Anand Rajaraman, co-founder of Kosmix, explains how social media sites like Facebook and MySpace are creating new ways for advertisers to target specific audiences.

The stats are staggering: More than 150 million people around the world have joined Facebook and almost half of them visit the site every day.  MySpace has 76 million monthly unique visitors and continues to grow.  The obvious temptation for advertisers is to reach these communities with an effective marketing platform—but how?

We all know that any good ad campaign needs to address three key measures: reach, frequency and targeting. Social media sites like MySpace and Facebook generally score high on reach and frequency, but often struggle to reach the right targeted audiences.

Why is targeting so difficult for social networks?  The short answer is affinity, which is defined as the relationship between a content creator and someone who views that content. 

Consider a Facebook profile, for example.  Anyone who looks at a Facebook update knows the person who created the profile—they have chosen each other as Facebook friends. Because they are in the same network, the act of viewing a Facebook profile gives us very little information about the viewer, other than the fact that she is friends with the profile creator.  The stronger the affinity, the more difficult targeting becomes.

The good news for advertisers is that the leading social networking sites are already taking steps toward improving their ability to target consumers.  One tactic is to create sections of the network that are more topic-oriented, and less about individuals. MySpace pages devoted to rock bands are a good example of this, as are Facebook groups.  Some sites are also mining individuals’ profiles and their off-site activities to target them behaviorally rather than contextually. This approach is tricky, however, and carries with it dangers of privacy violations, as the Facebook Beacon debacle demonstrated so vividly.

If social networks are to become a viable marketing medium, they need to find a better way to connect advertisers with consumers at the exact moment they are most receptive and engaged.

Until then, advertisers still find that they get better returns on topic-specific sites, where affinity is low but targetability is high.  Sites like TripAdvisor for travel and RightHealth for health still deliver the best bang for your targeted buck.

When a TripAdvisor user reads a series of reviews about hotels in Waikiki, for example, she is definitely interested in travelling to Hawaii.  For advertisers, this knowledge is highly valuable—we can extrapolate that she’ll also likely want restaurant recommendations, a rental car and a good deal on flights. Similarly, someone using RightHealth to look up the side effects of a new diabetes medication will also be interested to know that a pharmaceutical company is offering free information about diet and blood sugar.

In addition, a new breed of exploration engines gives advertisers the ability to target their message not just by subject, but also by category.  Kosmix, for example, organizes the Web into topic pages. This creates the opportunity to go beyond banner ads to reach audiences in unique and innovative ways.  An auto manufacturer with access to valuable data on energy efficient cars, for example, could use this in a widget on a topic page about hybrid vehicles—attracting consumers who have the greatest interest and represent likely customers.

The beauty of the Internet is that consumer behavior can be tracked, and the effectiveness of any campaign can be measured in days, if not hours.  By making adjustments to maximize reach, frequency, affinity and targeting, smart marketers can increase their success rates by connecting to the right consumer, in the right place, at the right time. 

Anand Rajaraman is co-founder of Kosmix, a new guide to the Web that organizes the Internet by topic. He also sits on the board of several technology companies, teaches in the Computer Science department of Stanford University and blogs at www.datawocky.com.