Analysts Revise Ad Spending on Social Networks Downwards
Social networking sites like MySpace and Facebook are here to stay. However their advertising business model will face significant challenges in the short and medium term.
eMarketer has revised its
projections for US social network ad spending. It now estimates
advertisers will spend $1.2 billion on social networks this year, down
from the previous projection of $1.4 billion made in May.
In 2008 and 2009, the recession
will affect all forms of online ad spending, but experimental formats
such as those available on social networks, which cannot always
demonstrate a proven return on investment, will be hit particularly
hard.
Spending will reach an estimated $1.3 billion in 2009, down
from the previous projection of $1.8 billion. The recession and
slower-than-expected revenue growth at MySpace are two of the reasons
for the lowered forecast.
In the meantime companies can make use of social networks to cultivate relationships with customers who have already raised their hand and expressed interest in their brand or product with a relatively small investment.