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How Social Nets are Changing Advertising

Fresh questions are being asked about Facebook's ability to monetize following the huge $200 million cash injection secured earlier this week with Russian firm Digital Sky Technologies. A $10 billion valuation is a lot to live up to, after all. Meanwhile, the argument still goes that people go to Facebook to socialize, not hunt for products.

BusinessWeek's Jonathan L. Yarmis thinks that that argument misses the point; he thinks the focus should be more on how Facebook and other social networks are changing advertising. "I'm loath to affix the 2.0 moniker to yet another phrase, but if ever an industry needed to be 2.0-ized, it's advertising," Yarmis says.

"The good news is that we're on the verge of a major rethinking of advertising's fundamental premises," he says, noting that one of the biggest challenges facing the industry is ad credibility. Consumers don't trust ads, but they do trust their friends, and telling friends about the products they use has never been so easy. As Yarmis says, through social nets, "credibility now has a channel for mass distribution."

He adds that businesses have to be thinking about how to incorporate the social map into the way they deal with customers and prospects. "This is going to be huge," he says, "and the opportunities are immediate."

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