U.S. advertising on social networks surges 20% to $1.68 billion, half of it on Facebook

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Just after Facebook hit 500 million users last month, some analysts increased their 2010 forecasts for spending on social media advertising.

U.S. advertising is expected to increase 20% over last year to $1.68 billion, up from December’s forecast of $1.3 billion, according to a study by digital research group EMarketer.

‘That’s primarily due to the strong performance of Facebook and somewhat due to the fact that we started adding Twitter to our analysis,’ said Debra Aho Williamson, an analyst.

The study, conducted every six months, also measures sites such as MySpace, LinkedIn and Classmates.com as well as popular sites in China, Japan and Russia for worldwide figures.

Half of that $1.68 billion spent by U.S. advertisers will go to Facebook, according to the study. By 2011, advertisers will spend $1.06 billion on the San Francisco company -- a 112% increase from 2009.

Worldwide, overall social media ad spending is leveling off -- except for on Facebook. Advertisers around the globe will pour an estimated $1.76 billion on the site in 2011, which is a 165% increase from 2009, according to the study.

This means marketers recognize this is an easy way to reach consumers where they spend a lot of their time, Williamson said.

‘Facebook has been one of the leaders in ways to advertise in social media,’ she said. ‘It’s become one of the go-to places for marketers.’

That’s largely because of Facebook’s self-serve advertising system -- EMarketer estimated that it accounts for at least half of the company’s revenue, an increase from previous estimates.

‘We underestimated how big that success was,’ Williamson said. ‘I think it was a surprise for Facebook as well.’

The system allows marketers to create and post ads without having to go through a salesperson, which is unique to social media sites, Williamson said. Once an ad is created, users also have the option to ‘like’ or ‘become a fan’ of an ad, which Facebook then posts as suggestions to mutual friends.

But although marketing dollars are increasing in the millions, Williamson said Facebook is far too big for users to worry about being bombarded with ads.

‘There’s plenty of opportunity and plenty of places to put advertising,’ she said. ‘It’s been very minimalistic, and that’s on purpose.’

Advertising on MySpace, which is refocusing on its roots in being a social media site for entertainment and music for youth, is on the decline. U.S. marketers will spend $323 million on the site, down from $445 million in 2009, EMarketer said. By 2011, U.S. and worldwide advertising on MySpace is estimated to decline about 38% from 2009 figures.

‘It’s a smaller targeted audience,’ Williamson said. ‘There are fewer advertisers who want to reach a youth market.’

-- Kristena Hansen

Charts: U.S. advertising spending on social networking sites, by venue, for 2009 compared with 2010 forecast. Credit: EMarketer