network environments are promising but have yet to drive significant revenues.
Over the next few years, the US social network ad spending will decrease as a percentage of the worldwide total. By 2013, its contribution will fall to an estimated 46%, or $1.6 billion of the total $3.5 billion.
The good news is that social network ad spending is expected to grow faster outside the US over the next few years than inside the US. In 2009, spending in markets outside the US is expected to rise 27%, compared with 10% in the US.
Key themes for this year include the rapid rise of social networking as a consumer activity around the globe; the potential for Facebook to become the dominant network in multiple markets worldwide; and the urgent need for sites to develop alternate revenue streams beyond advertising.
Find out more about eMarketer’s digital marketing and the new report “Social Networking Worldwide: Ad Spending and Usage”
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