Facebook to Surpass MySpace in Ad Revenue Sooner than Expected

Facebook will surpass MySpace in advertising revenues in 2010, a year earlier than expected, according to eMarketer’s “Social Network Ad Spending: 2010 Outlook.”

The projections released on Tuesday predict that MySpace will bring in $490 million in worldwide advertising revenue in 2009 but only $385 million in 2010, a decline of 21 percent. Meanwhile, worldwide spending on Facebook is expected to reach $435 million in 2009 and $605 million in 2010, an increase of 39 percent, finally putting Facebook ahead of MySpace as the number one social network in terms of ad revenue.

“Ad spending on Facebook is soaring while MySpace is tumbling,” read the report. “Facebook’s current strong performance is propping up the entire business of paid social network advertising in the US.”

In July, eMarketer predicted that U.S. ad spending on social networks would decline 3 percent in 2009. The new report reverses that, predicting a 4 percent increase, from $1.17 billion in 2008 to $1.21 billion in 2009, and then a 7 percent increase in 2010, to $1.3 billion.

“Facebook’s growth in the latter half of 2009 is the main driver of the change in the 2009 forecast,” the report said. “In addition, the U.S. economy has shown signs of improvement in late 2009, along with cautious optimism about an online ad spending rebound in 2010.”

Marketers are funneling their dollars to Facebook as the network continues to rack up big membership and traffic numbers. The site now boasts more than 350 million members, up from 200 million in April. In October, Facebook clocked 97.4 million unique visitors in the U.S., reaching 49 percent of the country’s online audience, according to comScore.

MySpace reached a high of 76.3 million unique visits in October 2008, but fell to 64 million in October 2009, according to comScore. As audiences are falling away from the News Corp.-owned site, so are marketers, the report said.

But even with the strong numbers being projected for Facebook, the report notes that most marketing dollars spent on social networks in 2010 will continue to be for earned media — contests, fan pages, and free applications, for example– rather than paid advertisements or sponsorships that the networks themselves charge for.

“Concepts such as earned media, local social advertising, social search and social ad networks will be key themes next year,” said Debra Aho Williamson, eMarketer senior analyst and author of the report. “Advertising will not be the primary focus, but it will serve to drive traffic and engagement with the larger social network presence.”