Social Network Ad Spend Doesn’t Match Hype, Forecast Lowered

eMarketer revised downward its projections for U.S. social network ad spending and now estimates that advertisers will spend $1.4 billion to place ads on social networks in 2008 - down from its previous projection of $1.6 billion, MarketingCharts writes.

(View chart: “U.S. Online Social Network Advertising Spend, 2006-2012.”)

That’s 5.5 percent of total projected U.S. online ad spending in 2008, according to eMarketer.

eMarketer now also projects that social-network ad spend will reach $2.6 billion in 2012 - down from its December ‘07 estimate of $2.7 billion in 2011, when it now estimates spending will total less than $2.4 billion.

eMarketer’s revisions include the two largest social networks, MySpace and Facebook:

• Previously, eMarketer predicted that MySpace would bring in $850 million in the U.S.; it has dropped its estimate 11.2 percent,to $755 million.
• At Facebook, advertisers will spend $265 million this year - a 12.9 percent drop from the earlier forecast of $305 million.

The poor economy is partly responsible for the revised estimates. Moreover, “social network sites are still trying to figure out what sort of advertising works,” said Debra Aho Williamson, senior analyst, who authors social networking reports.

“Tapping into consumers’ conversations and spreading brand awareness virally has proven more challenging than companies originally thought.”

Among other eMarketer projections:

• U.S. social network ad spend will increase 55 percent in 2008, down from the 163 percent growth rate the previous year - but that’s still more than double the 23 percent rate projected for all online ad spending growth in the U.S.
• MySpace will account for 53 percent of total U.S. online social network ad spending in 2008.
• Facebook will account for 19 percent of total U.S. online social network ad spend in ‘08.
• All other social networks combined will account for 26 percent - or $370 million - of total U.S. online social network ad spend in ‘08.
• Widget and other application spending will total $40 million, or 3 percent of the pie, in ‘08

eMarketer also revised its worldwide social network ad spending projections, saying ad spend on social networks would total $2 billion worldwide in 2008, reaching $3.8 billion in 2011 rather than the previous forecast of $4.1 billion.

About the data: “eMarketer’s figures take into account all forms of advertising within social networks, including display, search and video ads, as well as any fees that marketers pay to social networks to develop profile pages or conduct promotions. For the first time, the new numbers also include widget and application ad spending. While widgets and applications can also appear on blogs and personal start pages, the majority of development has been for social network environments,” according to eMarketer.