Sales of Social Network Ads are Growing on Facebook but Declining Across the Industry as a Whole
I’ve mentioned in the past that social media spending is on the rise, despite marketing budgets being cut across industries during the recession. Aberdeen found in March that 63% of companies (defined as best-in-class) plan to increase their social media marketing budgets this year. Before that, Forrester reported that 95% of social media marketers will maintain or increase social media spending in the downturn.
However, while earned social media marketing spend is rising, it appears that paid social media marketing is on the decline. At least that is what eMarketer is predicting. Debra Aho Williamson, a senior analyst at eMarketer, notes today that:
“U.S. social network ad spending will fall 3% to $1.14 billion in 2009, from $1.18 billion in 2008. This is a significant turnaround from previous years. Spending grew an estimated 33% in 2008 and 129% in 2007″
eMarketer’s reasoning behind the forecast downgrade is focused on trouble at Owen Van Natta’s MySpace. eMarketer had predicted that marketers would spend $630 million to advertise on MySpace in 2009. However, following an earnings call by News Corp. (Mypace’s parent) on May 6th which covered ad revenue dropping 16 % in January – March 2009, eMarketer now projects that U.S. ad spending on MySpace will reach just $495 million this year, down 15% from the estimated $585 million MySpace generated in 2008.
While other social networks (such as Facebook) are forecasted to increase their ad revenues this year, their expected gains won’t be enough to offset the industry losses associated with MySpace. Facebook is expected to increase its U.S. ad revenues 9.5% in 2009, to $230 million.
So why is paid social media marketing spend declining, while earned social media marketing spend is increasing? In short, marketers are having a hard time with leveraging advertising to converse with consumers online.
“Brands are now becoming conversation factors where academics, celebrities, experts and key opinion formers discuss functional, emotional and, more interestingly, social concerns, and of course, the conversation is no longer one way or 30 seconds.”
Paid social media marketing continues to be one way in most regards and the click-throughs (or lack there of) illustrate the relatively low ROI that current (not very targeted) campaigns are producing. On the other hand, earned social media marketing within social networks, which can take on many forms (i.e: content creation, content aggregation, brand ambassador activation, securing brand mentions, etc), creates an ongoing, multi-person conversation, which brands can continually influence and engage individuals within.
The ROI on these earned conversations and the online stories / blog posts that may grow out of them, are very powerful. According to a poll conducted by Forrester in December of last year, consumers are more likely to trust information they get through social networking profiles of people they know than information provided in print magazines. In addition, compared with banner ads, pop-up ads, e-mail offers and sponsored links, online articles that include brand mentions were most likely to lead US Internet users to read—and act according to a poll conducted by ARAnet in April.
A joint earned and paid media approach to marketing within social networks will be the best practice of the future, but it appears that marketers are turning more of their current attention to earned / non-paid media to reach consumers during their 3 hours + (average per month) on Facebook – as social network providers scramble to produce better advertising functionality and targeting capabilities.