January 2010: A 2010 Look at Social Network Ad Spending

Ad spending on Facebook is soaring while MySpace is tumbling. eMarketer projects that Facebook will receive $435 million from advertisers worldwide in 2009 and $605 million in 2010, a 39% increase year over year. US spending on Facebook is projected to reach $450 million in 2010, up 34% over 2009’s $335 million.

At MySpace, on the other hand, worldwide ad spending will reach an estimated $490 million in 2009 but is expected to fall 21% to $385 million in 2010. In the US, MySpace ad spending is expected to fall 23% in 2010, to $360 million from $465 million in 2009.

Facebook soared to more than 350 million users worldwide as of December 2009 from 200 million in April, according to company statistics. In October 2009 it had 97.4 million unique visitors in the US, according to comScore, reaching 49% of the entire US Internet audience.

As more marketers build out profile pages on Facebook to reach those users, they are also spending money to buy advertising there. As a result, eMarketer’s current estimates for Facebook are significantly higher than before. In May 2009, when Facebook had 100 million fewer users than it does now, eMarketer projected worldwide ad spending on Facebook would be $300 million in 2009, with $230 million coming from the US.

Meanwhile, MySpace’s fortunes are withering. In the US, it fell to 64 million unique visitors in October 2009, according to comScore, from a high of 76.3 million in October 2008. In many international markets it trails Facebook and other social networks.

With lower traffic volumes at MySpace come fewer ad impressions to sell. In addition, MySpace’s plan to narrow its focus to music and entertainment limits its pool of potential advertisers. It is no longer a general social site trying to appeal to everyone.

Marketers will continue to make social networks a priority for 2010, but a significant portion of their spending will go toward building and maintaining a social network presence. Paid social network advertising will remain somewhat of an afterthought.

Facebook’s current strong performance is propping up the entire business of paid social network advertising in the US. eMarketer estimates that US marketers will spend just over $1.2 billion to advertise on online social networks in 2009, rising to $1.3 billion in 2010 and $1.4 billion in 2011. That translates to 3.9% growth in 2009, 7.1% in 2010 and 7.7% in 2011.

In our July 2009 forecast we projected a 3% decline in US social network ad spending in 2009, to $1.175 billion, followed by a 13% rise in 2010 to $1.3 billion. Facebook’s growth in the latter half of 2009 is the main driver of the change in the 2009 forecast. In addition, the US economy has shown signs of improvement in late 2009, along with cautious optimism about an online ad spending rebound in 2010.

Though total US online ad spending is expected to fall 4.6% in 2009, to $22.4 billion, according to eMarketer’s latest estimate, the 3.9% rise in social network spending means it will account for an increasing proportion of total spending. In 2008, ads on social networks amounted to 5% of US online ad spending. In 2009 the percentage will rise to 5.4%.

Find out more about eMarketer’s digital marketing and the new report “Social Network Ad Spending: 2010 Outlook

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