Amid double-digit declines in traditional ad spending, the emerging category of social media sponsorships grew 13.9% to $46.0 million in 2009 and is forecast to climb 23.6% to $56.8 million in 2010, driven by higher demand among advertisers to reach social media's target audiences, according to a study by PQ Media.
Social media sponsorship, a digital word-of-mouth marketing segment, refers to material compensation (including cash, products, or points) provided to a social media content creator by brands in return for promoting or reviewing their products.
The value of paid and nonpaid social media sponsorships grew at a compound annual rate of 77.6% from 2004 to 2009, accounting for 2.7% of total word-of-mouth marketing spending in 2009, up from only 0.5% in 2004, according to PQ Media.
Below, additional findings and analysis from PQ Media's report, Social Media Sponsorships 2010-2014.
Much of the growth in sponsorships registered in 2009 was driven by smaller companies that were able to sign a handful of new clients, while the larger social media sponsorship players were posting low single-digit growth rates due to existing clients with reduced marketing budgets.
Cash-sponsored social media, available through sponsored-conversation firms, is the fastest-growing social media sponsorship segment, reaching $10.3 million in 2009, up 37.3% from the previous year, driven by brand requirements to reach specific "influentials" such as young females and working mothers.
Non-paid sponsored social media, in which the social media publisher is provides samples of the product or coupons, is composed of three categories: digital brand ambassador programs, digital seed/viral campaigns, and digital marketing agencies (companies that provide brands with access to influence social media networks as part of their online and mobile strategies). The value of the nonpaid sponsored segment reached $35.7 million in 2009, up 8.5% from 2008.
Word-of-mouth marketing brand ambassador programs accounted for the largest share of social media sponsorship spending (28.9%), or $13.3 million in 2009, driven by dedicated websites that discuss the strengths and weaknesses of brands being promoted successfully offline.
CPGs accounted for 25.2% of spending on social media sponsorships, followed by the food & beverage, health & beauty, media & entertainment, and technology & telecom categories.
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Federal Trade Commission (FTC) guidelines served to bolster sponsorships growth over the past year, despite speculation among some industry observers that growth would be hampered due to changes imposed by the FTC, PQ Media said.
Although social media sponsorships accounted for less than 3% of overall word-of-mouth marketing spending in 2009, its share is expected to growing over the next several years, fueled by the controversial sponsored-conversations segment.
"Brand marketers move dollars to where their target consumers are spending time, to build relationships with them; and as social media captures more of consumers' time, brands are warming to social media sponsorships as a new method to engage, educate, and activate them," said Patrick Quinn, CEO of PQ Media.
"This is a very young marketing category, but we view it as significant because of its impressive growth in the face of declining overall ad spending. We believe this sector will be among the fastest-growing alternative media in the near future because of the growth of social media, driven by popular mobile and online applications and devices, as well as the FTC's transparency guidelines, which require social media content creators to disclose when they receive compensation in exchange for editorial coverage."
About the data: Findings are from the study Social Media Sponsorships 2010-2014, based on the analysis of data from more than 40 companies focused on WoMM and social media sponsorship marketing strategy, as well as the input of several dozen key industry opinion leaders—executives, consultants, and analysts—at leading operators, agencies, financial companies, and trade associations to define, size, and structure the social media sponsorships landscape.
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