What We Can Learn From comScore’s Year in Review

Last week, market researcher comScore released its U.S. Digital Year in Review report that’s chock full of useful data for competitors and investors in the social media industry. For the record, comScore is one of the most reliable Internet data collectors. It combines panel-based tracking technology with census-style collection, and its numbers are the currency used by many media buying agencies for online advertising planning and evaluation.

Ryan Kim wrote up a good, quick summary of the report. Now, let’s take a look at the industry implications of some of those key facts and figures.

Facebook Dominance?

Facebook is now an imposing industry force. Social networking use as a whole is up, but Facebook totally dominates the category. Most important, the social network now consumes more of U.S. users’ time spent online than any other site, passing stalwarts like Google and Yahoo for the first time. Time-spent is the single most important web stat because it is driven by audience size, frequency of usage and page views. Remarkably, even with Facebook’s growing reach — it is well beyond youth and early adopters into mass-market audiences — its users continue to visit more regularly and spend more time on the site.

As a result, Facebook now shows more ads than any other online property. But advertisers don’t value those spots as highly as they do the ad inventory of other companies. Researcher eMarketer estimates Facebook did $1.86 billion in ad sales in 2010. Compare that estimate, which might be on the high side, with Google’s 2010 actual sales of $28 billion. Still, Facebook may be approaching Yahoo’s $5 billion and Microsoft’s approximately $2 billion, and has probably passed AOL’s $1.3 billion.

But retailers tell me that Facebook ads don’t convert to direct actions as well as others’ ads, although companies like Zynga and Groupon optimize Facebook ads fairly effectively for customer acquisition. Facebook’s inability to command high prices for its ads begs re-asking the perennial question: Is a communications-based medium simply less effective than a content-based one? It’s always been difficult to build effective advertising campaigns atop IM, chat and display inventory near email. Besides continuing to improve its targeting and optimization tools, Facebook must improve the richness of its formats and sponsorships to tap brand-advertising budgets.

Communications and Social Commerce Trends

The comScore report’s decline of email chart — time spent using web-based e-mail, to be exact — is getting a lot of coverage. Overall usage is down a bit, although it’s essentially flat for 18 to 24 year olds, whom you’d think would be the ones replacing email with mobile mail or social networking. Likewise, although teens’ 59 percent decline gets headlines, teens don’t use email much in the first place. Now, if texting were down, that’d be a story.

The report shows spectacular traffic growth to daily deals sites Groupon (7x growth) and LivingSocial (4x), as well as solid growth for flash sales sites like Gilt and RueLaLa. Social commerce is definitely hot, but these businesses depend on email newsletters. If there’s anything to the email decline story, those companies will have to rely even more on ad spending to maintain their growth.

What to Watch for in 2011

My industry outlook report is here, and based on what comScore saw in 2010, here are some other potential trends:

  • Communication evolution: Watch closely to see how Facebook Messaging affects email usage, and whether mobile social networking (used by 25 percent of Facebook members) gains critical mass.
  • Engagement measurement: Time-spent is critical, but doesn’t capture attitude, conversion or marketing objectives like increased awareness or purchase intent without adding pre- and post-campaign surveys and attribution tactics.
  • Social media and commerce leadership: Will Facebook continue its dominance? I expect players like Google and Amazon will soon play big roles as social launchpads for e-commerce.
  • Search quality impact: ComScore shows continued search dominance by Google. I think Google can maintain results quality in the face of spammers and content farms by tweaking authority settings in its algorithm, but other observers are skeptical.

Question of the week

What are the key digital media trends to watch for in 2011?