Online Networking Goes Small, and Sponsors Follow

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By Kim Hart
Washington Post Staff Writer
Saturday, December 29, 2007

When jet-setters began flocking to an exclusive social-networking Web site reserved for the rich, they got the attention of an online community's most valuable ally: advertisers.

The invitation-only site, ASmallWorld.net, has 300,000 select members who have become a magnet for companies that make luxury goods and are trying to reach people who can afford them. The site's biggest advertisers include Burberry, Cartier and Land Rover. Cognac maker Remy Martin last month threw a tasting party for the site's elite members, at which its top-shelf, $1,800-a-bottle liquor flowed freely.

Following the success of MySpace and Facebook, thousands of social-networking sites have popped up to cater to specific interests, backgrounds, professions and age groups. Nightclub frequenters can converge at DontStayIn.com. Wine connoisseurs have formed Snooth.com, and people going through divorce can commiserate at Divorce360.com. While such sites have fewer members than MySpace and Facebook, they form intimate communities of like-minded people.

Part of what is driving the development of these sites is advertising. Marketing on social networks is a fast-growing part of the booming online advertising business, and within that, niche interest sites' share is small. These sites typically allow members to establish a personalized page, then communicate and share photos, songs and updates among their friends. Based on that information, companies can target their ads.

Overall, ad spending on social-networking sites is expected to grow 75 percent next year, to $2.1 billion, according to eMarketer, a research firm that tracks online advertising. With more than 110 million active profiles on MySpace and 59 million on Facebook, those sites still attract the lion's share of attention and money, winning more than 70 percent of all U.S. social-network ad spending in 2007, according to eMarketer.

But smaller sites' share of that money is growing. Of the $920 million spent this year to advertise on social networks, 8.2 percent went to niche sites, up from 7 percent in 2006, according to eMarketer. Next year, niche sites' share of ad revenue is expected to grow to 10 percent, according to an eMarketer report released this month.

Large companies are already testing ads on smaller sites.

AT&T, for example, recently promoted one of its global cellphones on WAYN.com (short for "Where are you now?"), a social network for international travelers. While AT&T also advertises on the bigger sites like MySpace to reach a large audience quickly, the wireless carrier is also turning to niche networks, "where your ads are more meaningful -- those are the real gems," said Carrie Frolich, who manages ad placements in social media sites for at MediaEdgeCIA, which is owned by marketing giant WPP.

Frolich said her clients, including Campbell's soup, Colgate-Palmolive, Paramount and Citibank, are willing to take a chance on smaller sites that could be more relevant to their products.

"Even if they're just dipping their toes in the water, this is their strategy going forward," she said.

MySpace and Facebook also allow companies to target advertising based on their members' interests and habits, but their efforts have drawn criticism from users concerned about those companies' use of private information.

Facebook recently altered its Beacon system after drawing criticism from members objecting to the monitoring of users' online behavior. When Beacon was launched, users who bought items from another site had their purchases broadcast to their network of friends. It was Facebook's attempt to create an automated "viral" marketing campaign, but it caused a backlash.


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© 2007 The Washington Post Company

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