Social networking sites drive advertising changes

LONDON - A hunt for Britain's top university is helping mobile firm O2 tap Facebook's burgeoning audience and reflects the innovation advertisers need to tap the potential of such sites, analysts said on Friday.

Social networking sites such as MySpace, Bebo and Facebook are hugely popular with younger Internet users -- a vital but hard to reach category for advertisers.

But the media groups and marketers have so far struggled to convert their soaring popularity into revenue, as members have proved reluctant to accept advertising.

"A social networking site provides a place for a certain form of social engagement that no other medium provides," Rory Sutherland, vice chairman of advertising group Ogilvy Group UK, told Reuters in a recent interview.

"It's a little like a pub," he said, explaining that people are generally there to enjoy themselves, communicate and share experiences with each other.

A report released on Friday said Internet users who used social networking sites were more likely to buy a product or access a Web site following a recommendation from another user. And a recent development has made this more common.

Facebook opened its site to outside applications in May this year, in a move that has boosted its user base, and developers have created interactive programmes that allow members to recommend and review anything such as music and films.

Some of the applications are now being used by millions of people.

It has also unveiled a new advertising system that lets companies launch dedicated pages on the site for brands, while MySpace has signed up to Google's OpenSocial platform which allows developers to write programmes across multiple social sites.

The report by the Royal Mail and the Future Foundation think tank said companies and brands should use this opportunity to encourage users to review products as it builds a sense of community and awareness.

"The biggest of the existing (networking) sites are extremely attractive as they offer both access to millions of users and a ready-made set of mechanisms for these users to pass on personal recommendation," the report said.

"They don't, however, offer a formal way for brands to stimulate the conversation and activate lines of social communication about their brands."

Ogilvy's Sutherland said recommendations formed an amplified "word of mouth" which could be very powerful while applications developed and sponsored by a brand such as the O2 university network would also prove popular.

But there are also pitfalls.

Christian Robinson, managing director of online-retailer Firebox.com, said users would not accept advertising for the sake of it and would only use an application if it had a value.

"If it happens that your brand gets exposure then that's great, but they can't be seen to be looking for it," he told Reuters. "Customers are just too savvy ... and cynical about big brands attempts at viral marketing.

It's one of these (areas) where you have to be incredibly careful. It's incredibly hard to engineer."