RENEE MONTAGNE, host:
Facebook, of course, is another enormously popular social networking site. It now has more than 200 million users. But it still isn't making a profit. While Internet sites commonly make money by selling ads, NPR's Laura Sydell reports on how tricky that is for social networking sites.
LAURA SYDELL: I knew Facebook was big when my 85-year-old father joined. He joined for the same reason that musician and schoolteacher Jill Clapp did, to stay in touch.
Ms. JILL CLAPP (Musician, Schoolteacher): Close friends, that I don't know if they've time to call or they might not be available. It's a nice way to hear what things are going on without being too intrusive into people's lives.
SYDELL: But Clapp says the ads are driving her nuts.
Ms. CLAPP: Okay, you're over 40, you're a female. This is what you want. You want Botox injections, you need NutriSystem.
SYDELL: So what comes up, let's look what comes up on your page right now?
Ms. CLAPP: Okay, let's see, we've got play Sorority Life. Hottest game for hottest girls. Take a cruise, hit the mall. Yeah, not in the least bit appealing to me whatsoever.
SYDELL: Clapp may be an example of what is inheritably problematic about selling ads on social networks, says social-networking veteran Denise Paolucci.
Ms. DENISE PAOLUCCI (Social-Networking Veteran): You're not there for a specific task. You're there to socialize. And just like if you're at a cocktail party and mingling with people, having a conversation, you're not going to want to be interrupted by somebody jumping in and shouting, hey, free widgets.
SYDELL: Paolucci is starting up her own social-networking site. At Facebook, they're hoping they can make their ads more targeted so that people like Jill Clapp aren't annoyed but interested. Facebook also lets users give an ad a thumbs up or thumbs down. Facebook's director of product marketing, Mike Hoeflinger.
Mr. MIKE HOEFLINGER (Director, Product Marketing, Facebook): There's constantly, you know, the discovery of a better way to target, constantly the discovery of how more consistently to get the best possible performance from these products.
SYDELL: But so far ads haven't added up to a profit for Facebook. Ads have worked for MySpace. But Denise Paolucci says users are starting to leave.
Ms. PAOLUCCI: Even though their page viewers were skyrocketing, people were willing to pay so little to advertise on MySpace that they had to keep adding more ads and more ads and more ads, just to stay at the same point of income that they were already at.
SYDELL: Paolucci's social-networking site is called Dreamwidth. She refuses to sell ads. She charges users. Paolucci says she's already making a profit. There's a huge name in social networking who's also expressing skepticism about the advertising model. At a recent conference, Twitter co-founder Evan Williams talked about selling verification services.
Mr. EVAN WILLIAMS (Twitter Co-founder): If you're a new user to Twitter and you stumble across Dunkin' Donuts, first thing you want to know is, is this really Dunkin' Donuts?
SYDELL: Twitter could charge Dunkin' Donuts to prove to followers that it really is Dunkin' Donuts. Fred Stutzman thinks selling services is the best model for social networks. Stutzman is studying social networking sites at the University of North Carolina.
Mr. FRED STUTZMAN (Researcher, Social Network Sites, University Of North Carolina): I think that people will pay for services. People will pay for good technology. And people will pay for, you know, a responsive company.
SYDELL: Take the professional networking site LinkedIn. It has some free services, but users pay for a premium level with more features. It has significantly fewer users than Facebook or MySpace - about 40 million - but it's making a profit. Unfortunately, Facebook may find itself in a bit of a conundrum. There are two groups on the site called, We Will Not Pay To Use Facebook - If This Happens We Are Gone, with a combined membership of nearly eight million. Ultimately, Stutzman thinks that Facebook, MySpace and Twitter are going to be around for a long time, they just might not be the big cash cows that some people think they are.
Laura Sydell, NPR News, San Francisco.