Forecast: Networking Sites' Ad Revenue To Reach $1.86 Billion In 2010

Fast-growing, which now counts around 100 million users, will take in $180 million in U.S. ad revenue this year, predicted research firm eMarketer in a report issued Wednesday.

Overall, social networking sites are expected to account for $280 million in the United States this year, or 1.7 percent of the total U.S. online ad spend, according to eMarketer. By 2010, social networking sites will likely garner $1.86 billion in online advertising in the United States, or 6.3 percent of the projected total, according to the report, "Social Network Marketing: Carving Out MySpace."

With consumers increasingly turning to social networking sites, it's not surprising that marketers will follow, said Debra Aho Williamson, eMarketer senior analyst and author of the report. "Obviously, advertisers want to go where the eyeballs are," Williamson added.

Also, she said, sites like News Corp.'s MySpace offer marketers the chance to tap into user-generated content, now considered to be in vogue. "User-generated content and word-of-mouth are two big buzzwords right now in online marketing, and social networks give marketers an opportunity to experiment with both," she said.

The report states that most of MySpace's ad dollars come from large-scale promotional efforts on behalf of brand advertisers, which often involve the marketers creating their own MySpace profile and sponsoring branded content. MySpace has run such branding initiatives for several marketers, including fast-food chain Wendy's and PepsiCo's Aquafina water, among others.

Fees from more routine display ads, by contrast, make up just a small percentage of MySpace's total, according to eMarketer. The research firm calculated that MySpace's fees from ad impressions alone totaled around $11.8 million for the first six months of the year. Although MySpace accounted for about 17 percent of the 193.6 billion online display impressions tracked by Nielsen//NetRatings last month, the average cost to run a thousand impressions on the site hovers around 10 cents, according to The New York Times.

MySpace's Chief Operating Officer Peter Chernin said at a Deutsche Bank Media & Telecom conference last month that around 80 percent of the site's advertising is sold on a run-of-site basis, while just 20 percent is sold at premium rates.

Although some marketers clearly are interested in advertising on MySpace, others continue to remain wary of the site. One reason, said Williamson, is that companies are afraid of how consumers will react to the company or its ads. "The big hurdle is accepting that if you advertise on a social network site, you're open to getting comments--good, bad, negative, or ugly--from anybody who views your material," she said.

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