Borrell: 20% of Social Nets Ad Dollars Local

While I was gone Borrell put out an ad spending projection that contends social networks will see 20% of their ad dollars come from the local (read: SMB) market:

We just did an assessment of advertising placed on social networking sites and were surprised to find that nearly 20% of all ad spending is by local businesses. Our assumption going into this research was that commercials on social networks were almost purely national. We’re estimating that local advertisers will account for about $641 million of nearly $3.3 billion this year trying to reach consumers via these sites.

Borrell’s list of social networking sites is long but there are only three sites that matter in the big picture: Facebook, Twitter (no ads now) and MySpace (although MySpace is fading). Maybe AOL will do something with Bebo and local that is interesting in the future, given that AOL is making a renewed effort in local. There may be other isolated sites that matter here and there for specific industries or verticals.

Problems/issues/questions with this estimate:

  • It’s extrapolated from a small base
  • Most of the “action” on social networks among SMBs cannot be considered “advertising” (e.g., Facebook profiles, fan pages)
  • What’s a “social network”? We all know the top sites but definitions get murky when one gets farther “down” the ladder.

I agree that there will continue to be lots of focus and energy among SMBs directed to social networking sites — Twitter and Facebook in particular. The challenge for these sites is how to build functionality that both benefits SMBs and can generate revenue. The various flavors of “advertising” on Facebook are not as useful as the free tools. And Twitter effectively has no ads.

There is, however, a substantial opportunity for third parties, SEM firms and directory publishers in particular to add Twitter and Facebook tools (and reach) into their product set to add value to what they’re providing to advertisers. Some are contemplating or already doing versions of this. Agendize, for example, does extends directory publisher reach with its toolset.

Picture 1

Source Borrell Associates (n=118)


Related: From MediaPost . . . Most of the 2008 revenue forecasts proved to be terribly wrong:

A survey of eight revenue forecasts issued between June 2007 and December 2008 (from Veronis Suhler Stevenson, Jupiter Research, the Kelsey Group, Lehman Bros., Magna, eMarketer, J.P. Morgan, and ZenithOptimedia) reveals that, on average, the crystal ball for Internet advertising revenue growth in 2008 was about 100% higher than the actual growth rate, with an average prediction of 20% versus actual growth of just 10%, according to the Interactive Advertising Bureau. Midway through 2009, it seems likely the forecasts will be even further off. On average the analysts predicted 17.5% growth in Internet revenues, but the first quarter actually saw negative growth with a -5% drop. True, the rest of the year could see a recovery – but to yield an annual growth rate of 17.5% Internet revenues would have to grow an average 25% in the second, third, and fourth quarters.


3 Responses to “Borrell: 20% of Social Nets Ad Dollars Local”

  1. NewSunNetworks — Blog — Borrell: Social Nets to Get 20% of Local Dollars Says:

    […] original post here: Borrell: Social Nets to Get 20% of Local Dollars  SHARETHIS.addEntry({ title: "Borrell: Social Nets to Get 20% of Local Dollars", url: […]

  2. clay Says:

    The headline “Social Networks to Get 20% of Local Dollars” is deceptive and not all that accurate after reading the rest of the post. It seems to suggest that 20% of SMB dollars are going to social networks, when the post from Borrell itself suggests that 20% of social networking ad revenue dollars are from SMBs. These numbers are in no way necessarily the same.

  3. Greg Sterling Says:

    Clay: fair criticism. I wrote the headline quickly

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