Monday, November 2, 2009

Ad dollars moving into social media in 2010

Guest post: Michael Prospero Director of Research at FirstRain

In 2005, I was one of the analysts covering digital media and online advertising for an investment bank. At the time, most of the analysis was around the way people spent their time with media and the trend of eyeballs and dollars moving online. The number of people consuming their news from the internet was growing and the number consuming news via television and radio, not to mention newspapers, was falling fast. Everything on demand all the time along with the lack of commercial interruption are two of the major reasons for this behavioral change. As people spent less time watching television in the traditional manner (i.e., not using a DVR where they can skip commercials) they spent more time online. This trend continues today as people are watching movies on their computers that they download directly from Netflix or the watch TV shows online with sites like Hulu.

Gradually, advertisers began to follow the users online where they could accurately measure the success or failure of their advertisement using technology e.g., click tracking. The trend continues today and with the exception of certain sporting events (Monday Night Football or the Olympics), it is considered a much less efficient means of spending advertising dollars especially for certain demographics. However, this trend of ad dollars moving online was fairly slow compared to an emerging sub-trend. Social Media/Networking sites have surpassed email in terms of time spent online.

“Nielsen Company reports that the time spent on social networks and blogs accounted for 17% of the total time spent on the Internet in August 2009.” The interesting fact about this trend is how fast it has happened. In just one year, the time spent on social networking has tripled.

Just as it happened with ad dollars moving online following customer eyeballs, you will see ad dollars moving into the social media space at a rapid rate in the next year. It’s no surprise that the sites that stand to benefit the most today will be Facebook, MySpace and Twitter. In fact, eMarketer projects that social network ad spending US marketers will increase their spending 13.2% in 2010, to $1.3 billion. If most of this new ad money is spent on the handful of the most popular online social destinations, I expect a number of new competitors to emerge in this fast growing space in short order.

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