Why Facebook and Twitter May Not Be White Knights for Internet Advertising

by: Andy Beal

Apparently, ads on social networks aren’t working out too well.

While this is not anything we didn’t already know, it must be disheartening for Facebook, MySpace et al, to learn that pinning their revenue growth on display ads may be a tough row to hoe.

It’s not a completely ugly picture, according to eMarketer, ads on social media networks will gain a 5.5% share of all online ad spending, but

That’s up from 5 percent in 2008, the stats released Thursday say. The good news is that, unlike some other sectors of the ad world, it’s not shrinking–but it’s also not growing exponentially by any means. After plunging from a 61 percent rate of growth in 2008 to 12 percent in 2009, the rate of growth is projected to crawl back up to 14 percent this year and stay about the same at 13 percent next year.

MySpace is to blame for most of the stagnation–its own ad revenues have fallen–and it doesn’t help that Facebook is cutting back on its ad serving as well.

Of course, the news isn’t quite so depressing for social networking advertisers. Social networks still make up around 22% of all online display impressions, it’s just that they are dirt cheap–hence not being a bigger slice of the ad spend pie.