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US Social Network Ad Spending Growth Lowered

The medium will still grow, but there are many obstacles to overcome.

Consumers are using social networking sites more than ever, but advertising spending has not kept pace. Despite new social network ad formats launched in 2008, 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.

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.

“Marketers should not write off social networks completely,” said eMarketer senior analyst Debra Aho Williamson. “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.”

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.

eMarketer has also revised its forecast for 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, which is 20.8% lower than 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.

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