• Fortune, Tuesday, November 13, 2007 10:45 AM

The Web advertising industry is at a crossroads: Nobody pays any attention to display ads, classifieds are ruled by Craigslist, which is free, and search continues to be the industry's main driver. Aside from search, a direct marketing tactic, "there's scant evidence that online ads are finding their mark." Meanwhile, money continues to pour into the Web.

Facebook Ads vs. OpenSocial (the Google alliance) is "the first great battle for the future of advertising on the web." With Facebook Ads, we have the first attempt by a large social network to leverage the substantial power of interpersonal word of mouth advertising. Indeed, Facebook is trying to turn brand marketing into "something people could actually use."

Social networking is built on trust, trust between friends and trust between the user and the social network. That trust will be tested with Facebook Ads. Is this a watershed moment for Internet advertising? So far, there's no consensus. Advertisers seem to like the idea: Sean Finnegan, CEO of Omnicom Media Group Digital, called it "a groundbreaking step toward associating word of mouth -- the best medium ever -- into the advertising space." But software developer Jia Shen, co-founder of Rock You, worries that Facebook's plan sounds like spamming your friends.

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