Social network ad spending is growing faster than expected as advertisers begin to embrace viral marketing and user-generated content, according to a report published Wednesday by eMarketer.
Fourth-quarter inventory—particularly video—is tight at several social networking destinations, according to the report. And more marketers are committing money from their advertising budgets to social networks and other user-generated content environments.
“The conversation at marketing firms is not necessarily ‘Why MySpace?’ any more, but ‘How do I use MySpace?’” said Debra Aho Williamson, an eMarketer senior analyst and author of the report.“That change has taken place pretty quickly,” she said.
Events since August led eMarketer to revise its estimates of social network ad spending. Google’s $900 million deal with MySpace, and an overall increase in advertiser interest in MySpace and other social networks like Bebo and Piczo are helping to drive up the numbers.
U.S. marketers are now expected to spend $350 million in 2006, up 25 percent from a previous estimate. The amount that U.S. marketers will spend by 2010 is also up 16 percent to $2.2 billion, according to revised numbers. By 2010, social network ad spending will account for 8.5 percent of the $25.2 billion U.S. online advertising market.
“You’re seeing tremendous growth in these sites in terms of people going to it and the amount of time they’re spending there,” said Ms. Williamson. “Marketers want to be where the people are, and this clearly is somewhere the people are going.”
News Corp’s MySpace, the number one social network, will remain the top destination for ad dollars, according to the report, with $525 million in ad revenue in 2007, up from $180 million in 2006. Ad revenue for sites like Facebook, Bebo, and Friendster should reach $200 million. Social networks from portals like Google (Orkut) and Yahoo (Yahoo 360), and vertical social networks that target dog lovers or car enthusiasts will see an estimated $95 million and $45 million, respectively.
U.S. marketers won’t be the only ones testing the social networking waters, however. International ad spending is also expected to increase as established players launch networks in other countries and languages. eMarketer estimates that worldwide social network ad spending will be $1.1 billion in 2007, up from $445 million in 2006. Spending is expected to rise to $2.8 billion in 2010.
MySpace is live in Australia, France, Germany Ireland, and the UK, and its worldwide visitor count has grown by 245 percent over last year, according to comScore. MySpace launched sites in beta in France and Germany in September, according to MySpace. MySpace is also expected to make an announcement about moving into Asia in the near future.
But social networks will also continue to face some challenges when it comes to drawing marketing dollars. For one, quantifying the results of campaigns on social networks remains difficult, especially for viral campaigns. And marketers need to figure out how they will respond to consumers’ discussions of their brands—especially if it is negative.
“We’re in an age of communication where people feel very comfortable saying what they want to say, and marketers absolutely need to become comfortable with that,” said Ms. Williamson. “It’s great market research and prior to this, marketers didn’t have access to it,” she said. “But it is a double edged sword because you’re getting the raves as well as the cat calls.”
Contact the Writer: AWeinstein@RedHerring.com
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