• by Shankar Gupta , November 2, 2006

Ad spending on social network sites is set to top $1.8 billion by 2010, but the network operators such as MySpace and Facebook must develop tools to measure results. That's one of the main conclusions of a new report released Wednesday by research firm eMarketer.

The report predicted that ad spending on social networking sites this year will reach $350 million--an upward revision from the previous estimate this summer of $280 million. Next year, ad dollars going to social networking sites will total $865 million, with MySpace.com capturing 60% of spending, according to the new report.

At the same time, eMarketer cautioned that social networking sites must develop metrics for their unique marketing offerings--including sponsored groups, or users that add brands as "friends" or "interests."

"If social networking sites are to capture more than experimental ad dollars, adequate measures of return on investment need to be in place," the report stated. "So far, these are still a work in progress."

As a percentage of total online ad spending, eMarketer expects ad spending for social networking sites to account for 2.2% of the $15.9 billion estimated total online ad spending this year; by next year, such sites will account for 4.7% of the predicted $18.3 billion in online ad spending. By 2010, the report estimates that social networking site spending will account for 8.5% of the projected $25.5 billion in online ad spending.