In Response to 'eMarketer Lowers Social Networking Ad Spending Estimate'

After having read Debra Aho Williamson's article titled 'eMarketer Lowers Social Networking Ad Spending Estimate', there are a couple of quick points I would like to make.

1. In the online world, and especially in the social networking world, things are changing extremely fast - so to say that advertisers will spend 2.2 Billion instead of 2.4 Billion in 2011 doesn't change my perspective on the future of social network advertising.
   
   
2. One trend which was not mentioned in this article, is that advertisers are starting to move away from advertising directly with these social networking sites, and looking at ad networks that place advertisements into custom applications. Why is this relevant? Because it has been shown consistently that click through rates and advertising effectiveness is higher on custom applications than advertising directly with social networks. This is because the user is more engaged with an application whereas they have gotten used to 'blocking out' the ads that they know will always appear in the 'left column' or the 'top right'. Once advertisers discover the effectiveness of advertising within applications, I believe social network ad spending will go up.

       

Worldwide Internet users vs social networking users [Corresponding Advertising Markets]

There are some interesting numbers that I am always looking for - so I decided to bring them together and post them on my blog, as I am sure others will also find them useful. These numbers are taken from three sources: The Economist, USA Today, and eMarketer with some extrapolation of course.

Worldwide Internet users: 1.2 Billion
Worldwide social networking site users: 506 Million
% of Internet users registered on at least one social networking site: 42%

Worldwide online advertising spending: $40 Billion
Worldwide social networking advertising spending: $500 Million
% of online advertising dollars spent on social networking sites: 1.25%

Seems to be quite a discrepancy however, I expect advertising spending on social networking sites to increase steadily over the next few years as marketers become more comfortable with the concept and more aware of the benefits.

Social Networking World Map

It shocks my every time I speak with a Canadian who thinks that facebook is the only social networking site or when I speak to an American who thinks the same about myspace. There are plenty of other ones out there - hundreds in fact. Different countries actually are 'dominated' by different social networks. Although my blog is usually dedicated just to advertising in social networking sites, I though it would be prudent to try to clarify this. Please see the images below, with due credit given to the original sources of these images:


From Valleywag - The world map of social networks




From Le Monde.fr - Réseaux sociaux : des audiences différentes selon les continents

MySpace Featured Apps. Mathematical Analysis - Is it worth $75k?

It is quite late, but I just read Nick O-Neill's article MySpace Begins Charging for Application Promotion and felt the need to blog. Instead of taking the approach that most are taking by simply declaring it outrageous, I decided to take a mathematical approach and look at the ROI. I have made many assumptions and obviously every app is very different. I have tried to take an average or an educated guess in some cases - PLEASE let me know if you have any reason to believe they are far off.

MySpace has ~15 Million unique visitors / week. Let's say of those 15 million, 1% check out the application directory - 150,000 people. Assume a conversion rate (people who see your promotion click on in and add your application) of 30% (It is quite the prominent display) so 45,000 people add your application. Also assume that each person has an average of 3 friends who also add the application, so you are looking at a total of 180,000 Installations from your $75,000 Investment!

Now, Assume each person that adds your application will visit your canvas page 5 times a week.
Showing ads on your canvas page, an ad network like AdParlor has an ~eCPM of $2/1000 impressions, let's be conservative and use an eCPM of $1/1000 impressions so each person who adds your application will earn you about 0.5 cents / week. Earning 0.5 cents/week from each of these 180,000 people = $900/week. That translates to about 83 weeks (~1.5 years) to earn back your $75,000.

I will leave it up to you now to decide if it is worth the investment?