NEW YORK (Dec. 10, 2008)—As consumer usage of social networking sites continues to flourish, advertising has not kept pace. Despite new social network ad formats launched in 2008, eMarketer has revised downward its projections for US social network ad spending. It now estimates that advertisers will spend $1.2 billion to place ads on social networks this year, down from the previous projection of $1.4 billion that it made in May.

Spending in 2009 will reach an estimated $1.3 billion, 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 2008 and 2009, the recession will affect all forms of online ad spending, but experimental formats, such as the ones available on social networks, which cannot always demonstrate a proven return on investment, will be hit particularly hard.

eMarketer has also revised its forecast for the two largest social networks, MySpace and Facebook. In its previous prediction, eMarketer said MySpace would bring in $755 million in US ad spending in 2008, but that estimate has now dropped 22.5% to $585 million.

At Facebook, US advertisers will spend an estimated $210 million in 2008, a 20.8% drop from the earlier forecast of $265 million.

Although the outlook for ad spending is challenging, there are still many benefits to using social networks and they remain a viable marketing venue. Monitoring social network discussions about a brand or product and interacting with consumers in a community are still valuable—and probably essential—activities.

“Marketers should not write off social networks completely,” said eMarketer senior analyst Debra Aho Williamson, author of the forthcoming report “Social Network Marketing: US Ad Spending Update.” “In a difficult economy it is usually easier to market to an existing customer than to acquire a new one. With a relatively small investment, companies can use social networks to cultivate relationships with customers who have already raised their hand and expressed interest in their brand or product.”

For more information on social networks, or to speak with Ms. Williamson, contact the media staff listed below.

Note: Ad spending estimate includes Websites where social networking is the primary activity (e.g., MySpace, Facebook); social networks linked to portals such as Google or Yahoo!; and niche social networks devoted to a specific hobby or interest. Does not include virtual worlds, YouTube or marketer-created social networks. In all cases, the figures include spending on display, video, search and other forms of advertising appearing within social network environments; fees marketers pay to social network sites for profile pages, promotions, etc.; and fees paid to develop, distribute or sponsor widgets and applications appearing within social network sites.

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