An eMarketer report projects US ad spend on social networks is expected to slide 3% to $1.14 billion in 2009, due primarily to "problems at MySpace," writes MediaWeek.
Typically, major socnets generate more inventory than they're able to sell. What's more, most users are less inclined to click on ads within social networking environments, says research firm IDC.
In part as a result of all this, brands increasingly approach social networks more for marketing or PR than for paid advertising — all characteristics which hamper the growth of MySpace, whose ad revenue model has consisted primarily of rich media and banner ads.
eMarketer reported revenues of 33% in '08 and 129% in '07 for the social networking sites category. And while the decline was anticipated across the entire online ad space, the plummet in social network ad spend is thought to be particularly significant, given the category's previous growth.
The research group revised growth predictions downward for the genre twice in 2008, lowering ad spend estimates as recently as December for both Facebook and MySpace — with a particular eye on the latter, which it claims suffers from unique ad challenges. In the revision, MySpace's '09 revenue was pegged at $630 million; now eMarketer believes it will only hit $495 million — a full 15% decline from 2008.
In contrast, Facebook ad revenue for the US alone should rise by 9.5%, to $230 million. And spending across other socnets will likely rise by 1.5% to $345 million — a small figure, given that advertising across social networking widgets demonstrated clear growth so far this year.
In Q1 of 2009, Fox Interactive Media's ad revenue fell 16%. Fox is a subsidiary of News Corp., MySpace's parent company.
Last month ex-Facebook exec Owen Van Natta became MySpace's new CEO, replacing co-founder Chris DeWolfe. The change in leadership was stimulated by CEO-Digital Media/CDO Jonathan Miller of News Corp.
A study by InsightExpress recently pegged sites like MySpace and Facebook as "gateways" to other social networks. InsightExpress also said 40% of socnet users in general are receptive to opt-in advertising; in contrast, just 23% of users felt randomly generated ads were acceptable.
MySpace does a great deal of the latter, and markedly less of the former.
