Social media use is exploding, but ad spending in the sector continues to be a blip on the radar for most brands.
Razorfish, one of the largest digital ad spenders, compiled data on its 2009 digital ad spending. It found that social media display advertising made up just 3 percent of its clients' budgets. Non-display in social media accounted for another 1 percent. The figures pale in comparison to the time spent online. According to comScore, U.S. Internet users spent 11 percent of their time online in 2011 on social media sites.
The spending figures reflect that, all the chatter about Facebook, Twitter and iPhone notwithstanding, online media is dominated by traditional vehicles: vertical sites, ad networks, portals and search accounted for 88 percent of buys. Vertical sites got the biggest share of spending, 31 percent. Search was next with a 25 percent share and ad networks received 20 percent. Other emerging media remain blips: mobile accounted for just 2 percent of Razorfish's spending.
Like other agencies, Razorfish has found social media is less of an ad medium and more of a platform for building communities. The spending doesn't take the form of ad buys but rather the labor to build a Facebook page and staff it to respond to consumers, said Jeremy Lockhorn, vp of emerging media at Razorfish.
"A lot of the display media in social media is very cheap," he said. "More importantly, a lot of the money going into social is people powered, like blogger outreach. You don't see that in the media spend."
More money will flow into social in 2010, but Lockhorn believes it will continue to be in the earned media space rather than paid.
Overall, Razorfish saw signs of an online ad recovery. After dipping by 13 percent in 2008, ad spending for clients rebounded to increase by 4 percent in 2009. Razorfish expects growth to pick up in 2010. The average CPM paid was between $7 and $8. The median was $5. Razorfish said it expects CPM prices to rise in 2010.
Search occupied less of the spending pie at Razorfish. In 2008, the agency spent 37 percent of client budgets there, but in 2009 that dropped to 25 percent. The shop attributed that to normally high-spending clients in financial services and health pulling back budgets. Plus, at one point last year, pharmaceutical firms took down their ads after the FDA sent out warning letters. The losses in those sectors weren't offset by travel and retail, where spending was flat.
Portals fell out of favor, with spending dropping from 16 percent to 12 percent overall. Ad networks continued to hold strong, increasing from 12 percent of spending to 20 percent. Ad exchanges, which only got going late in 2009, accounted for 2 percent of expenditures. Lockhorn predicted more money would flow through them in 2010.
Despite excitement over new interactive formats, the overwhelming bulk of Razorfish's spending (77 percent) remained in standard display units. Rich media accounted for another 15 percent, with video at 8 percent.
The report, compiled based on spending data and a survey of Razorfish's media department, reveals some interesting impressions of digital media. Google, despite its efforts to be more than "just search," isn't viewed highly in other areas. Razorfish's media planners gave it the highest marks on a four-star system for search, but doled out single stars in other areas, ranging from performance display to video to mobile.
Looking ahead, Razorfish's list of publishers to watch includes Facebook, mobile ad network Greystripe, Hulu, Pandora and, perhaps most surprisingly, MySpace. On the latter, Razorfish praised the News Corp. property for mining profile data for ad targeting.