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Many new ‘friends’ to be made online, but what about dollars?

Social network websites are booming. If only they could turn a profit.

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“People clearly, especially on the social networks, [are] not particularly interested in clicking on the ads,” says Mr. Brooks, who as editor of socialnetworkingwatch.com has followed the online industry for a decade. “Advertising needs to evolve, and social networks are forcing this change. People are really tired of being assaulted [by ads], but they still love to buy.”

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Networks are scrambling to find a winning formula. Both MySpace, owned by News Corp.’s Fox Interactive Media, and Facebook, founded by Harvard University student Mark Zuckerberg in 2004, are in the midst of redesigning their sites. MySpace is trying to sell items like cellphone ringtones and concert tickets to its young demographic. MySpace Music aims to compete with Apple’s iTunes, and the network will allow members to sell items, eBay style, says Ms. Williamson from eMarketer. Facebook reportedly will begin allowing credit-card purchases.

Others observers have suggested that “virtual gifting” might make money. Two social network sites in Asia – qq.com, with 300 million users in China, and cyworld.com, in South Korea – promote the buying and sending of on-screen items that can decorate a user’s own home page or be sent as a gift to a friend. “It seems to be a distinctly Asian concept,” Brooks says, noting that the idea “bombed” when tried as an experiment in the US.

Other ideas include selling online games or charging for different levels of access to a site.
Advertisers are also trying to reposition themselves from hard-sell marketers to a softer approach as helper and “friend.” That sometimes subtle shift hasn’t been easy to pull off.

Social networks, along with the rest of the Web, are expected to expand onto phones in the coming years, giving users even more opportunities to spend time with them. The sites also offer a tempting platform for targeted ads aimed at people who have particular interests.

As users share personal information within their networks, companies have an opportunity to capture and employ this data for targeted marketing. Social networks are building huge databases about where users go and the people they connect with, says Fred Stutzman, a doctoral candidate at the University of North Carolina who studies social networks.

Most users don’t think much about the personal information they’re sharing, Mr. Stutzman says. “We’re not thinking about behind the scenes.” Facebook already sells targeted advertising based on this demographic information, he says. With so many tools available, the long-term possibilities for marketing these sites remain wide open.

“They’re going to be a place that can be monetized,” Stutzman says.

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