• by Mark Walsh  @markfwal, June 3, 2008

Social networking sites represent a new mass medium for brand advertising, but marketers must shape their campaigns to fit the contours of users' online conversation to reap any gains.

Accomplishing that goal isn't necessarily easy, acknowledged entrepreneur Seth Goldstein in a keynote address at the Interactive Advertising Bureau conference Monday on user generated content and social media.

The co-founder and CEO of Social Media Networks pointed out that even Google has struggled with how to make money through advertising on MySpace and other social sites. But with so many people spending so much time on social networks, advertisers can't simply ignore the critical mass of consumers they bring together.

"Social media is killing advertising," Goldstein said. "A few years ago people started to become more interested in each other [online] and less interested in advertising." With response rates for standard banner ads under 1% and search not geared to brand advertising, social media is the next frontier for major marketers to attack.

How do they do that? By asking consumers questions about their likes and dislikes to figure out how best to engage them on social media platforms, according to Goldstein. That might include anything from "What book are you reading?" to "Which shoe best fits your personality?"

By asking such questions about behavior and brand preferences, marketers can more seamlessly insinuate themselves into the millions of "quiet conversations" going on within social networks. Social marketing "now feels awfully crude and jarring, but will become more sophisticated in the coming years," said Goldstein, in an interview.

To that end, SocialMedia plans to introduce a new type of "social" banner ads that promise to raise response rates and CPMs by making ads more relevant. While Goldstein declined to disclose details of the new ad format before launch, he said the program was starting with a small list of prominent advertisers "looking to scale their conversational (marketing) efforts" across social Web properties.

Consumer packaged goods, wines and spirits brands, automotive and entertainment are among the advertiser categories showing the most interest in cracking social media marketing. CPG brands that haven't previously marketed aggressively online all have dollars earmarked for social media spending in 2009, he said.

In his talk, Goldstein described Facebook's controversial Beacon ad program, which notified friends about users' purchasing activity on other sites, as a "setback" for the industry but an important step toward integrating ad messages into peoples' everyday exchanges online.

A key will be the emergence of more advanced filtering and targeting technologies within social networks to insure that messages reach the right audience at the right time. "If it's wrong, it's just spam," Goldstein said.

With social sites still struggling with monetizing a glut of inventory, he estimated CPMs at only about 5 cents for run-of-network buys on social platform and between 10 cents and 80 cents within specific applications within networks.

As an example of a more nuanced approach, he cited a campaign SocialMedia had created for the BMW Series 1 model allowing people to customize their own cars through an online application and invite friends to join them on a virtual "joy ride" of their choosing. "You're giving people a chance to express themselves around a brand," Goldstein said.

Users interaction with a branded application such as BMW's will then show up in their news feed, status updates and other communications on the social network.

What about all the goofy, time-wasting applications launched on Facebook in the last year, spawning everything from online food fights to zombie bites? The utility of these apps doesn't really matter, engagement does, explained Goldstein.

"They're important because people are spending an ungodly amount of time with them," he said, likening social apps to songs that become popular for a time before giving way to the next hits. Continuing the analogy, he compared popular application developers to top bands that keep churning out hit songs.