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According to new research released Monday by eMarketer, U.S. advertisers will spend an estimated $1.7 billion in ads on social networks in 2010, accounting for 6.7 percent of all online ad spending.
The dramatic rise — with growth of 20 percent this year, accelerating to 24 percent next year — shows why Google, the biggest player in online advertising, is finally taking the threat from social networks seriously, and Facebook is moving to protect its turf.
The gradual economic recovery and the growing relevancy of social media in marketers’ mindshares is credited for the increase in spending. eMarketer previously forecast the market at $1.3 billion back in December. The research firm says it has increased its predictions as a result of “strong performance from online ad spending in general, and Facebook in particular.”
Unsurprisingly, Facebook accounts for more than half of social-network ad spending. In an interview with Inside Facebook in June, Mark Zuckerberg confirmed that estimates of around $1 billion to $1.1 billion for its 2010 revenue were “not so far off.”
Despite its buzz in the marketing world, Twitter’s contribution to the number will be low in 2010. The microblogging service could see a noticeable leap in 2011 with implementation of its Promoted Suite of advertising products and its “resonance” model of measuring the effectiveness of ads. Back in April, the site announced Promoted Tweets, which enables brands to buy special placement atop search results.
The bullish forecast of ad spending in social networks should come as no surprise to anyone who has been following the space. Marketers may be slow to grasp new opportunities, but they do eventually follow audiences to new media. Recently, Nielsen reported that social networking dominates Americans’ time online with nearly 22 percent of all online activity, a 43 percent increase from 2009. This figure neatly correlates with Facebook’s estimated revenue growth over the same time period.
Last week, eMarketer estimated advertisers will spend $220 million on advertising in social games, a rise from $183 million in 2009. Although advertising income provide a healthy contribution, it’s worth noting that it is revenue from virtual goods that account for the majority of income in social gaming, which alone is reported to be a $1.6 billion market.
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