The huge traffic that social networking sites generate makes many marketers see equally huge dollar signs. To be sure, any site that draws in hundreds of millions of visitors on a regular basis has the potential to bring big profits to savvy marketers. The key is understanding the right way—and the wrong way—to make “socializing for profit” a viable business model.

There are two main ways to use social networking as a business development tool. First is the advertising and sponsorship model. For certain businesses, this can be a good way to generate awareness and drive traffic to their site. Advertising on the major sites can work well if the goal is to attract a large, general audience. If the target is a niche audience, such as dog owners or moms, advertising on relevant niche sites can be even more lucrative. There are some downsides to this approach, including competition, expense, and the inundation of this type of advertising that has resulted in visitors conditioning themselves to ignore website ads. The campaign must be compelling enough to stand out from the rest.

The other way to use social networking as a business development tool is the active participation model. In this model, investment is in time rather than money. By creating a solid presence on a social networking site, you can engage with potential customers and develop brand loyalty. The main downside to this approach is that it takes time to develop the kind of presence that creates a true relationship with your customers. It’s an ongoing effort as well, not something that you can do once and then ignore.

When talking about a social networking marketing campaign, the second approach is what most people have in mind. Using a comparison to the traditional business world, social networking is more like public relations than direct sales. It’s what creates the buzz that makes people aware of your products and want to buy them.

If your goal is to make a lot of money through direct sales on social networking sites, think again. A presence on a social networking site that comes across as a hard sell puts you at risk of alienating your audience and driving them away. On some sites, you may even violate their terms and agreements.

Emphasize a low-key, relationship-building approach when using social networking for business purposes. That doesn’t mean that you can’t be strategic and focus on increased sales as one of your primary goals for participation. In fact, if you don’t have a solid plan, you’re unlikely to succeed. It just means that you need to understand the unwritten rules of social networking and play by them to develop that special connection with your audience that makes them buy.

For an example of what works and what doesn’t, let’s look at one social networker’s experience in carrying out a social networking marketing campaign to increase the sale of his products.

Andy is a fitness trainer who creates his own line of fitness DVDs. To compete with DVDs produced by larger companies with bigger budgets and better distribution, Andy decides to generate some good buzz and word-of-mouth marketing through social networking sites. To start, he creates a presence on MySpace. He uploads sample clips of his DVDs, highlights his qualifications as a fitness trainer, and reposts the heavily sales-oriented, call-to-action web copy that’s focused on driving sales on his own website. He also tries to befriend as many people as possible who share his interest in fitness.

Unfortunately, he sees little impact on overall sales. He even receives a few messages from people who tell him to stop trying to sell them things. It’s time for a new approach. With a revised strategy in place that emphasizes building awareness and generating buzz, Andy reworks his MySpace presence. The new page offers a custom design geared to fitness enthusiasts as well as blog posts and other useful content of real interest to his target audience. With Andy’s new commitment to posting content on a more frequent basis and becoming a truly active participant, his audience begins to grow. Andy also develops an innovative contest with valuable prizes that encourages viral, word-of-mouth marketing and additional publicity. Within weeks of launching the revised site, sales are picking up.

Andy then decides to create a similar campaign on a social networking site dedicated to fitness buffs. He also posts a number of video clips on YouTube. These videos include clips from his DVDs and a series of quick video fitness tips that become popular with the YouTube community. Andy soon becomes known as “the fitness guy” on YouTube. With his combined campaign on three targeted social networking sites, Andy’s sales—and his reputation as a fitness expert—continue to grow.

By focusing on the right way to use social networking, you can definitely generate a profit. But you need to clearly understand the kind of “socializing” that really works with this medium. Social networking is about relationship building. It’s an online opportunity to develop a connection with your target audience, to generate the kind of buzz that makes people think of you first when they need a product like yours, and to convert casual visitors into loyal customers.