Social networking advertising

Social networking advertising

Social networking sites such as Facebook, MySpace, and Orkut are among the most visited websites in the world and many of them also rank among the fastest-growing online properties. comScore estimates that 71.3% of the global online population visited social networking or social media sites in March 2010. Furthermore, according to comScore the average user spent 15.3% of their mobile internet time usage on social networking and blogs.

Active Facebook users alone increased over the past 18 months to more than 400 million, 50.2% of whom log on every day, resulting in the evolution of a social ecosystem. Additionally, 70.3% of Facebook users engage with platform applications each month, creating new opportunities and business models for advertising, content, digital media, marketing, videogames, and so on, and 250 applications on Facebook have more than one million active users, creating substantial business opportunities.

Besides the well-established general social networking sites such as Facebook, MySpace, Orkut, and so on, there are also a number of specialized social networking services. For instance, Linked-in is a networking website for professionals, Twitter is used for microblogging, Yelp is for local business reviews and chat, and Flickr is for sharing photographs.

With rapid growth in the number of users, advertisers are also becoming increasingly comfortable with placing ads on social networks. Currently, the majority of social media sites offer CPM or cost per click (CPC)-based advertising options, which can be targeted at a specific audience (based on interest, location, age, gender, education level, and so on) and provide real-time reporting on campaigns.

Advertisers have also begun to capitalize on the power of unique formats in social media such as Facebook fan pages, personal recommendations and endorsements, and the use of tweets to update followers on popular product reviews, sales, and promotions. For instance, to date Dell has sold $3m of products through the social networking site Twitter, replacing most of its email, search, and affiliate marketing activity.

Growing popularity of social networking sites

The number of unique users visiting social networking sites is growing by leaps and bounds. At the end of 2009, Facebook recorded the highest number of users with 350 million, while Windows Live Profile and NetLog recorded the least of those studied, at 42 million. As people spend more and more time online, they are left with less time to connect with friends and family in the real world. As a result, reliance on these sites as major touch points is increasing.

Social networking ad revenues

In view of the growing popularity of social networking sites, many advertisers consider them to be effective media through which to reach the Generation X and Y audience (segments of the population that have high disposable incomes, are well connected, and exert an influence over their friends).

Social networking ad revenues grew at a CAGR of 62.5% from $500m in 2006 to $3,490m in 2010. The segment is already making significant inroads into the old guard’s stronghold. According to comScore, in May 2010 Facebook surpassed Yahoo in the US display ads market with 176 billion ad impressions, garnering a 16.2% share compared to the latter’s 12.1%.