With growth slowing down at MySpace (NYSE:NWS-A) and Facebook, eMarketer has revised its advertising forecast down for the two large social networking sites. Now they project overall ad revenue to come in at $1.4 billion in social networking ads in the United States, against the $1.6 billion originally forecast.
Earlier projections also had social networking advertising growing at a 70 percent clip, where now it's revised to 55 percent for 2008. That's a significant change from the 163 growth rate enjoyed last year.
EMarketer was quick to point out that the revised numbers were connected more to the sector itself, than they were to a slowing economy.
"The challenge is that all of these new forms of advertising are more difficult to plan, measure and quantify than what advertisers are used to, and that has impacted spending growth," wrote eMarketer Senior Analyst Debra Aho Williamson.
At the same time, Williamson did say that the majority of marketers look at social networks as something experimental, and will make cuts there first when things do slow down economically.
For Facebook, the opening up to third-party applications may have actually hurt, rather than helped the company, as far as monetization goes. While they may resound with developers, they don't generate ad revenue in any significant way, other than if they are very high-profile. Williamson believes this has hurt Facebook because marketers create applications for the network rather than buy advertising in many cases.
Even though the much-hyped sector receives so much press coverage, in the end, eMarketer concludes the overall industry won't become much more than a niche category, which by 2012 will account for only 5.1 percent of overall online spending.
While some have projected the demise of the Web portal, this news may actually help them out some, rather than hurt them, as marketers understand a mass audience visiting a centralized site.
Another factor is advertising on social networks have also put downward pressure on advertising prices, which if they are abandoned, could help out Web portals as prices could increase as a result of slowing social network advertising.
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