MySpace's DIY ad service

October 13, 2008: 12:01 AM ET

MySpace on Monday launches MyAds, a do-it-yourself service that lets anyone create their own banner ads, target those ads and distribute them for as little as $25.

Say you're a pizza maker in Chicago. You follow easy-to-use prompts to make an advertisement and send it to football fans in Chicago on Sunday evening, setting the price you are willing to pay if a fan clicks on your ad and the dates you want the ad to run. These ads will compete for space with large creative campaigns sponsored by corporate MySpace (NWS) advertisers.

It's a tough time to launch a new advertising product. With the economy in free fall, the rate of online advertising growth has slowed considerably. It even dipped slightly in the second quarter compared to the first, according to a report from the Interactive Advertising Bureau and PricewaterhouseCoopers.

But MySpace CEO Chris DeWolfe insists the site has so many new offerings, like MySpace Music, that he hasn't seen demand slacken. Research firm eMarketer estimates advertisers will spend $755 million on the site, up from $505 million a year ago.

DeWolfe explains his "cautious optimism" this way: "A year and a half ago we were in the social networking category .... Now we're considered to be a competitor with the portals." In fact, comScore reported in June that MySpace had surpassed Yahoo in the amount of display ads it showed.

It's true, the site has been on something of a tear. It has recently hired a number of former Yahoo employees, including Valeh Vakili, who was the company's director of U.S. sales operations. And developers like RockYou's Jia Shen report focusing more of their energies on developing applications for the site.

In August, MySpace's 120 million users spent an average 164 minutes on the site. In tough economic times, an entertainment site like MySpace could see a bump in traffic as people cut back on pricier attractions like concerts and movies. But as social networking begins to mature, it's not enough to get attention; MySpace will need to continue making money. And in the next few months, that may be tricky for everybody.

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