Measuring ad spending on social network sites is as much of a work in progress as is defining social networking. With so much of the business being created almost on the fly, there is very little concrete detail on which to pin an estimate.
Advertising on social networks can take a variety of forms-- ranging from large-scale profile pages and banner ads bought directly from social network sites, to low-cost run of site ads placed by ad networks and search ad spending. Thus any ad spending estimates must take into account the relative cost and amount of each type of advertising that exists on social network sites today and in the future.
In addition, there are a variety of social network types, including sites where the main purpose is social networking, sites where social networking is one of several activities and vertical social networks. Additionally, there are marketer-specific social networks.
eMarketer estimates that marketers will spend $280 million on social network advertising in the United States in 2006. The largest chunk of that spending will go toward MySpace, which eMarketer estimates will generate $180 million in U.S. ad revenue this year.
In 2010, U.S. online social network ad spending will total $1.9 billion, eMarketer projects. This rapid growth assumes that marketers will embrace the one-to-one-to-many style of marketing that social networking makes possible. The figure also reflects aggressive growth projections that Wall Street analysts have set for MySpace.
Social network ad spending will account for 1.7 percent of the $16.7 billion spent on U.S. online advertising in 2006 and 6.3 percent in 2010, according to eMarketer's projections.
Globally, social network advertising will be an estimated $350 million business in 2006, rising to $2.5 billion in 2010.
eMarketer's projections for social network advertising assume that current efforts to regulate social network sites will not significantly limit site audiences or the way people use the networks. Regulations that substantially harm these businesses are very unlikely in the next four years, but they are not impossible, given the growing privacy and safety concerns. The obvious impact of any such restrictions would be a reduction in traffic and, inevitably, ad revenue growth.
Debra Aho Williamson is a senior analyst at eMarketer. This article is drawn from the just-published report Social Network Marketing: Carving Out Some MySpace. Contact eMarketer directly.