08.31.10, 11:00 AM EDT
By Adam Ostrow
Forbes.com
In the social media world a number of trends are dictating how, why and where money gets spent–trends that will push the industry past the $2 billion mark in 2011, according to eMarketer’s projections.
Not surprisingly, the biggest beneficiary of the current euphoria around social is Facebook, with several estimates now pegging the company’s 2010 revenue at better than $1 billion. That growth is being fueled in part by what some advertisers see as competition to scoring prime advertising space on the site.
“Most of our clients see a real need to spend a lot on Facebook ads,” says Andrea Wolinetz, a partner at MEC Global, which represents the likes of Ikea, AT&T ( T – news – people ) and Citi ( C – news – people ). “There’s so much noise and clutter on Facebook now, that spending a good deal has become important in order to be heard.”
There’s also a growing sense that social media advertising can deliver a return on investment. Neil Kleiner, head of social media at Havas Media UK says, “We’ve found advertising on social networks to be very effective, but mainly as a part of a larger piece of activity that involved more ‘traditional’ social media techniques … ads on social media work best when they drive interaction and engagement. Interaction and engagement can then drive purchase.”
Kleiner, whose firm does work for brands ranging from McDonald‘s ( MCD – news – people) to Warner Bros., adds that Facebook advertising has become a “default for most brands as a part of their media spend.”
Twitter’s Experimental Phase
After years of fielding questions about how it plans to make money, Twitter has launched numerous experimental business models over the past several months. At the forefront is Promoted Tweets, a program that inserts a brand-sponsored topic into Twitter’s “trending topics” list and presents a tweet from that sponsor to users, in hopes of generating retweets, replies and other forms of engagement.
Early testers of the program include Virgin America and Coca-Cola ( KO – news – people ), the latter of which reported 86 million impressions and an “engagement rate” of 6% back when it used the program in June during the World Cup. More recently, the online brokerage firm Zecco reported that engagement on its promoted tweets was 50% higher than its regular tweets, with “200 to 300% increases in some cases.”
Case studies are still limited, though. “Promoted Tweets have not seen that much traction [with my clients],” Kleiner says, though he sees an opportunity to “add real value to a long tail of advertisers.” For the moment though, that long tail is mostly left out of Promoted Tweets, as the program remains in limited beta.
As the program sees public rollout later this year, the results could be significant for Twitter and advertisers. In its report, eMarketer said it expects “spending on the microblogging service [to] be low in 2010,” but adds that, “the potential for 2011 and beyond could be dramatic if it proves that its ‘resonance’ model of measuring advertising effectiveness works.”
Location Excites Marketers, Maybe More Than Consumers
The latest extension of social–knowing not just what your friends are doing but where they’re doing it–is one of the hottest trends of the year.
The field collectively referred to as “location” has marketers from Starbucks ( SBUX – news – people ) to Best Buy ( BBY – news – people ) excited about the possibilities of increasing foot traffic through programs that reward customers for “checking in” and sharing their location and brand affinity with their friends.
That said, such programs are largely experimental, and many of the startups in the space lack the critical mass to significantly move the needle for big brands. “Foursquare is the buzz word on a lot of people’s lips, but it has such a comparatively small audience that are niche to the point of incestuous,” Kleiner says. “It’s mainly used by people that work in marketing, not ‘normal’ people.”
Still, getting started in the location realm requires less of an investment than competing for space on Facebook. Says Wolinetz: “We spend a lot of our time testing and focusing interest in location-based services and Twitter, as our clients are eager to ‘master’ these emerging platforms, and [they] generally require less of a paid media investment than Facebook does.”
Kleiner concedes that he’s bullish on the potential of Facebook getting into location with the recent launch of Places, though the tools aren’t yet there for advertisers. “We will have some real mass to play with when Facebook allows advertisers to buy against location,” he says.
Social No Longer Sits at the Kids’ Table
While the market sorts out the winners and losers from a platform perspective, one thing that’s becoming clear is that social–which eMarketer estimates will account for 6.7% of total online ad spend this year–is being thought of in a much broader light than even the increasingly optimistic projections show.
“Social campaigns used to be more siloed from the rest of the communications and marketing strategies,” says Wolinetz. “Now we’re seeing social as either an extension of an overall activation idea that occurs throughout other media outlets, or conversely, the marketing/communication strategy is at its heart and inception social, and we’re using other media outlets to drive awareness and scale.”
And while that might mean social’s share of ad dollars is still relatively small, its importance within organizations is as high as it has ever been. “The biggest shift for us is that we are now seeing brands move away from pure campaign planning altogether and are allowing social media to be the bedrock for a 24-7, 365 days a year chance to engage their customers,” says Kleiner.
