Making money off social-network advertising may prove tougher than originally thought.
eMarketer on Tuesday revised its projections for social-network ad spending in the U.S. this year to $1.4 billion, down from the previous projection of $1.6 billion. The Internet market researcher said the poor economy was partly to blame for the revision.
"Social-network sites are still trying to figure out what sort of advertising works," Debra Aho Williamson, a senior analyst who authored the report, said in a statement. "Tapping into consumers' conversations and spreading brand awareness virally has proven more challenging than companies originally thought."
The researcher also revised its forecast for how much advertising money would be attracted by the two leading social networks, MySpace and Facebook. In its previous prediction, eMarketer said MySpace would bring in $755 million, down 11.2 percent from eMarketer's original $850 million estimate. Facebook advertisers are expected to spend $265 million, a 12.9 percent drop from the earlier forecast of $305 million.
Still, the market research firm expects the sector to grow by 55 percent in 2008.
The revised projections come on the heels of Rupert Murdoch blaming the U.S. economy for putting the squeeze on advertising budgets. Fox Interactive Media, which oversees all News Corp. Internet business, including MySpace.com, announced that it expected to fall $100 million short of its ambitious $1 billion annual revenue goal.
For online advertising, the word is that portals are out, but search, entertainment, and social network sites are in.
(Credit:
Avenue A/Razorfish)
During 2007 total online ad spending through Avenue A/Razorfish was $735 million, up 36 percent from the year before, and the number of Web sites on which ads were placed doubled to more than 1,800, according to the "2008 Digital Outlook Report."
The share spent on portals dropped from 24 percent in 2006 to 19 percent, while search share rose to 31 percent from 28 percent, vertical sites rose to 39 percent from 37 percent, and spending on ad networks was flat at 11 percent. More dollars went to the top five ad networks.
"This endorses the strategy of the portals to buy ad networks" and beef up their paid search efforts, Jeff Lanctot, senior vice president of media at Avenue A/Razorfish, said in an interview.
Microsoft's new AdCenter and Yahoo's Panama are aimed squarely at reducing Google's dominance in the paid search market. Meanwhile, the major portals also recently acquired ad networks: Microsoft's acquired DrivePM as part of its Aquantive purchase, Yahoo bought Right Media and Blue Lithium, and AOL purchased Tacoda and Quigo.
Asked about what effect a recession would have on online ad spending, Lanctot was fairly optimistic. "If there is a widespread recession, all advertisers will be impacted, but digital is more insulated than other channels" because of the accountability it offers--the ability to track its effectiveness better than other types of advertising, he said.
However, search might not be as well shielded, because even if marketers keep placing ads, searchers will be cutting back on their online shopping to try to save money, Lanctot said.
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