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Another day, another online ad spending forecast revised downward. This time it’s for social networking: eMarketer says advertisers will on…


Another day, another online ad spending forecast revised downward. This time it’s for social networking: eMarketer says advertisers will only have spent $1.2 billion on social media ads by the end of this year — down 14 percent from its prediction of $1.4 billion in May. And the researcher is curtailing social net spending growth by nearly 28 percent for next year as well: from its projection of $1.8 billion to $1.3 billion next year. The recession and slower-than-expected revenue growth at MySpace are two main reasons for this cut.

Despite that, the firm has hope and offers some: “Marketers should not write off social networks completely…With a relatively small investment, companies can use social networks to cultivate relationships with customers who have already raised their hand and expressed interest in their brand or product.” The other side of it though, is that experimental ad formats cannot always demonstrate a proven ROI, so marketers will likely cling to more familiar formats.

eMarketer has also revised its forecast for MySpace and Facebook. In its previous prediction, eMarketer said MySpace would bring in $755 million in US ad spending in 2008, but that estimate has now dropped 22.5 percent to $585 million. At Facebook, US advertisers will spend an estimated $210 million in 2008, which is 20.8 percent lower than the earlier forecast of $265 million. The poorer projections are also bad news for the host of startups and companies like Slide and RockYou that have pegged their fortunes on advertisers flocking to social media — not just the networks themselves.

  1. Not every short-coming can be pointed to and blamed on "the economy".

    Simple fact – advertising on social networks has extremely poor click-through rates and this is statistical proof that monetization of social networks requires a different strategy.

    Know your customer. Why do social network users use these sites and what is their behavior when engaged on these sites? Does this constitute fertile ground for advertisers? A comment in the article states, "With a relatively small investment, companies can use social networks to cultivate relationships with customers who have already raised their hand and expressed interest in their brand or product." I am not so sure.

    There must be a strategy of engaging with social networks and delivering value to users that creates sticky customers. Advertisers have not captured a valued relationship with social network users and their customers using social networks.

    Monetization of social networks has failed thus far for one simple reason … vendors are focused on “what they do” and how to exploit “what they do” on a platform that serves masses (social networks).

    BUT all this will change soon. Please contact me if you want to continue the discussion and learn more.

    Steve Goldner
    Opt-In
    stevegoldner@optonline.net

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