Gen Y Social Networking Sites Rake in Online Advertising Dollars

According to a recent article published by eMarketer.com, advertising spending on social networking sites is expected to increase by more than 600% by 2010. Long the familiar stomping grounds of Generation Yers, these online communities were formerly viewed as an unpredictable channel for marketing dollars. Now with advertising spending on these sites nearing $350 million for 2006, advertisers have declared social networking sites an extremely viable means of reaching the valuable Generation Y demographic.

While social networking sites still only account for just over 2% of the almost $16 billion spent on online advertising in the US in 2006, eMarketer analysts predict that by 2010 social networking sites will garner nearly 10% of online advertising sales, with total US online advertising increasing to a $26 billion market. These predictions extend to the worldwide online advertising market as well. Ad sales on social networking sites popular in other regions of the world has been slower to take off than in the US, but the market for advertising on these sites will pick up in the next couple years with the proliferation of global and multilingual social networking sites.

Until now, most advertising done on these social networks has been for products that compliment the multimedia environment of online communities. Entertainment has been an especially lucrative advertising category for these sites, with video, banner ads, and flash content for new movies and games easily fitting in with the surrounding content. Not wanting to be left behind, many other categories, such as food, automotive, and retail, have now delved into advertising on social networking sites, reaching the Generation Y audience captivated for an average of an hour per day on these sites.

The most important thing advertisers are learning from working with social networking sites is the ability to forge a relationship with the consumer. Rather than just tossing advertising messages out on the site and hoping someone clicks one, advertisers are actively engaging consumers by producing their own profiles and conducting dialogues, humanizing the brand/product/service and creating brand enthusiasts through grassroots efforts.

MySpace is the undisputed king of social networking site ad revenue, and its slice of the advertising pie seems to be getting bigger as it branches out into global markets. When MySpace becomes too cluttered from the predicted influx of advertising in the next couple years, expect advertisers to find niche social networking sites (Warcraft Social Network, Dogster) a desired avenue to reach a segmented Gen Y audience.