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Facebook, MySpace, Orkut, Bebo — and most other social networking properties — are becoming popular models of online advertising as their increasing popularity among the youth, in particular, has led marketers to underpin these Web 2.0 sites into their marketing and advertising operations. As social networking sites have large databases and carry descriptions about user demographics and psychographics, it is easier for marketers to pitch their products to the target audience. Hence, social networking sites are considered to be a good platform by many companies for their marketing campaigns.
  
This model makes business sense to both advertisers as well as social networking sites. Advertisers get access to the desired target market and social networking sites see monetization of their operations by way of advertising revenues. The benefits of online advertising are well established and advertisers have now taken a step forward to tap the potential of advertising on social networks.
  
But the utility of this model for consumers is still debatable. On the one hand, users get information about new products and services; while, on the other hand, there are privacy issues and concerns about malicious postings. For instance, advertisers get access to users' personal information and that can have an impact on user privacy.
  
Even for advertisers and social networking sites, there are certain pitfalls that are akin to a 'Catch 22' situation. For instance, companies will not want their advertisements to be seen along with illicit content posted on the Internet as it may affect their brand image. The problem is compounded by the fact that social networking sites cannot control this practice — if they restrict users on the kind of content they can post, the social networking may end up losing market share and customer base, which is the main incentive for online advertisers.
  
Despite these shortcomings, the interactivity offered by social networking is the main attraction for advertisers. Keeping this characteristic in mind, advertisements should be designed in a similar manner — traditional advertising, or ads that are too intrusive, may bring nothing but dissonance from targeted customers. Advertisers should also monitor and measure the impact of their advertisements at regular intervals. It is important to gauge the success rate of advertisements, as companies may not realize how users are responding to these advertisements and may go on making futile efforts that do not yield any economic benefit. Advertisers must acknowledge that negative word-of-mouth will get propagated on social networks like wildfire because of its grapevine structure; therefore, it becomes very crucial to take each step with utmost care.
  
Although analyst firms have differing projections for the growth of social network advertising, they all agree that the sector is poised for growth. With an increasing number of social networks partnering with advertisers to monetize their operations, this business model is witnessing a surge, though only time will determine the extent to which this form of online advertising will skyrocket.
  
Social networking websites, although a relatively new channel for online advertising, have fast gained acceptance among advertisers. Inherent advantages, such as large customer base and easy identification of target audiences, make these websites a favorable destination for marketers to place their advertisements.
  
'Trust' or 'reputation' is an important aspect of social networks. If a website is recommended by friends, the response rate to that particular site improves — and this has captured the attention of marketers. At the same time, it is important to note that negative comments also spread equally fast and, hence, maintaining quality and drawing a line between communicating and intruding are two issues that hold immense importance for marketers.
  
Other pertinent issues with social networking sites are: privacy concerns from the customer's viewpoint and lack of control over the content that is posted from an advertiser's perspective. Despite these challenges, advertising on social networks is growing rapidly.
  
Our partners at Analysts Perspectives present an overview of social network advertising through analyst views, opinions, and predictions.
  
Some key findings include the total social network ad spending in 2008 will be around USD 2 billion, rising to USD 3.8 billion in 2011; MySpace and Facebook will together account for 72 percent of total ad spending on social networking sites in 2008; and at USD 1.4 billion, social network advertising will make up 5.5 percent of total US online ad spending in 2008.