Report: Social Nets Ad Sales Slow

Advertising on social networking sites is no longer expected to grow as fast as once predicted this year, says a new report issued by eMarketer, suggesting that enthusiasm is waning among buyers for the still fast growing category.

Spending will reach $1.4 billion in 2008, according to eMarketer’s latest report, down from the more bullish $1.6 billion estimate the researcher had previously issued in December. That new spending benchmark would represent growth of 55 percent — still enviable by any media standard — but down significantly from the 163 growth spurt exhibited last year.

eMarketer pins the dip in expectations on the uncertain economy and the lack of established advertising practices in the still emerging segment, which is driven primarily by user generated content. In recent months, MySpace has reorganized its advertising sales operations as the company fell short of parent company News Corp.’s stated revenue goals. Meanwhile, Facebook is still recovering from it’s bungled Beacon program, which attempted to take advantage of the viral nature of the site by publishing its users purchases and brand preferences to their respective friend groups.

Those two sites, according to eMarketer, take in the majority of ad dollars in the space (72 percent), and the researcher has downgraded growth predictions for both. MySpace, which accounts 53 percet of total US online social network ad spending “has had monetization difficulties,” said the report, leading to a forecast or $755 million in ad revenue for this year, down from eMarketer’s previous forecast of $850.

Meanwhile, eMarketer has also lowered its ad revenue expectations for Facebook from $305 million to $265 million. That move is in part due to the growth of the exploding number of widgets and applications built specifically for Facebook, which according to eMarketer provide marketers with alternative means of advertising on the popular site.

Still, eMarketer expects social networking advertising to grow at a healthy rate over the next several years. By 2012, spending is expected to reach $2.6 billion, down just slightly from eMarketer’s previous prediction of $2.7 billion for 2011.