Massive Growth of Ad Spending Over Social Networks

Social networking, blogging, Twitter, Facebook -- all still inspire negative reactions from some execs inside the traditional media industry, but a report released by Nielsen found that over the past year, the social media world has expanded its footprint substantially among the U.S. Internet population.

As of August, according to the Nielsen study released last week, social networks and blogs accounted for 17 percent of all time spent on the Internet, which is close to triple the percentage just one year earlier.

Advertisers have taken notice. Here are some of the report's main findings:

• "Year-over-year, estimated online advertising spend on the top social network and blogging sites increased 119 percent, from approximately $49 million in August 2008 to approximately $108 million in August 2009."
• "The share of estimated spend on these sites has also grown, increasing from a seven percent share of total online ad spend in August 2008 to a 15 percent share in August 2009."
• "The Entertainment Industry led in growing its online ad dollars, increasing ad spending on the top social network sites by 812 percent in August. Travel advertisers followed suit, increasing their ad spend on these sites by 364 percent."
• Five other industry segments, including automotive, health, and software, also experienced triple-digit growth.
• "In the past, advertisers had significant concerns with social media advertising. The considerable increases we've seen in ad spending over the past year suggest that many of these concerns have subsided or been addressed."
• "(A)dvertisers that want to connect with core fan bases, such as movie studios, are allocating more and more dollars to online communities like Facebook and MySpace, where they can engage in an ongoing dialog with their target market."

This kind of structural change in spending decisions by advertisers is not going to reverse just because the economy (as is widely rumored) is beginning to recover. Economic growth may soon actually resume, marketing and ad spends may soon increase, but the old media players most likely will not be invited to the party.