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.
MySpace used another data-mining technology, HyperTargeting, that sifts through its users' friends, comments and photos to fine-tune ad placement. That, too, has met with complaints from privacy advocates.
Faced with that sort of backlash, marketers are beginning to focus more on ads tailored to smaller, more specific audiences, said Jeremiah Owyang, a social-networking analyst at Forrester Research.
"Companies are learning that these smaller communities may reach people that are more valuable to their brands. It will someday feel more like information than marketing," he said.
Because members of niche social networks share common interests and experiences, they tend to spend more time on the site and contribute to the group by chatting and posting comments. Members tend to be less involved on bigger sites and are therefore less appealing to advertisers, said Julie Wittes Schlack, vice president of innovation and research at Communispace, an online consulting firm in Watertown, Mass.
"The bigger sites have become so cluttered and overrun with advertisers that members are used to tuning stuff out, even personalized ads," she said. But on networking sites that have a self-selecting demographic, people tend to trust the content, including ads, she said.
Facebook user Liz Collins, 26, of the District, said she's drawn to the smaller community aspect of social networking. She said she likes being able to join smaller groups within Facebook while still having access to all of her other friends. She recently joined YogaMates.com at the suggestion of a friend.
"It feels less commercial, which I like," she said of that site.
There's at least one social network for just about every interest or hobby. Yub.com is for shopoholics; Fuzzster.com is for pet lovers; OnLoq.com is for hip-hop fans; Jango.com lets music fans find others with similar tastes; and PassportStamp.com is one of several sites for avid travelers.
Some cater to the obscure. Passions Network, with 600,000 members, has 106 groups for specific interests, including "Star Trek" fans, truckers, atheists and people who are shy. The most popular group is a dating site for the overweight.
Membership on niche networking sites varies greatly, ranging from a few hundred to a few million. LinkExpats.com, which provides an online haven for U.S. expatriates, launched last month and has about 200 members. Flixster.com has 40 million members who rate movies and gossip about actors.
In September, Robin Wolaner launched a social network geared to people over 40 called TeeBeeDee.com, short for "to be determined." Wolaner, who founded Parenting magazine 20 years ago, said she saw a need for baby boomers who cringe at the thought of joining AARP. Next spring she plans to find advertisers targeting the middle-aged market.
"You've got a really active and hard-to-reach demographic coming to this site, and they'll all have to make difficult purchase decisions," such as life insurance and financial planning, said Wolaner, who runs the site from San Francisco. "If we are a safe and trusted place, they'll come to us when they make these purchases -- that's more interesting than just pure advertising."
But not all niche networks embrace marketers.
Sermo.com, a social network for physicians, rejected advertising out of concern that it would tarnish the site's credibility. Instead, Sermo sells access to the site to health-care-related companies wanting to tap into the community's specialized expertise. Sermo has strict membership rules and lets doctors discuss patients or medical opinions anonymously. Industry groups and drug companies pay top dollar for feedback from Sermo's 41,000 members, said founder Daniel Palestrant.
Zolve.com, a two-month-old network for real estate agents, is waiting to accept advertising until its membership, currently 4,200, grows. Eventually, Brian Wilson, its founder, hopes the members will help create detailed Web pages about cities and neighborhoods, making it an attractive place for local businesses to advertise.
"We want to gain their trust before we try to capitalize on them," he said.
Smaller sites still need to take care not to fall into the same trap as their bigger rivals; members may feel exploited if the sites are suddenly overrun with ads, said eMarketer senior analyst Debra Aho Williamson.
"The biggest hurdle is getting consumers used to the idea of being targeted," she said.