U.S. Social Network Ad Projections Revised Downward
Posted by Nick O'Neill on May 14th, 2008 6:57 PMeMarketer has revised US social network ad spending projections previously made to $1.4 billion this year down from and estimated $1.6 billion. They also project ad spending on social networks in 2011 to be $2.36 billion. That’s somewhat discouraging for those that are investors in this space. While it represents substantial growth, there are some definite downsides.
As eMarketer states, “The challenge is that all of these new forms of advertising are more difficult to plan, measure and quantify than what advertisers are used to, and that has impacted spending growth.” In other news, the Social Times is now projecting revenues of $500 million for SocialTimes.com and related sites for the year 2011. I’m looking forward to it!
News of reductions in ad spending circulated throughout the blogosphere today. This appears to be a result of some of that news. This year ad expenditures for social networks is expected to grow 55 percent in comparison to 163 percent growth seen last year. That may have something to do with the domestic recession. eMarketer projects social network ad spending to be 5 to 6 percent of the total online ad spending. Where is the rest going? The majority goes to Google.
If you didn’t notice from my projections related to Social Times, I don’t take most of these statistics seriously. Everybody in the industry knows the horrendous CPMs that social networks currently provide. What we are all waiting for (and some people are working on) is a way to dramatically increase revenues for these sites. MySpace claims that their HyperTargeting initiative has been successful at increasing CPMs. There are currently no statistics to show recent improvements in Facebook’s SocialAds.
I’d suggest that the real opportunity for SocialAds (and other ad networks) comes through extending their platforms outside the walled gardens as has been announced in the past week. I would expect Facebook SocialAds to extend beyond their own website within the next 12-18 months. For now, the large social networks are still focusing on building highly scalable platforms. It’s about time that the companies start making serious money.
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