Social networking adspend bucks the trend

Advertisers have more than doubled the amount of money they are spending on social networking websites since last year, according to recent analysis from The Nielsen Company.

Around $108 million was spent by advertisers on social sites like Facebook and MySpace in August 2009, up 119% year on year. Nielsen estimates that social networking sites now account for 15% of all online ad spend.

This surge in social media spending comes amid a sour economic climate that has sapped advertising budgets. But social media appears to be bucking the trend, recording across-the-board increases in all categories, including a staggering 812% year on year increase in spending within entertainment.

This growth suggests a wholesale change in the way advertisers are using the internet – historically they have been hesitant to funnel dollars to those sites which are dominated by user-generated content and which do not always guarantee an optimal setting for marketing placements. But these new figures suggest a fundamental shift in the way advertisers are regarding social sites and are increasingly seeing that Facebook and MySpace offer compelling opportunities to seed their messages across a highly engaged community.

However, according to eMarketer, social network advertising spend is taking a hit from the worldwide economic crisis and the ongoing challenge to develop effective advertising models remains.  Nevertheless, eMarketer estimates that marketers will spend $2.1 billion to advertise on social networks worldwide in 2009, a 17% increase from 2008.

eMarketer’s ‘Social Networking Worldwide’ report analyses the struggle to build revenues for a channel that – despite overwhelming consumer acceptance – many marketers still view as “experimental”.

Although a double-digit ad spend increase during a recession sounds good, the reality is that it is only half the growth rate eMarketer previously projected. In fact, growth in spending on social network advertising is slowing around the world, a result of poor economic conditions and a lack of proven ad models.