eMarketer Again Lowers Social-Net Spending Estimate

For the second time this year, online ad industry authority eMarketer has lowered its spending estimate for social-networking advertising for 2008 to $1.2 billion, down from the $1.4 billion benchmark set in May—which itself was down from an earlier spend estimate of $1.6 billion.

Officials at eMarketer said the decision to lower its spending estimates for the segment was driven by the overall poor ad economy and weak performance by MySpace, which saw its revenue projection for 2008 drop by $170 million (from $755 million to $585 million) versus the company’s May numbers. Rival social network Facebook’s revenue estimate also dropped from $265 million to $210 million, indicating that the still unproven ad medium is gaining traction at a slower rate than once expected. Overall, MySpace and Facebook account for 70 percent of social media ad dollars, according to eMarketer.

eMarketer’s findings echo a recent report issued by IDC, which found that in spite of increased consumer usage of social networking sites, advertising had yet to find its place in these environments. (Read this previous report.)

The silver lining found in eMarketer’s new numbers is that social-networking advertising is expected to grow next year, albeit by just 8 percent to $1.3 billion. eMarketer had previously forecast 2009 spending at $1.8 billion.

In 2009, many marketers may turn to social networking sites to retain their current customers rather than aggressively going after new ones, said eMarketer senior analyst Debra Aho Williamson, since many users of these sites express specific brand preferences in their profiles. “In a difficult economy it is usually easier to market to an existing customer than to acquire a new one,” she said. “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.”