Social Network Advertising: Trends for 2010

Can Facebook continue its momentum into 2010? Last week I wrote about TBI Research’s forecast that Facebook would generate $1 billion in revenue in 2010, a substantial increase from the $550 million TBI estimated Facebook would earn this year.

Today, eMarketer released my latest forecast for social network ad spending. I estimate that marketers will spend $435 million worldwide on Facebook in 2009 and $605 million next year, a 39% increase. My figures include only paid advertising (such as Facebook’s Engagement Ads, search and self-serve ads) and don’t include any other form of revenue, such as the money Facebook makes when a member purchases a virtual gift item.

Overall, I expect marketers to spend $2.2 billion to advertise on social networks worldwide, up 12% over 2009. In the US, spending is expected to grow 7.1% next year, to $1.3 billion.

The momentum behind Facebook has been one of the key social media marketing trends of 2009. But I believe several macro trends will play out in 2010. For Facebook to maintain its dominance (and potentially increase it) it will need to create ad formats that capitalize on these trends:

Earned media takes center stage. Marketers will look for better ways to manage and measure the impact of earned media—the additional free exposure that a brand gets when consumers talk about a brand online or share information about their interactions with it.

Social networks will challenge traditional local ad venues. By some accounts, Facebook’s self-serve ad system, which caters to small and local businesses, is generating a sizable chunk of the company’s revenues. With geolocation technology, local ad targeting and location-based services on mobile phones, there will be many more opportunities for local businesses to make their marketing more social.

Social combined with search will yield better results and more ad opportunities. Search will meet social by incorporating real-time content (e.g., tweets from Twitter and status updates from MySpace and Facebook) into search results, adding information from social network friends to search results, and using collective information from other Web users to hone search relevancy. These trends will yield new ad formats—and will raise new red flags for privacy advocates.

Social ad networks will expand. Expect more momentum behind advertising that is targeted based on information from social network user profiles.

Will Facebook succeed? Let me know in the comments.

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