NEW YORK - Facebook has begun transforming itself from an online hangout into an online business district.
Companies can now create their own pages on Facebook for free, under a new program announced Tuesday. Advertisers also will be able to show users their pitches in the guise of friends' endorsements, based on what the friends buy and do online.
For example, if a friend has booked a vacation on Travelocity, the online travel agency will be able to display the friend's photo as part of an ad to entice the user to buy flights and hotel stays.
The friend will have some control over whether to share that information, but the user will have fewer choices over whether to receive it.
As Web companies look to boost advertising revenue by offering to target ads based on users' hobbies, interests and behavior, Facebook's move could change the tone of the site and revive privacy complaints it faced last year. Facebook will rely on information in users' profiles and on friends' online activity to determine what ads might appeal to users.
Key will be how Facebook tells users about the program, something it plans to do shortly.
"Some people may find it creepy," said Deborah Pierce, executive director of the San Francisco-based Privacy Activism. "They are trying to find some ways to monetize this and keep the lights on. If the disclosure is up front, yeah, I think this is a reasonable thing for them to do."
Facebook has long prided itself on guarding its users' privacy, but the walls have gradually lowered. A feature allowing users to track changes their friends make to profiles backfired when many users denounced it as stalking and threatened protests. Facebook quickly apologized and agreed to let users turn off the feature.
Advertisers can fine-tune their audiences -- having their pitches appear only to women under 30 who attended New York University and work at Goldman Sachs, for instance.
Facebook promises no information that could identify individual will be disclosed to advertisers. And its officials said users can complain again if they find the new targeting program offensive.
"If users are displeased with this, we will hear from them," said Chris Kelly, the company's chief privacy officer.
Privacy concerns aside, many Facebook members may be reluctant to endorse an advertiser for fear of alienating friends who had bad experiences with the same company, said Chris Winfield, who runs 10e20, an online marketing specialist.
"They are relying a lot on their users to make this happen, and that's going to be tricky," Winfield said.
Facebook Chief Executive Mark Zuckerberg, who founded the company three years ago, said marketers must respond to the changing nature of communication, driven in part by social-networking sites like his.
"Pushing your message out to people is no longer good enough," Zuckerberg told about 200 advertising-industry executives, many already in New York for the ad:tech conference. "You have to get your message out to the conversations."
Facebook's usage has grown rapidly since last year, when the site opened membership to all Internet users. ComScore Media Metrix says Facebook had 30.6 million U.S. users in September, compared with rival MySpace's 68.4 million.
Search companies like Google Inc. have generated a lot of revenue from text-based ads targeted to a user's search terms. Those have been good at fulfilling demand -- users often are already looking for a car or a travel package when searching and seeing those ads.
Zuckerberg said Facebook planned to go after the bigger opportunities in generating demand -- something Google and other sites are trying to do through display and other brand promotions. Seeing a friend buy a product or praise a band, he said, are good ways to generate demand.
David Hallerman, a senior analyst at the research group eMarketer, said Facebook's success would depend on how the site grows and whether users buy into the program.
It might help with movies and local restaurants, he said. But he questioned whether it would work promoting a soft drink: Coca-Cola Co. is among the early commercial participants that began launching more than 100,000 new pages Tuesday.
The key difference between companies' pages and individuals' is that businesses won't have access to individuals' profiles the same way their friends do, even when users formally declare themselves "fans" of a company.
Among the new features Facebook announced, companies can now embed coding it calls Beacon on outside sites such as eBay Inc., enabling a Facebook user who lists an item for auction, for example, to generate alert messages for Facebook friends, who may then check out the item.
Users can similarly alert friends to their reviews of restaurants or bands they enjoyed and books or DVDs they bought online, whether through the Beacon or the Facebook page. And advertisers can have their pitches appear next to those alerts -- appearing with the user's photo, though marked "sponsored."
"People influence people," Zuckerberg said. "Nothing influences a person more than a recommendation from a trusted friend."
Besides Coca-Cola and Travelocity, initial participants include General Motors Corp.'s Saturn, Sony Corp.'s Sony Pictures and the National Basketball Association.
It's unclear whether Facebook -- a three-year-old startup with about 300 employees -- is mature enough to deal with the diverse demands of thousands of advertisers, said Deama Zlotin, who runs SEMDirector, which provides online marketing tools.
"The opportunity is tremendous, but I think it will take them at least six months to get it right," Zlotin said.
Social-networking sites like Facebook and News Corp.'s MySpace have been trying to find the best way to profit from the trove of personal data their users put on profile pages. On Monday, MySpace announced an expansion of its targeting program to include more categories and more advertisers.
MySpace lets companies create profile pages but doesn't have Facebook's system of alerts and adjacent social ads. However, MySpace appears to be trying to analyze its users' interests based on what they write in profiles.
Zuckerberg told reporters he wasn't worried users would consider Facebook too commercial. He said regular ads would stand out more because targeted ads can be better integrated with conversations users are already having with one another.
