The Social

Networking

Explosion: Ad

Revenue Outlook

$995

June 2010

www.borrellassociates.com

EXECUTIVE SUMMARY

Report layout by Anya Pavlenko www.visualsphere.net 416. 932. 9689 © 2010 BORRELL ASSOCIATES INC. ALL RIGHTS RESERVED

BORRELL ASSOCIATES MANAGEMENT

Colby Atwood, PresidentCAtwood@borrellassociates.com

Gordon Borrell, CEOGBorrell@borrellassociates.com

Kip Cassino, Vice President of ResearchKCassino@borrellassociates.com

Peter Conti, Jr., Executive Vice PresidentPConti@borrellassociates.com

TABLE OF CONTENTS

4

THE SOCIAL NETWORK EXPLOSION

© 2010 BORRELL ASSOCIATES INC. ALL RIGHTS RESERVED

Fig 1: Social Network Marketing Spending, Forecast Through 2015 ....................................................................................................................................................................... 5Fig 2: Jack’s Media Schedule ..................................................................................................................................................................................................................................................................................................... 7Fig 3: Jill’s Facebook Campaigns ................................................................................................................................................................................................................................................................................. 9Fig 4: 2010 Plans for Use of Selected Social Marketing Tools ........................................................................................................................................................................................ 11Fig 5: Level of Current Social Media Engagement among Respondent Businesses, B2B vs. B2C ................................................................. 12Fig 6: Social Network Marketing - Ad Spending Share vs. Promotions Share, 2009 - 2015 ................................................................................ 12Fig 7: U.S. Smart Phone App Use, 2009 vs. 2010 ................................................................................................................................................................................................................ 13Fig 8: U.S. Smart Phone Mobile Browser Use, 2009 vs. 2010 ........................................................................................................................................................................... 14Fig 9: Social Network Marketing, Local vs. National Spending, 2009 - 2015 .......................................................................................................................... 14

APPENDIX I: Social Networking Timeline .................................................................................................................................. ............................................................................................. 16

APPENDIX II: Micromarketing: the Anti Mass Medium .............................................................................................................................................................................. 19

APPENDIX III: Social by DMA Table .............................................................................................................................................................................................................................................................. 24

ABOUT US

Executive Summary

THE SOCIAL EXPLOSION

Executive Summary

5 © 2010 BORRELL ASSOCIATES INC. ALL RIGHTS RESERVED

THE SOCIAL NETWORK EXPLOSION

The Internet began as a way for people to communicate with each other. The invention of ARPANET in 1971 let government scientists whisper classified secrets to each other from computers all over the nation. [See Appendix I, Social Network Timeline.] So, in a sense, the rise in the popularity of social networks is simply the Web going back to its roots. What started as disassociated chat rooms and private bulletin boards now connects hundreds of millions of people worldwide. More than 1.5 million local businesses participate in social networks as well, and the number continues to grow.

Given their unique ability to move messages among connected users, social networks have been irresistible to marketers looking for ways to deliver advertising and promotional messages. The results to date have been breathtaking. We estimate that social network marketing spending totaled more than $4 billion nationwide last year, with about half coming from nationally prominent companies and the rest from local businesses. This year, our projections call for a 68 percent increase, propelling marketing spending on social networks to almost $7.5 billion. About 11 cents of every marketing dollar spent online will go to social network campaigns. In five years, social network marketing is forecast to reach almost $38 billion − a full third of all online marketing spending in the U.S. (Figure 1).

FIgurE 1: Social Network Marketing Spending, Forecast Through 2015

Source: Borrell Associates Q1, 2010 Data All Estimates, Projections, and Forecasts in $ Billions

The rapidly growing marketing spend is fueled by wildly climbing consumer use of social networking services. According to comScore, To Facebook alone had more than 100 million unique visitors in the US last December – out of 400 million registered users worldwide. The average visitor came to the site 27 times during that month, almost once a day. As of the end of 2009, one hour in every nine spent online was spent on a social network site. More than two-thirds of the nation’s largest businesses recruit new employees through social networks, and 13 percent more plan to start this year.

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Ad SpendingPromotions Spending

6 © 2010 BORRELL ASSOCIATES INC. ALL RIGHTS RESERVED

THE SOCIAL NETWORK EXPLOSION

If it’s that big, why hasn’t social network marketing gotten more attention? Three reasons:

1. It’s fuzzy. This year, about a quarter of all social network marketing dollars will be spent on promotions, not advertising. As the ratio of promotions to advertising rises (as we believe it will), the line between ad spending and promotions will become more and more blurred. By 2015, $1.75 worth of promotions spending will accompany every ad dollar spent through the social networks.

2. It’s misunderstood. As marketers tout their thousands of “friends,” they continue to attempt to use the social networks as mass media. As we’ll see in this report, that is absolutely the wrong way to look at this new medium.

3. It’s hard to measure. Old-fashioned mass media are relatively easy to measure. The process consists of looking up what’s being spent by advertisers and matching that to receipts from media companies. Measurement of social network marketing is far more nuanced. In some cases, what would be considered good for a mass media effort is actually a bad result in social networks.

