Digging In To MySpace And Facebook's (Projected) Slump In Ad Sales

This story was written by Tameka Kee.

Earlier this month, eMarketer lowered its social media ad spending outlook for 2008 through 2013, with revised forecasts for News Corp.'s MySpace and Facebook. In an update, the online research firm offers details for why the two nets will take in less money this year:

Slower growth overall at FIM: eMarketer lowered its MySpace ad revenue forecast for 2008 by more than 22 percentfrom $755 million to $585 millionpartly because of slowed revenue growth at parent company Fox Interactive Media (NYSE: NWS) (FIM). Over the course of News Corp.'s past fiscal year (which includes half of 2007 and half of 2008) FIM's year-over-year revenue growth sputtered from 87 percent at the end of Q2, to 55 percent in Q3, to just 23 percent in Q4. The downward trend continued in the company's most recent earnings report: for the quarter ended September 30, 2008, FIM's revenues were up just 17 percent year-over-year, and eMarketer expects the trend to continue. Just don't tell that to MySpace CEO Chris DeWolfe: at the Reuters Media Summit he said that the social net hadn't really seen "any impact" from the financial crunch and that he expected revenues to grow next year.

Facebook picks utility over revenues: Though eMarketer revised its Facebook ad revenue forecast for 2008 by more than 20 percent (down from $265 million to $210 million), the social net also lowered revenue projections on its own, per BusinessWeek. Citing a source familiar with the company's finances, the article said Facebook brass had initially hoped to generate between $300 million and $350 million in revenues for 2008but lowered that forecast to $250 million to $300 million, and chose to focus on more on developing user-facing features than advertising products.
More after the jump.

New ad formats to pick up the slack : eMarketer notes that the end of MySpace's $900 million text ad deal with Google (NSDQ: GOOG) is loomingwhich will undoubtedly be another drag on the social net's revenues. Though the current deal doesn't end until 2010 (and FIM will likely broker a new one with Google or another partner), MySpace is already rolling out alternative ad formats and revenue streams to help pick up the slack. After months of hype, the self-serve display ad platform MyAds expanded to an open beta in October and the network also plans to start raking in e-commerce revenues from MySpace Music downloads.

Meanwhile, even with its focus on user-facing features, Facebook is diversifying with video ads,"engagement ads" and virtual gift sales. The net also has its eye on a bigger slice of the European advertising pie: it bulked up its UK sales team in August and opened a sales office in Paris about two weeks ago. But dismal predictions for the economy as a whole still force the issue of whether either network (and the myriad others out there) will grow as much financially as they have over the previous few years.



By Tameka Kee
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