• Ad Age, Tuesday, August 21, 2007 11 AM

Facebook and MySpace are starting to make bank on online advertising, but a recent Forrester study shows that traditional online ad formats aren't really playing well for advertisers. The result is a growing concern that social networking isn't a marketing boon.

There's a new movement in some marketing circles that says social networks should be used more like a customer-relationship management (CRM) tool. eMarketer analyst Debra Aho Williamson called advertising on social networks "low-hanging fruit" for marketers that need to figure out "a model that expands the beauty of social networking." However, it's far easier for marketers to buy display ads and sponsorships than to develop widgets.

Using it as a customer-relationship-management tool could be one answer; former Jay Walter Thompson CEO Chris Jones said MySpace is at a crossroads. It doesn't want others using its audience for marketing purposes without getting a piece of the action. Jones is now an adviser to widget-creator FreeWebs. Indeed, some marketers, like Carnival Cruises, have developed internal social networks to let customers review their products and talk to the company directly. That's part of Facebook's expansion plans; get companies to develop continuing relationships with consumers.

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