Hooking up with Social Networks.

Last week, WPP Group became the second agency conglomerate to make an investment in the social networking arena in recent weeks. It is clear that agencies are keen to understand the impact of social networks on advertising as well as to turn a profit off of their investments. This is one of the themes examined in eMarketer’s latest report, Social Network Marketing: Carving Out Some MySpace.

WPP’s investment – it acquired roughly $2 million in stock in LiveWorld, a company that creates community and social networking environments for Fortune 1000 companies – gives it a place at the social network table. WPP had previously worked with LiveWorld on its well-regarded “Campaign for Real Beauty” for Dove. A new joint venture between the two firms will help clients of WPP’s agencies (such as Ogilvy & Mather, Dove’s agency) use and deploy social network communities.

Late last month, Interpublic Group announced that it would develop marketing programs on Facebook for its agency clients and also acquire a stake of around 0.5% in the company. It was estimated that Interpublic would spend roughly $10 million in advertising on the site.

These agency groups are racing to get their share of something many of their clients are already experimenting with. According to a Forrester Research survey of marketing executives conducted last December, 13% were marketing via blogs or social networks at the time, but 51% said they believe there will be “total adoption” of the technique within 12 months of the survey date.

The total US Internet audience has grown 4% over the past year, but several social network sites, including MySpace, Facebook and Bolt, have grown by triple-digit percentages, according to comScore Media Metrix. Other sites that either did not exist a year ago or were too small to measure have also generated large gains.

Agencies have participated financially in Internet media and technology ventures in the past: Bozell invested in Doubleclick in the mid-1990s and Interpublic acquired a stake in ad technology firm Mediaplex in 2000. WPP has acquired stakes in a variety of Internet firms over the last decade.

By gaining a stake in an Internet property or service, agencies can offer their clients easier access to cutting-edge technologies. The risk, of course, is whether the choice is a good one. And at this early stage of understanding how social networks can also serve as marketing vehicles, there are no clear winners.

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