eMarketer projects US social network ad spending will fall in 2009.

Problems at MySpace are the main reason for the revision.

As a result of the expected shortfall at MySpace, eMarketer now forecasts that total US social network ad spending will fall 3% to $1.14 billion in 2009, from $1.18 billion in 2008.

This is a significant turnaround from previous years. Spending grew an estimated 33% in 2008 and 129% in 2007.

In eMarketer’s last forecast, published in December 2008, we estimated marketers would spend $630 million to advertise on MySpace in 2009. Now eMarketer projects that US ad spending on MySpace will reach just $495 million this year, down 15% from the estimated $585 million MySpace generated in 2008.

News Corp. executives said in a May 6 conference call with financial analysts that ad revenues fell 16% at Fox Interactive Media (FIM) in the January–March 2009 quarter, compared with the previous year. MySpace makes up the bulk of FIM’s revenues. (News Corp. does not break out MySpace revenues separately.)

The challenges facing MySpace do not necessarily mean that other companies operating in the social network space will have similar problems. Facebook, for example, is expected to increase its US ad revenues 9.5% in 2009, to $230 million, while US ad spending on widgets and applications is projected to reach $70 million, up 75% from 2008 (albeit from a very small base). US spending on all other social network sites combined is expected to rise 1.5% to $345 million.

Moreover, marketers are still focused on using social networks for other purposes aside from advertising, such as public relations and customer relationship management. In a Forrester Research survey, 53% of marketers said they would increase their investment in social media in 2009.

MySpace remains the largest single social networking site when it comes to ad spending, but its fortunes have changed dramatically over the past few months. Its CEO Chris DeWolfe stepped down in April as new CEO Owen Van Natta, a former Facebook exec, joined the company.

MySpace has also lost traffic. Its US unique visitor count continued to rise as recently as last fall. But traffic fell 8% between October 2008 and March 2009, to 70.1 million people, according to comScore Media Metrix. Meanwhile, Facebook’s unique visitor total grew 33%, reaching 61.2 million.

Simultaneous with the revised US estimates for 2009, eMarketer is issuing—for the first time—estimates for ad spending on MySpace and Facebook outside the US.

Overall, marketers worldwide are expected to spend $520 million to advertise on MySpace in 2009, with $495 million coming from the US and $25 million from other markets. Non-US spending on Facebook is expected to reach $70 million this year, for a total of $300 million in 2009.

Although MySpace got a head start over Facebook in selling advertising outside the US, its international operations have struggled lately. Meanwhile, Facebook’s international user base has grown rapidly and it has been ramping up ad sales operations in several countries.

Source: http://www.emarketer.com/