Heard it through the Web grapevine

In 1994, the band R.E.M. was a superstar on a par with U2. But in the space of 10 years the band has been reduced from four members to a trio, its album sales have plummeted, and it's now about as welcome on MTV as REO Speedwagon. It hardly helps that R.E.M.'s fan base has been getting tubbier, balder, and smaller - not unlike the band itself.

For the release of a new album, "Around the Sun," the band is turning to the Internet to sell more records and garner a younger fan base. A few weeks ago, the alternative rockers posted their album on MySpace.com, a Los Angeles-based website that's a social networking hub for more than 4 million people - most of them between 16 and 24 years old. R.E.M.'s idea was to create ripples of buzz through the vast online community by drawing curious listeners who would then tell other friends in the MySpace network to listen to the album.

Regardless of whether R.E.M.'s gambit translates into sales, the strategy symbolizes a significant shift within the music industry to embrace the Internet as a promotional tool. While radio, TV, print media, and concert tours are still the primary engines of music sales, record labels are realizing that online communities can spread word of mouth among the elusive demographic that watches MTV's "Total Request Live."

"The general underlying principle is that in the off-line world, people find out about new music primarily through their friends," says Chris De Wolfe, CEO of MySpace.com. The Internet works in the same fashion except on a larger scale and without any geographic constraints. "The word spreads virally from friends telling friends," says Mr. De Wolfe.

It's not just MySpace that's revolutionizing "viral marketing" of music on the Internet.

Until now, eBay has been the place to bid on everything from real estate to Britney Spears's chewed bubble gum. The site now sells bubble-gum pop by Britney and other artists. Last month, the world's largest auctioneer started a bold program to promote and sell music by making 500,000 digital songs from four major record labels available to its 114 million members.

EBay, too, is relying on word of mouth to increase music sales. With every purchase, a customer is allowed to e-mail a sample of the song to their friends. For every 10 songs sold as a result of that recommendation, the original sender gets a free song.

Other online communities are more useful to the record industry's smaller players - namely unsigned bands, musicians on independent labels, and nonmainstream artists.

A Web "club" for musicians, iFanz.com, boasts a roster that's 90 percent unknown artists in addition to well-known clients such as Clint Black, LeAnn Rimes, and Oleta Adams. The site's primary purpose is to give musicians the Internet tools to bypass record labels and sell directly to fans.

Most significantly, the entertainment company has what Ruth McCartney, the founder and CEO of iFanz, calls a "Swiss vault" of data: About 1 million music fans have opted into the system. iFanz boasts that it can "supersize" the audience base of its entertainer clients through an advanced database that sifts information to identify potential new fans. And iFanz can send an e-mail to millions of fans simultaneously.

"We have another technology called 'Word of Mouth,' " says Ms. McCartney in a recent phone interview from Los Angeles. "By having a button at the bottom of every outgoing e-mail that says 'Send Your Friend,' word of mouth and affinity marketing is obviously always the best way to grow."

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