PQ Media's First-Ever Social Media Sponsorships Forecast Finds Emerging Sector Grew 13.9% to $46 Million in 2009; Double-Digit Growth Expected Again in 2010

Spending in This Emerging Word-of-Mouth Category, Including Controversial "Sponsored Conversations," is Expected to Reach $56.8 Million in 2010

Driven by Growing Popularity of Social Media and New FTC Guidelines Requiring Transparency, Brand Marketers Are Increasing Investment in Social Media Sponsorships

STAMFORD, CT – May 11, 2010 – In yet another example of brands seeking innovative ways to engage harder-to-reach U.S. consumers, the emerging category of social media sponsorships grew 13.9% to $46 million in 2009, despite double-digit declines in traditional advertising spending, according to new research released today by PQ Media. The alternative media econometrics firm's Social Media Sponsorships Forecast 2010-2014 is the first source to define, size, structure and forecast this burgeoning category of word-of-mouth marketing.

PQ Media defines social media sponsorships as a digital word-of-mouth marketing segment in which brands provide material compensation, such as cash, products, points or trips, to social media content creators to promote and/or review their products and services through long-form text or status updates, often with accompanying visuals. As part of its standard research methodology, PQ Media garnered 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.

Key findings from the report include:

  • The value of paid and non-paid 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.
  • PQ Media expects the total value of social media sponsorships to increase 23.6% in 2010 to $56.8 million, driven by a stronger advertising and marketing environment as the economy improves, as well as continued pressure on brands to increase their presence in social media.
  • Cash-sponsored social media, available through sponsored conversation firms, is the fastest-growing social media sponsorship segment, with spending rising 37.3 percent in 2009 to $10.3 million, driven by brand requirements to reach specific "influentials" such as young females and working mothers.

"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."

The FTC guidelines have served to bolster the category's growth over the past year, despite what some industry observers thought would happen – that growth would be hampered. The largest brand categories by spending in 2009 were CPGs, food & beverage, health & beauty, and media & entertainment. While social media sponsorships accounted for less than 3% of overall word-of-mouth marketing spending in 2009, this share is expected to continue growing over the next several years, fueled by the controversial sponsored conversations segment, according to Social Media Sponsorships Forecast 2010-2014.

Sponsored conversations tend to help brands create even more buzz than usual because by paying social media content generators, a brand is assured of receiving editorial coverage on a targeted blog, online video, podcast or other social network. One of the pitfalls of this tactic, however, is that brands can't control whether the coverage will be positive or negative.

Despite the uncertainty of the content, the sponsored conversations category is exhibiting strong growth because leading social networks, such as YouTube, are beginning to develop partnership programs in order to forge agreements with brands to allow end users to generate cash by hosting video blogs about products they purchased. For example, sisters Elle and Blair Fowler were highlighted earlier this year on an ABC News segment regarding "haul videos," in which young women were paid to shop and then post videos through the YouTube Partner Program extolling the products they purchased. Some of the female vloggers claimed to generate over a $1,000 a month and the most popular girls were said to have earned more than $100,000 in a year.

PQ Media divides social media sponsorships into two major segments, which include a total of four categories. The first segment is cash-sponsored social media, which includes only one category – sponsored conversations – and accounted for 22.4% of total spending in 2009, or $10.3 million. As noted in the aforementioned key findings, the cash-sponsored segment is driving overall social media sponsorship growth. Non-paid sponsored social media, in which the social media publisher is provided samples of the product or coupons, includes three categories – digital brand ambassador programs, digital seed/viral campaigns and digital marketing agencies – and the value of the non-paid sponsored segment reached $35.7 million in 2009, representing an 8.5% gain over 2008, according to PQ Media.

Challenges to social media sponsorships detailed in the report include the lack of national scale this marketing tactic is currently providing brands and agencies, as it remains difficult for brands to go to one place to make a national buy. There are, however, a growing number of companies facilitating sponsored conversations between brands and social media "influentials." Social Media Sponsorships 2010-2014 profiles more than 40 companies focused on this marketing strategy and provides a detailed evolution of this media segment.

About PQ Media

PQ Media (www.pqmedia.com) is the leading provider of global media econometrics and pioneer of 21st century alternative media research. Our experienced management team and analysts are mapping the new frontier of media and communications comprised of more than 100 segments of media. PQ Media's accurate spending and consumption forecasts are used to advise top executives at leading media companies, financial institutions, agencies, brands and management consulting firms about real growth opportunities in the fragmented media landscape. Through our custom research, syndicated reports and proprietary PQ Medianomics™ methodology, clients receive unbiased and actionable strategic intelligence found nowhere else.

Media Contact

Greg Abel
Abel Communications for PQ Media
(410) 843-3808 / greg@abelcommunications.com

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