Nearly all social networking sites offer their users free membership, and make most of their revenue through strategic advertising. Are the advertising techniques utilized by sites stable and well-regarded by users? How can social networking sites target their advertisements given the data they have on their users? And how else have social networking sites made money?

Most social networking users accept that there will be advertisements on the sites, and don’t see the ads as annoyances. But the advertisements that social networking sites choose to display can still greatly affect their users’ experiences on the site. An article analyzing the success of online advertisements explains that a good advertising atmosphere can greatly influence a social networking website’s success, and this affects the effectiveness of their advertising, heavily influencing their advertising clients and revenue.

The definition of a good advertising environment can vary based on audience and site layout, but in general, successful site advertising is consistent and non-invasive, not flashy, extremely distracting, or taking up the whole screen. Advertising also succeeds when it fits its audience well. Because social networking sites are often very hip and entertainment-oriented, marketing for entertainment is usually effective and well-received. The Summer 2006 movie Snakes on a Plane had a successful “viral-marketing” plan through social networking sites such as MySpace and LiveJournal.

Because social networking sites potentially have a lot of influence on child and teen consumer decision-making, these sites could be said to have social responsibility for shaping the social values and habits of the next-generation. A U.S. advocacy group insists that social networking sites should even have a legal responsibility towards responsible advertising, believing that these sites could help prevent problems such as child obesity.

Because social networking sites have a lot of demographic data on their users, it is unsurprising that they use this data to deliver advertising relevant to their audience. It is for this reason that sites state that they have a third-party information disclosure clause in their privacy agreements with users. Nonetheless, users of social networks are concerned as to how their personal information is used.

Facebook, because of its emphasis on its privacy policy, has especially been discussed and targeted with theories and allegations of privacy misuse in the past year. An article discussing the introduction of Facebook’s News Feed feature in September 2006 discusses Facebook’s arguably vague privacy clause for release of information to third parties. Some users feel that third parties could benefit from a more accurate understanding of today’s internet users, while people with opposing feelings fear that there could be a conspiracy between Facebook and eligible third parties, including U.S. intelligence agencies. A blog entry on Facebook privacy and data addresses both sites of this issue.

Facebook also features a kind of group for advertising purposes, called Sponsored groups. These groups, which are open to all members of Facebook, allow a company to share promotions and attract customers on the site. Facebook promotes new sponsored groups on the News Feed, its home page for users. (Sponsored groups are further explained in our groups section.)

Some sites, offer a premium social networking service for monthly or yearly fees. Xanga has a membership type called Xanga Premium, in which paying users get more online storage space for multimedia, can use Xanga Skins or pre-designed profiles, and may remove banner advertisements on their page. LinkedIn, a social networking site geared towards professional development, offers Business and Pro Accounts for paying members, which enable more effective professional tools such as recruitment, as well as more effective networking and searching.

Some sites set aside advertising space for premium advertisements or for site users. Facebook offers Network Flyers, text advertisements put up by paying users that replace the advertisement on a page of content, that advertise events, job opportunities, and anything relevant to a Facebook network such as a college network. MySpace has many different structures of advertising space, such as having ads spread across the entire page and having comedian and musician profiles featured on the front page.

Because of its success as an independent site, Facebook has recently evolved into a development platform. It features one-dollar graphical gifts that users can give each other, and for all of February 2007, the first month of the feature, all gift revenue was donated to a breast cancer research charity. Facebook’s new Application platform allows small software development firms to add interfaces to the site and interact with Facebook profile data, in doing so Facebook and the application share extra revenue from new site features.