My sweet aSmallworld.net

Online Networking Goes Small!

When jet-setters began flocking to an exclusive social-networking Web site reserved for the rich, they got the
attention of an online community’s most valuable ally: advertisers.
The invitation-only site, ASmallWorld.net, has 300,000 select members who have become a magnet for compa-
nies that make luxury goods and are trying to reach people who can afford them. The site’s biggest advertisers
include Burberry, Cartier and Land Rover. Cognac maker Remy Martin last month threw a tasting party for the
site’s elite members, at which its top-shelf, $1,800-a-bottle liquor flowed freely.

Following the success of MySpace and Facebook, thousands of social-networking sites have popped up to cater
to specific interests, backgrounds, professions and age groups. Nightclub frequenters can converge at Dont-
StayIn.com. Wine connoisseurs have formed Snooth.com, and people going through divorce can commiserate at
Divorce360.com. While such sites have fewer members than MySpace and Facebook, they form intimate com-
munities of like-minded people.

Part of what is driving the development of these sites is advertising. Marketing on social networks is a fast-
growing part of the booming online advertising business, and within that, niche interest sites’ share is small.
These sites typically allow members to establish a personalized page, then communicate and share photos,
songs and updates among their friends. Based on that information, companies can target their ads.
Overall, ad spending on social-networking sites is expected to grow 75 percent next year, to $2.1 billion, ac-
cording to eMarketer, a research firm that tracks online advertising. With more than 110 million active profiles
on MySpace and 59 million on Facebook, those sites still attract the lion’s share of attention and money, win-
ning more than 70 percent of all U.S. social-network ad spending in 2007, according to eMarketer.
But smaller sites’ share of that money is growing. Of the $920 million spent this year to advertise on social
networks, 8.2 percent went to niche sites, up from 7 percent in 2006, according to eMarketer. Next year, niche
sites’ share of ad revenue is expected to grow to 10 percent, according to an eMarketer report released this
month.
Large companies are already testing ads on smaller sites.
AT&T, for example, recently promoted one of its global cellphones on WAYN.com (short for “Where are
you now?”), a social network for international travelers. While AT&T also advertises on the bigger sites
like MySpace to reach a large audience quickly, the wireless carrier is also turning to niche networks, “where
your ads are more meaningful -- those are the real gems,” said Carrie Frolich, who manages ad placements in
social media sites for at MediaEdgeCIA, which is owned by marketing giant WPP.
Frolich said her clients, including Campbell’s soup, Colgate-Palmolive, Paramount and Citibank, are willing to
take a chance on smaller sites that could be more relevant to their products.

“Even if they’re just dipping their toes in the water, this is their strategy going forward,” she said.
MySpace and Facebook also allow companies to target advertising based on their members’ interests and habits,
but their efforts have drawn criticism from users concerned about those companies’ use of private information.
Facebook recently altered its Beacon system after drawing criticism from members objecting to the monitoring
of users’ online behavior. When Beacon was launched, users who bought items from another site had their pur-
chases broadcast to their network of friends. It was Facebook’s attempt to create an automated “viral” marketing
campaign, but it caused a backlash.

MySpace used another data-mining technology, HyperTargeting, that sifts through its users’ friends, comments
and photos to fine-tune ad placement. That, too, has met with complaints from privacy advocates.
Faced with that sort of backlash, marketers are beginning to focus more on ads tailored to smaller, more specific
audiences, said Jeremiah Owyang, a social-networking analyst at Forrester Research.

“Companies are learning that these smaller communities may reach people that are more valuable to their
brands. It will someday feel more like information than marketing,” he said.
Because members of niche social networks share common interests and experiences, they tend to spend more
time on the site and contribute to the group by chatting and posting comments. Members tend to be less in-
volved on bigger sites and are therefore less appealing to advertisers, said Julie Wittes Schlack, vice president of
innovation and research at Communispace, an online consulting firm in Watertown, Mass.

“The bigger sites have become so cluttered and overrun with advertisers that members are used to tuning stuff
out, even personalized ads,” she said. But on networking sites that have a self-selecting demographic, people
tend to trust the content, including ads, she said.
Facebook user Liz Collins, 26, of the District, said she’s drawn to the smaller community aspect of social net-
working. She said she likes being able to join smaller groups within Facebook while still having access to all of
her other friends. She recently joined YogaMates.com at the suggestion of a friend.

“It feels less commercial, which I like,” she said of that site.
There’s at least one social network for just about every interest or hobby. Yub.com is for shopoholics; Fuzzster.
com is for pet lovers; OnLoq.com is for hip-hop fans and Jango.com lets music fans find others with similar tastes.
Some cater to the obscure. Passions Network, with 600,000 members, has 106 groups for specific interests,
including “Star Trek” fans, truckers, atheists and people who are shy. The most popular group is a dating site for
the overweight.