• Business Week, Thursday, July 13, 2006 11:47 AM

Major advertising companies and their top clients are beginning to get serious about social networking Web sites and the user-generated content they provide--after first viewing the medium with skepticism and fear. In a significant sign that such companies are serious about the potential of such sites, last month advertising giant Interpublic Group agreed to spend at least $10 million on advertising at Facebook, the wildly popular Web site for college students and others. The deal was accompanied by a separate agreement in which IPG acquired 0.5 percent of privately held Facebook. IPG also created a user-generated content lab last month. "My task is to acquire [proprietary] insights into what is happening with user-generated content, to engage with the media community and help them develop advertising models, and to help them execute specific programs," says Brian Monahan, director of the Los Angeles-based lab. Companies like IPG and their clients were initially wary of social networking sites because user-generated content cannot be controlled and some of the material is not only controversial but could also be harmful to a marketer's brands. But the sites are becoming such an enormous communications vehicle that they can no longer be ignored.

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