August 2009: Social Network Ad Spending

Facebook, once a distant No. 2, has outperformed MySpace in nearly every measure of usage and is on track to surpass its rival in ad spending by 2011. And while paid advertising on online social networks is expected to fall 3% in 2009—a result of the poor economy and the difficulties at MySpace—eMarketer projects that US marketers will increase their spending 13.2% in 2010, to $1.29 billion.

The expected rebound in spending will come as more companies focus on creating and implementing an overall social marketing strategy. This foundation will be essential to the development of social network advertising because it will signal that the experimental phase may finally be ending.

Spending is expected to grow 8.2% in 2011 to reach $1.4 billion.

Although 2009 will see an estimated 3% spending decline, mostly due to the recession and difficulties at MySpace, the good news is that the rest of the business is still growing. eMarketer believes much of the increase in social network ad spending in the next two years will take place on Facebook.

US spending at MySpace is expected to fall 15% in 2009, to $495 million, while US spending at Facebook is projected to rise 9%, to $230 million. Consequently, MySpace’s share of US spending is projected to fall to 43.4% in 2009, while Facebook and other social network venues will increase their share.

While the US accounts for the majority of ad spending on MySpace and Facebook, non-US spending is growing rapidly at Facebook. eMarketer estimates that marketers will spend a total of $520 million to advertise on MySpace worldwide in 2009, down 14% from 2008. Worldwide spending on Facebook, by contrast, is expected to grow 20%, to $300 million, in 2009.

As a percentage of total US online ad spending, advertising on social networks is expected to remain relatively flat at 4.7% to 4.8% over the next few years.

Marketers continue to innovate in social network advertising, and one development to watch in the second half of 2009 is the ability to target advertising based on the social graph—the network of online connections between consumers. This advertising will appear not only within social networks, but on other Websites as well. Near-term spending on this form of advertising is limited, due to consumer privacy concerns and the potential for legislation regarding targeted advertising. But the concept of using people’s social connections to deliver targeted advertising across the Web is exciting territory to explore.

Find out more about eMarketer’s digital marketing and the new report “Social Network Ad Spending: A Brighter Outlook Next Year

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