Here’s the bottom line: social media are fundamentally different from the mass media that most marketers − including online marketers − have been educated to use. The winners in this new and burgeoning arena are going to be those who can forget the past and embrace the new.

Executive Summary

Market IntelligenceOne of the most valuable assets you can have in your sales arsenal is market data on “local” ad spending across all media and business categories along with pro�les of how consumers in your market use the Internet.

We o�er an assortment of local online ad data that will help media companies tell the best story with their advertisers and help distinguish them from the competition. This data also helps our clients determine the amount of online ad money available in their markets and how that money is being spent.

One of our most popular data reports is the LA$R® (Local Ad Spend Report).This report provides comprehensive estimates of ad spending across 11 major media types (newspapers, TV, radio, billboards, online, etc.)including promotions, by each of the top 100 business categories in a market. Some other popular reports are:

Local Online Advertising Detail (LOAD), which provides a comprehensive view of online advertising in any local market, including share estimates on who’s receiving that money. It also shows individual business segments (such as automotive, furniture stores, real estate, telecommunications) and how they’re spending their interactive dollars, by ad format (display, paid search, video and e-mail).

Media Usage, which provides insights into consumer buying and media usage patterns across direct mail, newspapers, radio, TV and Internet, including things such as items purchased, coupons redeemed, etc. It shows current Internet access rates for local markets, top uses of the Internet, time spent online, etc.

In addition to 25 di�erent data reports we also o�er custom market data reports. Our researchers can generate unique data sets that provide insight into a variety of market segments, in any local market, using our highly-re�ned and industry-praised methodology.

1643 MERRIMAC TRAIL, SUITE B, WILLIAMSBURG, VA 23185TEL: 1-757-221-6641 INFO@BORRELLASSOCIATES.COM

�e Borrell Associates team of researchers and analysts are the experts in local advertising. We help clients gauge ad spending in local markets – especially online advertising – and increase their revenue share by providing detailed ad-spending data, fact-based consultation and sales training. Our mission is to help our clients understand what's happening to local media, how it a�ects their speci�c market, and how they can act on it now. And we have the facts to back up our recommendations.

WWW.BORRELLASSOCIATES.COM

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Broadcast TVDirectoriesMagazinesNewspapersOther PrintPureplayRadio

Spending was Shared in 2009How $13.3B in Local Online Ad

Contact us today at 1-757-221-6641, or visit us at www.borrellassociates.com, and increase your Web revenues immediately.

Our Interactive Revenue Accelerator program has jump-started hundreds of online ad sales, producing almost $3 million dollars for local sites this past year. We come into your market, and in just one day, educate hundreds of potential advertisers the bene�ts of advertising on your Web site.

We also provide hands on, in-the-�eld training that utilizes local Web usage patterns and the ad spending data to build dynamic, compelling sales pitches. The program also o�ers guidance on sales team recruitment, compensation, sta� structure, rates and marketing materials.

ConsultingUncover the advertising potential in your local marketplace by drawing on the benchmarking we conduct throughout the year with thousands of local media operations. Our top-level analysts can work directly with executives, managers or front-line employees to help your company’s online operations develop, grow and thrive. We work with Internet pure-play businesses, newspapers, TV and radio stations including vendors who provide enabling technology to these outlets. We provide executive-level strategies that focus on helping your company grow local advertising revenues exponentially rather than incrementally.

Research Reports We publish 10 to 12 research reports per year, also available through an annual subscription, that provide an in-depth look and analyze major trends in local online advertising. Reports include annual revenue benchmarking for local media sites; reports on the automotive, real estate and recruitment verticals; and an annual outlook report published in early fall designed to provide next-year budget guidance.

Conference and Company Meeting PresentationsWe conduct hundreds of presentations every year, typically for executive management, industry seminars and trade conferences. Each presentation is tailored to your needs. We tie the "big-picture" analysis into actionable information about the audience's speci�c markets. These presentations are challenging, insightful and �lled with projections for new advertising formats and trends.

Webinars Borrell Associates can host and deliver an exciting Webinar for any organization or association. Our topic list is extensive, and we tailor a presentation for each audience. We o�er research and factual evidence backed by real-world experience.

Some popular Webinars are: “The Top 5 Online Advertising Recommendations for Your White Board in 2010” “Making Money With Online Video” “The Online Moneymakers” “Overcoming Online Ad Sales Objections”

"The Interactive Revenue Acceleration Program from Borrell Associates produced immediate results for our media group. We generated new interactive revenue across four local properties within the �rst week! We realized a 5-to-1 return on our investment. Our local sta� received great local market information and interactive sales training. We would recommend this program to anyone

interested in moving the needle in the short and long term." Todd A. Porch, Senior Vice President, eMedia Nexstar Broadcasting Group, Inc.

“This has been one of the best resources we have ever worked with and it has been great training for our sta�.

Your presentations marked a turning point for our sales and we have more than doubled our revenue from March. What more could we have asked for. And we’re still climbing and use the data all the time.”

Chris Tingle, General Sales Manager KTAL NBC 6 / Arklatexhomepage.com

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