via Businessweek

JP Morgan Chase knows credit cards. It also knows college students are not afraid to use them. So it wanted to create a marketing program that would foster loyalty within that target audience. To do that, the bank hired student "ambassadors" at 300 college campuses. It produced food-and-game incentives that would appeal to young people (macaroni and cheese, Twister). But most important, it chose Facebook—an online community that counts millions of students as members—to serve as the centerpiece of the effort, rather than using its own Web site.

The bold departure underscores the central role social networks have come to play for the people companies covet the most. "We've been very active in marketing to a younger consumer and we know we need to be relevant to their life," says Kathy Witsil, director of Chase brands.

As companies try to build or keep relevancy among young people, they're increasingly tailoring marketing campaigns specifically to social networks. These go far beyond placing banner ads on a site, and involve interaction with users over time in what companies hope will be a memorable way. Besides JP Morgan Chase (JPM), companies creating campaigns for social networks include Burger King (BKC), Apple (AAPL), and Wendy's (WEN).

A BROADER APPEAL.  Burger King, for instance, created a MySpace page for the King, the unnerving, grinning character that appears in the chain's commercials. To date, the King has amassed more than 120,000 "friends," or fellow MySpace users who opt to associate themselves with his profile—though, admittedly, the King buys his friends with free episodes of Fox shows such as 24 and American Dad. "Consumers respect us more as a brand if we are giving them something they can use," says Gillian Smith, senior director of media and interactive at Burger King, adding that Burger King is trying to reach a younger demographic.

The hamburger chain has come to the right place. As of August, MySpace boasted more than 100 million member profiles, and had anywhere from 45 to 54 million unique users in July. Most of those users are under the age of 35, although older people are increasingly frequenting these sites. About 36% of MySpace users are people aged 35-54, as are 30% of Facebook users, according to comScore Media Metrix.

Advertising on social networks is still a small portion of overall online advertising, but it's poised to grow. "Marketers are just now getting their arms around what social network marketing is," says Debra Aho Williamson, senior analyst at eMarketer. The researcher estimates that marketers will spend $280 million on social network advertising in the U.S. this year, about 1.7% of the projected $16.7 billion due to be spent on U.S. online advertising in 2006. The social networking ad tally will reach $1.9 billion in 2010, making up 6.3% of the total.

REWARDS SYSTEM.  Chase opted to create the campaign on Facebook after conducting research that showed young people prefer to interact with brands in familiar surroundings. "When your marketing takes them outside of their environment, it becomes much less effective," says Manning Field, senior vice-president of branding and advertising for Chase Card Services.

The Facebook campaign will be supplemented by offline advertising designed to bring consumers to the Facebook site, where they can earn points for joining a Chase subgroup, signing up for and activating a credit card, and reading about wise credit use.

Adding to the appeal of social network marketing, any message that reaches a network user is likely to be spread among that user's friends. Facebook says its average user has about 140 "friend" connections. And the sites are happy to help companies construct campaigns. "We can help make sure the messaging of the campaign and the targeting of the campaign is contextually relevant to the audience," says Mike Murphy, chief revenue officer of Facebook.

But no company wants the message to come across as too carefully crafted or otherwise jarring to the user. "Many people who don't understand this medium well feel they need to break through the noise by creating a really disruptive experience on the site, and nobody likes to be disrupted less than this audience," Murphy says. "A disruptive advertising experience in our space is likely to create a bad brand experience."

CREATIVE DISOBEDIENCE.  And any marketing campaign that lets customers create content can take unexpected turns. "Whenever you engage in a dialogue, you may not hear exactly what you want to hear, but it's valuable nonetheless," says Michael Barrett, chief revenue officer of Fox Interactive Media, the division of News Corp. (NWS) that includes MySpace.

The King's friends on MySpace can post messages on Burger King's page. As long as those messages adhere to MySpace policy, users can say what they want. There are even a couple of rogue MySpace pages featuring the King doing things such as rubbing suntan lotion on a woman's back at the beach. Still, Burger King isn't trying to shut those pages down. "It's amusing to us," says Burger King's Smith. "Imitation is the highest form of flattery."