By Alan Sipress and Sam Diaz
Washington Post Staff Writers
Friday, May 25, 2007

Facebook announced yesterday that it is taking the unusual step of allowing the public to develop features for the popular social-networking Web site, permitting any software designer to access the company's millions of members.

The new program, which debuted with 85 new features designed by other companies at Facebook's invitation, comes as social-networking sites grapple with how to build on their success among young users and convert this into profit.

To make money, many social-networking companies are looking to attract and hold enough users so that marketers will want to pay to advertise. Members might also be willing to spend more of their own money to pay for advanced features.

In the three years since networking sites like Facebook and MySpace exploded on the scene, they have revolutionized the way people interact online. MySpace had 67 million visitors last month, and Facebook, appealing heavily to college and high school students, had 23 million, according to ComScore. But even as the two sites combined add several hundred thousand members daily, the buzz can no longer mask questions about their business model.

"We have all these people," said Jill Meyers, an analyst with the In-Stat market research firm. "Now, what are we going to do to make money?"

In a recent study of 400 social-networking sites, Meyers found very few had successfully answered that question. Even MySpace, which was bought two years ago by Rupert Murdoch's Fox Interactive Media and then last year signed a $900 million advertising-and-search deal with Google, has yet to post a profit, she said.

Industry analysts said social-networking sites seeking to boost their revenues could head in one of two directions. They could try to carve out niches by building online communities devoted to the specific ethnic, geographic, age and other groups with common interests. Or they could try to build on networking and offer users a chance to do more than share messages, pictures, music and video.

That's where Facebook's initiative, unveiled yesterday in San Francisco by its 23-year-old chief executive Mark Zuckerberg, comes in.

The program debuts with features designed by companies such as Amazon, Microsoft and The Washington Post. For instance, a member could add a feature that compiles the songs he listens to on his iPod and then informs everyone in the network of these favorite tunes. Others in his network could do the same, and this could automatically create a list of favorites reflecting the member's entire social network.

The Post is contributing a feature called "political compass" that allows users to determine their position on the political spectrum, based on answers to a short online questionnaire, and share that with other Facebook members.

The approach would permit the site's members to add new, interactive features to their Facebook pages and share them with others in their online network, including classmates and colleagues.

Tim Bajarin, president of the Creative Strategies consulting firm, said opening a site to others reflects the need for social-networking sites to make themselves more "media rich" to attract new members and retain old ones. This is particularly important because young Internet users tend to be fickle, often abandoning sites once they no longer seem hip.

Some Web companies are betting instead on a strategy of creating small, loyal communities.

Michelle Mullin, a Phoenix-area mother, tried MySpace but instead started a site a few weeks ago on iVillage, which is devoted to women's issues. Her goal was to communicate with other people who, like her, experience epileptic seizures or with parents of kids who suffer from them.

"MySpace just wasn't for me," said Mullin, 39, who so far has 10 members on her new site. "I tried it for several months and ended up canceling my account."

Sites like Mullin's prove that people want to interact with others who have common interests, said iVillage president Deborah Fine. Similar sites are popping up elsewhere: people with spouses in the military, moms who want to quit smoking and fans of "Grey's Anatomy."

"We call it social networking with a purpose," Fine said. "Our users wanted us to give them a place where they could connect in a deeper way. They see MySpace as a place where their children are."

The goal for some smaller sites, like Eons for users in their 50s and up, is to expand to the older, wealthier demographic attractive to advertisers. The narrow focus of the sites also makes it far easier for marketers to target their ads.

Glee, a site that primarily targets gay men and lesbians, sold out on advertising before it launched this year, said Benjamin Sun, chief executive of Community Connect, which also runs other ethnically targeted sites such as BlackPlanet, MiGente and AsianAvenue. Travel companies can aim ads at gay and lesbian travelers, for example, just as wireless phone companies can use MiGente, a site for Hispanics, to target their ads to an ethnic group that tends to spend more on phone services.

"It's not about being on a site with the most people but about being on the site with the right people, the people you most likely want to connect with," Sun said.