Social-Network Advertising to Keep Growing

August 15, 2007

This article is included in these additional categories:

Youth & Gen X

Advertisers are increasingly shifting ad dollars to social networking sites from portal sites, much of that money going to MySpace and Facebook, according to a recent eMarketer report, “Social Network Advertising: Where to Next?”

The two social networks together account for 72% of the US market for social-network advertising, according to the report.

Advertising on social networks has exploded in recent years, with marketers predicted to spend $900 million in the US in 2007. In 2009 that figure will double, reaching 1.81 billion – and within two years thereafter, in 2011, reach $2.5 billion, eMarketer predicts.

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Facebook, has achieved tremendous growth since opening up its site to the general public, and now has 31 million active users, up from 8.9 million in September 2006.

Three factors are driving increased revenue for MySpace, eMarketer said: It has begun beta testing a new targeted advertising tool that will significantly increase CPMs; parent Fox Interactive Media’s (FIM’s) deal with Google to supply search technology is providing increased revenue; and MySpace’s international business has ramped up significantly.

“It wasn’t so long ago – 24 months – when many said we were embarking on a fool’s errand. In the 12 months prior to our acquiring MySpace, the site generated $23 million in revenue. Today, on the back of its durability and success, we are forecasting that MySpace alone will generate in excess of $800 million in revenue in fiscal ’08,” the CEO of MySpace parent News Corp., Rupert Murdoch, is quoted as saying.

eMarketer has projected that MySpace’s US ad revenue would be $525 million in 2007 and $820 million in 2008, but this week said those it would likely up its forecast later this year.

Facebook is projected to bring in $125 million in ad revenue in 2007, and its deal with Microsoft to sell banners will reportedly generate some $200 million in revenue for Facebook through 2008.

Overall, eMarketer projects, $900 million will be spent on advertising on social networks in the US in 2007; it expects that number to increase to $1.38 billion in 2008.

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