May 14, 2008 5:15 PM PDT

Ad spending forecast lowered for social networks

Posted by Steven Musil

Making money off social-network advertising may prove tougher than originally thought.

eMarketer on Tuesday revised its projections for social-network ad spending in the U.S. this year to $1.4 billion, down from the previous projection of $1.6 billion. The Internet market researcher said the poor economy was partly to blame for the revision.

"Social-network sites are still trying to figure out what sort of advertising works," Debra Aho Williamson, a senior analyst who authored the report, said in a statement. "Tapping into consumers' conversations and spreading brand awareness virally has proven more challenging than companies originally thought."

The researcher also revised its forecast for how much advertising money would be attracted by the two leading social networks, MySpace and Facebook. In its previous prediction, eMarketer said MySpace would bring in $755 million, down 11.2 percent from eMarketer's original $850 million estimate. Facebook advertisers are expected to spend $265 million, a 12.9 percent drop from the earlier forecast of $305 million.

Still, the market research firm expects the sector to grow by 55 percent in 2008.

The revised projections come on the heels of Rupert Murdoch blaming the U.S. economy for putting the squeeze on advertising budgets. Fox Interactive Media, which oversees all News Corp. Internet business, including MySpace.com, announced that it expected to fall $100 million short of its ambitious $1 billion annual revenue goal.