Social media is all the craze, especially the exponentially growing Twitter. You know something is big when Oprah is talking about it. As companies rush to assemble a social media strategy, the question needs to be asked: what is the purpose  of using social media?

To first answer this question, the company must begin with their target users, not technology. Trying to keep up to date on the latest social media tech fad will do the company little good. What is important is a focus on how the target market interacts with the online community.

Here are key areas to evaluate before jumping into the social media party:

1. Are your users more likely to simply read or contribute?  Depending on the user market, some companies have a target market that simply just browses reviews and does not contribute to much of their discussion on their company or product. Knowing this will shape what approach the firms takes, whether it be establishing a Facebook group or a private forum of discussion.

2. Does the technology match overall marketing objectives? A key point of evaluation of your firm entering the social media world, is does it match other marketing objectives and are the users there? A careful consideration of this will determine what technology is used.

3. Does your company even know what Twitter is? A poor sign of a company is having the marketing intern constantly on blogs finding the newest social media gadget and tool. Its better to be focused then hip.

As MySpace places an ex-Facebook executive in the CEO position, an interesting discussion arises between the “success” of each social networking community. In one instance, success of a social network can be measured by the number of users. Facebook, in this category, would win the battle between the two giants. Facebook, in February, had 264 million international visitors. Compare this to MySpace which 124 million.

While the visitor numbers tell one story, advertising revenue tells another – after all, these networks are businesses. It is when one evaluates the two companies from this perspective that the effectiveness of two marekting plans is revealed. MySpace, taking the traditional online marketing route of banner ads and sponsorships brought in $1 billion in ad revenue. Facebook took in an estimated $300 million.

Facebook has took pride that it does not follow the traditional marketing plan, going for what they call “Engagement Ads.” There is plenty of talk nowadays about avoiding traditional internet marketing and searching for better ways to promote a brand and bring in ad revenue. While, undoubtedly, this is true and there needs to be a necessary progression in order to avoid consumer “ad fatigue,” the numbers between the two giants need to be noticed.

Social media is term that is constantly tossed around amongst marketers and the media as the new way to promote a company’s brand. While some criticize the terminology of “social media,” it is undoubtedly a force in marketing that every firm must accept and be immersed in to succeed. The problem is not merely whether the firm is using social media or social marketing tools, it is whether or not they are using the right ones in the right context.

As is discussed in the insightful book Groundswell, there are various types of internet users present in social media. Some users create blogs and join social networks, while others simply contribute reviews or read commentaries on products. Each company, in turn, has different demographics of customers. These demographics accordingly correspond to the type of social media users they are: whether they read or create blogs, have a Facebook or MySpace page, whether they tweet or not etc.

The battle of a firm appropriately approaching the use of social marketing is to know what type of user  their customers are. Knowing this information in the beginning avoids misuse of internet resources and avoids wasted time and money.

Here are some other social marketing tips companies need to understand as the approach the social media world:

1. It is one thing to have presence, it is another to monitor it. As has been recently made clear by Domino’s handling of a viral video, being present on social media and monitoring it are two different things. It is vital for the company to be constantly aware of what the public, i.e. the groundswell, is saying about their products.

2. Social Marketing Takes Time.A firm cannot expect to immediately get results when they first create a Facebook or MySpace account. Such results and presence takes time. A new Twitter account is not the golden ticket to new users and sales.

3. Avoid Non-Organic. In preparation for a new auto show, automaker Land Rover recently launched one of the largest, most extensive Twitter campaigns by a major national brand. The campaign works by “hiring” prominent Twitters to highlight the Land Rover product. The goal is to present the image and brand of Land Rover through respected Twitters. Such a campaign, as I see it, avoids the true essence of social media: it must be organic. Users to quickly can see through the veil of corporate deceit.

In light of the mass panic over the the slowing economy, many entrepreneurs, particularly the internet inclined have withdrawn efforts to pursue their business. Driven by fears of lack of funding and interest, such entrepreneurs, in a time of high unemployment and empty 401-k’s, recede back to the enclaves of entrepreneurship abandonment.

Pessimistic thinking is not necessary when the proper options are considered for the potential online entrepreneur. A recent article in Time, highlights the that the hard-pressed economic times is in a reality time for a new boom in internet start-ups. The online companies that are able to thrive now are those that cost little to start and run, and with proper planning have the potential for big payouts in the end.

Central taking advantage of this new boom is starts with a great idea for a need in the modern online marketplace. Find the need, construct the plan, and run the company on shoestring until the economy improves. But, just how do sites run on a shoestring budget? Taking the cast study from the Time article, the site MotorMouths.com (the Rotten Tomatoes of car reviews) offers some insight into the matter:

1. Start as a hobby and grow. Many entrepreneurs are working full-time and treating their new business as a time intensive hobby. By staying in their full-time job and working hard on the evenings and weekends, they are building a strong base for financial security in the  company.

2. Collaborate. Not all internet entrepreneurs have to be MIT graduate programmers. The web has access to numerous sources of helping hands and programmers with the right skills. In most cases, these programmers can be a bargain.

3. Start small and build progressively. Build the idea slowly, bootstrapping as much as possible. If the idea catches on in the internet community, the funding will quickly follow.

There is one area of online advertising that remains untapped: small-town and local businesses. A casual walk down the main street of many towns will reveal a variety of small antique, pizza, coffee, and other eccentric shops. Amongst the variety of stores in a small downtown there is the common factor that they lack an online advertising presence.

For many stores, the reasoning follows the logic that the stores reach is only in a local vicinity and going to the web would serve little purpose or functionality. Debunking this logic is the movement towards hyper-local marketing. Hyper-local online advertisements are ads that target a particular area based on area code or other geographic information.

For example, say you go to your favorite travel site and click on article on Chicago pizza restaurants. The typical banner advertisements could quickly change ads placed by local Chicago businesses. In essence, the small businesses that would never consider to use online ads have an opportunity to reach a relevant market.

Quicly growing are firms that provide the advertising services to small businesses that allow them the ability to market effectively via hyper-local ads online. The growth in the sector represents a  new way to rethink the scope and focus of online ads. Relevancy is a pillar of marketing and hyper-local makes this its strength.

In summary:

• Hyper-local introduces the small town business into the online ad market
• It creates relevant ads to users
• Opens the door to a new, vastly untapped segment of the advertising market