Some Social Networks May Never Support Brand Advertising, IDC Finds

FRAMINGHAM, MA – AUGUST 28, 2007 – Hundreds of millions of U.S. consumers have adopted social networking services as a tool to manage their social networks and express themselves. Spreading like wildfire, social networks have a stickiness among consumers that potentially make them prime real estate for advertising. However, a new report from IDC argues that sites like MySpace, Facebook and YouTube have not yet realized their full potential as advertising media.

According to IDC, social network operators are only beginning to learn how to monetize their services. Few offerings currently generate income in proportion to the media attention they receive. However, the popularity of social networks will eventually translate into revenues. IDC estimates that social networks only made about $400 million in revenues in 2006, but could make as much as $1 billion this year.

To generate new revenues in the future, IDC expects that most social network services will employ a mix of business models, including advertising, subscriptions, and ecommerce. Of these three models, only advertising scales well enough to make social networks interesting for portals and major media companies. So far, however, little advertising can be found on social networks. And while the issues underlying slow ad sales may eventually be solved, some services may never be able to attract brand advertisers on a large scale.

"Social networks cannot guarantee a brand-safe environment. Advertisers don't want to see their ads displayed alongside illicit content, for example," says Karsten Weide, program director of IDC's Digital Marketplace: Media and Entertainment. "The dilemma for social networks is if they start to control what content users can post, they will lose popularity, which is what attracted advertisers in the first place."

This IDC study, Social Networking Services in the U.S. – Popular, Yes, But How to Monetize Them? (IDC #208115), describes the opportunities and challenges social networks present to companies that do business in the digital marketplace. An overview of the current state of U.S. social networking services is provided in this report as well as IDC's definition of "social network," "social networking service," and "user-generated content." Additionally, the business models social networks support and the money they can bring to these businesses is outlined.

Meet with Karsten Weide and other members of IDC's Digital Marketplace research team at an IDC Digital Marketplace breakfast briefing in the Silicon Valley area of California on Thursday, October 18, 2007. To learn more about this event and how you can register, contact Marketing Specialist Caroline Dangson at cdangson@idc.com.

To purchase this document, call IDC's Sales hotline at 508-988-7988 or email sales@idc.com.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 900 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 90 countries worldwide. For more than 43 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com .

All product and company names may be trademarks or registered trademarks of their respective holders.

###