From all the press coverage, it seems
like 2010 is going to be the year of social media in terms of online advertising, and especially social networks -- most prominently Facebook, MySpace, and Twitter. But a look at recent ad revenue
forecasts definitely tempers the cheery outlook somewhat: Yes, there will be sustained growth over the next couple years, but it will be in relatively small increments, and social network advertising
will remain a small -- in fact, decreasing -- part of total online advertising. This naturally leads me to wonder: What's holding social network advertising back?
The most recent forecast
I have access to, from eMarketer, has total social network ad revenues rising from $1.2 billion in 2009 to just under $1.3 billion in 2010 and $1.4 billion in 2011, for a cumulative annual growth rate
of about 7.5%. This is respectable -- enviable, even, from the traditional media standpoint -- but it can only be described as a disappointment following explosive growth rates of 150% in 2006-2007
and 34% in 2007-2008. In fact, in dollar terms the anticipated increases of $100 million per year are also less than previous year (over $500 million added 2006-2007, and $300 million 2007-2008).
Even more telling, the predicted growth rate for social network advertising revenue is lower than much larger, better-established online categories like search and display. Again according to
eMarketer, search revenues are forecast to 13% in 2010 and 12% in 2011, while display will rebound from a -3% growth rather in 2009 to 19% growth in 2010 and 2011. Or compare it with behavioral
advertising revenue, which is supposed to grow 22% in 2010 and 20% in 2011.
Of course, comparing search, display, and behavioral with social networks isn't an "apples-to-apples"
comparison, as it contrasts methods of advertising with an advertising venue or medium -- but it seems valid, in light of the fact that most social network advertising is still either search or
display, and will probably incorporate more behavioral targeting too. In other words, it would appear the growth rates of these different kinds of advertising are all depressed in the social network
arena, versus elsewhere in the digital universe. Is this a fair statement to make? And if so, what is the reason?
Looking back at previous, much more positive eMarketer forecasts, I wonder
if something has happened in the last two years to limit the potential of social network advertising, or at least the perception of it? Back in December 2007, eMarketer predicted social network
advertising revenues of $2.7 billion -- almost twice the more recent estimates. Of course the intervening period brought the Great Recession, which must have something to do with the big downward
revision, but the fact is eMarketer hasn't lowered its forecasts for search or display ad growth nearly as much. And social network advertising's share of total online advertising is supposed
to decrease, per eMarketer, from 5% in 2009 to 4.7% in 2010, 4.4% in 2011, 4.1% in 2012, and 3.9% in 2013.
So what's holding social network advertising back?
