Social Networks: Millions of Users, Not So Many Marketers

Consumers love social networks—but advertisers are still standoffish.

Anyone still questioning the efficacy of social network marketing needs to look only as far as the 2008 presidential election. Barack Obama rode a wave of social media support to the White House—using both established social networks and homegrown networking site to build a database of millions of supporters.

“Sen. Obama’s social media activities were not only grassroots, his campaign also advertised on social networks,” says Debra Aho Williamson, eMarketer senior analyst and author of the new report, Social Network Marketing: Slow Growth Ahead for Ad Spending. “Through October 2008, 6% of the campaign’s $8 million in online ad spending went to Facebook—over $450,000, by some calculations. Factoring out Google, which garnered $3.5 million in Obama campaign ad spending, Facebook netted 10% of the online dollars.”

The New York Times’ roadblock ad campaign on Facebook’s home page commemorating Obama’s victory reached 68 million people and tripled the newspaper’s Facebook “fan” count in 24 hours. In addition, 400,000 images of the Times’ front page were sent in the form of virtual “gifts,” and the newspaper generated a return on investment of 4.3 times what it spent.

But despite these and other success stories, the social network ad market is suffering. In fact, eMarketer significantly lowered its forecast for US social network ad spending.

“In 2008, companies will spend $1.2 billion on US social network advertising, down 14% from our previous estimate of $1.4 billion, published in May 2008,” says Ms. Williamson. “Even in 2009, spending will rise barely $100 million to $1.3 billion.”

There are three primary forces driving the lowered forecast:

* The economic recession will hit experimental ad formats especially hard, including the ones on social networks.
* MySpace revenues are growing more slowly than eMarketer had expected.
* Social network sites will start to wane as destinations once networking becomes a feature of Web browsing. However, targeting advertising to Web users based on their online social interactions or “social graph” will be extremely difficult to scale.

“No matter what the obstacles are, however,” says Ms. Williamson, “marketers still need to be where their customers are, and consumers remain heavily involved in social networks.”

Advertising is not the only way for marketers to participate in social networks.


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