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For ads, social media still a niche buy

There's a lot of hype about advertising on Facebook, but in the digital-ad market it's still a small sliver of the pie.

Considering all you hear about social networks finally starting to convince the advertising industry that they're a worthwhile destination for dollars, it's a bit surprising to see new numbers from eMarketer that put social networks' share of the digital-ad marketplace at a paltry 5.5 percent last year.

That's up from 5 percent in 2008, the stats released Thursday say. The good news is that, unlike some other sectors of the ad world, it's not shrinking--but it's also not growing exponentially by any means. After plunging from a 61 percent rate of growth in 2008 to 12 percent in 2009, the rate of growth is projected to crawl back up to 14 percent this year and stay about the same at 13 percent next year.

Part of the reason for the relative stasis is the fact that one of the big destinations for social-network ads, the News Corp.-owned MySpace, is on the decline. Ad spending on MySpace is expected to drop 21 percent from 2009 to 2010--a 23 percent drop in the U.S. offset a bit by a 3 percent gain overseas. In 2009, according to eMarketer, MySpace was the destination for $490 million in worldwide social-network ad spending; in 2010, it's projected to be $385 million.

The same numbers indicate that from 2009 to 2010, Facebook will surpass MySpace for the first time in terms of U.S. ad spending market share. MySpace is down from 38.4 percent to 27.8 percent; Facebook went from 27.7 percent to 34.7 percent. Meanwhile, ad spending on other social networks grew slightly from 26.8 percent to 27.4 percent; spending on ads within widgets and other social apps went from 7 percent to 10.1 percent.

And next year, non-U.S. ad spending on social networks is expected to eclipse the U.S. market share for the first time.

eMarketer's numbers were put together in December, before Facebook made the announcement that not only was it ending its longstanding display ad contract with Microsoft, but that it was also getting rid of banner ads altogether. It's made the choice to focus instead on the "social ads" that have garnered it a lot of attention, but with Facebook doing away with the ads that are the most familiar to Madison Avenue buyers, and MySpace in an apparent state of turmoil, it's unclear what this will do to the rest of the market.

Amid the recession, eMarketer cut its online ad spending estimates several times.