The World is not Enough

It's not your father's social networking anymore. eMarketer released a report recently titled “Social Network Marketing: Ad Spending Update". Ad spending in the US for social networking will increase from $280M this year to an estimated $865M in 2007, with MySpace hosting 60% of the ad spending. All leading to a staggering $1.86B estimated in 2010. Social networking’s share of US total online ad spending is also projected by eMarketer to grow from 1.7% ($280M/$16.7B) in 2006 to 6.3% in 2010. Globally, such ad spending will grow from $350M in 2006 to $2.51B in 2010.

So, social networks are poised to grow both internationally and in niche groups. International expansion is only natural as social networking promotes communities without physical borders. The large players such as MySpace are already expanding to at least Europe and Asia, where it is facing off against homegrown social networks such as Cyworld in South Korea, Mixi in Japan, Studivz.net in Germany and Skyblogs in France. However, MySpace may gain a slight advantage only if it is able to incorporate media products (ie movies, television shows, etc…) from News Corp. other properties, and not turn off its targets. 24, the TV show has a huge following in Japan (note the energy drink commercial starring Kiefer Sutherland in Jack Bauer mode) and should complement the Japanese launch, if the lawyers allow it.

Niche social networking would be another way social networks can grow in the near future. This segment has been getting its fair share of attention lately as well as funding and endorsement. JibJab launched its social network to share online humor more than ½ year ago followed by some venture capital funding. Sports Illustrated aligned with Takkle, a high school sports social network, recently while it may invest $25M in FanNation.com, another social network for sports, according to another report. The large players will still be the draw for general social networks, while niche sites will become like the Long Tail, attracting communities interested in particular topics, whether acting like virtual watercoolers for entertainment or virtual community center for common activities.

By growing social networks, both globally and in niches, additional advertising inventory can be created. The more targeted the communities (by geography or interest), the more valuable they are for advertisers. Then, these newer social networks will then be alternative distribution platforms for larger media concerns as well as additional advertising outlets. The question is whether the owners can monetize their social networks without alienating their community. I think “yes" but only if they remain true to their community and be upfront about their intentions, ie relevant advertising.