Facebook Domestic Ad Growth Rate Decelerating Sharply

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eMarketer is reporting that advertising on social networks will taper off this year. This is an additional negative for MySpace, which is currently struggling, but a new negative for the much loved Facebook, which I opined in a recent write-up CashBurn Book, is hemorrhaging cash. The report states that advertising on social networks will decline 3% to $1.1 billion in the U.S. versus the prior prediction made in December 2008 of a 10% increase to $1.3 billion.

The report further states that MySpace's U.S. advertising business will decline 15% year-over-year in 2009 to $495 million, representing half of the social networking dollars, down from 51% in 2008.

Conversely, Facebook will see its domestic advertising business increase 9% year-over-year to $230 million, and will shoot past MySpace in total dollars by 2011. Its domestic share of social networking ad dollars will increase to 21% in 2009 from 19% in 2008. However, the 9% growth is a 41 point deceleration from the 50% growth in domestic ad dollars in 2007, where sales grew 50% to $210 million.

So while there is positive conjecture about the health of Facebook's business since one director stated that they are on track to generate $500 million in total revenues in 2009, market experts are calling for a significant slow down in the growth rate of FaceBook's domestic ad business.

To be fair, any ad growth above 0% in 2009 is a positive for any ad company who can deliver that. But given all the hype about Facebook, they should be doing much better, particularly if they want to stop bleeding cash and have a decent chance at an IPO next year.

As an aside: I thought the SEC forces companies with more than 500 shareholders to file public documents. I could be wrong but Facebook does have over 500 employees and I am sure all have shares. Just a thought.