Social Network Ad Revenues to Grow -- But Where?

Zuckerberg bill

Social network advertising clearly has a bright future, and the prospects for future growth were confirmed by a new forecast from Borrell Associates, which predicts massive growth in ad revenues this year. My only question is: Where is this ad spending going to happen?

Overall the Borrell report, "The Social Networking Explosion: Ad Revenue Outlook" has social network ad spending increasing 68% from $4 billion in 2009 to $7.5 billion in 2010, then continuing to grow every year to about $38 billion in 2015. The 2015 figure will represent approximately a third of all U.S. online marketing spending. According to Borrell, 2009 ad spending was divided roughly equally between national brands, while half came from local advertisers. Meanwhile, approximately a quarter of the spending actually goes to promotions, not advertising.

For all these caveats, however, I'm still at a loss to figure out where the majority of the dollars are coming from, and where they are going to; I'm also not sure how to make the Borrell figures line up with other (much lower) estimates of social network ad spending.

For example, a report from eMarketer released in December 2009 estimated social network ad revenues in 2009 at $2.2 billion, a little over half the Borrell estimate. Even factoring in another third for the additional dollars which Borrell says go to promotions, that still comes to just $2.9 billion -- meaning there's over $1 billion missing. While that might be a rounding error for, say, the U.S. budget, it's a lot compared to the relatively small spending base of this young, growing medium.

Moreover, I have to wonder which social networks account for the current spending, as well as for the projected future growth. According to Facebook CEO Mark Zuckerberg, Facebook might make $1 billion in 2010, up from about $800 million in 2009. The separate (December 2009) figures from eMarketer have MySpace revenues at $465 million in 2009, decreasing 23% to $360 million in 2010. Twitter execs forecast $140 million in ad revenue in 2010, while Classmates.com had about $80 million in ad revenue in 2009 and is on course for similar performance in 2010.

All that adds up to about $1.35 billion in 2009 and $1.58 billion in 2010; depending on which estimate you are using -- Borrell or eMarketer -- that means there was somewhere between $850 million and $2.65 billion which went to other networks in 2009, and almost $6 billion going to other networks in 2010 (per Borrell). Understanding the peril of combining figures from different sources, and acknowledging that there are probably a number of smaller networks adding incremental ad revenues, I'm still at a loss to make the estimates even come close to adding up.

Recommend (9)
7 comments about "Social Network Ad Revenues to Grow -- But Where?".
  1. Sean Simon from TrafficMarketPlace , June 28, 2010 at 1:43 p.m.

    Erik, you're forgetting about all those applications that run on on Facebook and to a lesser extent MySpace. Think about all the revenue that Zynga alone is projecting for 2010. I think this should account for the missing revenue.

  2. Lisa Foote from MixMobi , June 28, 2010 at 1:54 p.m.

    Good column, Erik. Some of the blur may also come from newly overlapping media. For example, how do you classify a mobile-friendly promotion that's emailed, texted, Tweeted and posted to Facebook?

    Sean - Sharp observation, and another example of overlapping categories (Social? Games?).

  3. Steve Smith from TouchTunes Music Corporation , June 28, 2010 at 2:06 p.m.

    There are many 'Social' media buys which are not directly with the network. Example yfrog.com hosts virtually all of the photo/video shared on Twitter. So the media placed on yfrog is a social buy but its not on Twitter. I wonder if all the content sharing sites are factored into their study.

  4. Chase Mcmichael from InfiniGraph.com , June 28, 2010 at 3:14 p.m.

    Great post Erik I think we should consider the blog world and ad being ran since a great deal of traffic is being generated via social. bit.ly is doing a great job of exposing those traffic numbers would like your input on what we talk to on the Content Consumptions Graph http://bit.ly/aSxhFU and Social Intelligence should be a big impact when consider user interactions with the brand pushing for more social investment. @chasemcmichael @infinigraph

  5. Ben Dehan , June 28, 2010 at 4:33 p.m.

    Thanks for pointing out the gap between eMarketer's 2009 forecast for social network ad spending ($2B) and the Borrell number ($4B). The questions is; Does Borrell know more 6 month later, or are the category definitions fundamentally different? You can get to a 2009 number around $2B by adding up the recent forecast for the big players. If you include earned revenue (microsites and fan pages) and long-tail blogs, Borrell may not be far off. I know there are hundreds of players like us that could add up to another $1B. And, I definitely see more than 68% year-to-year growth for 2010. So I can believe $3B in 2009 and $6B in 2010. For anything above that, Borrell must be including additional revenue streams that eMarketer is not including.

  6. Mark Burrell from Tongal , June 28, 2010 at 6:30 p.m.

    I'd like the answer to that as well, wish I could tell you it was all going to us but not the case.

  7. Miguel Montoya from YconoArt Studio , June 30, 2010 at 3:59 a.m.

    If Social Media were just tweeting and posting, no way to get 6B. There're so many apps and goodies around that looks more like a big and complex tree to me.