WHEN SOCIAL NETWORKING SITES like Facebook and Twitter reached a critical mass of users, business owners saw dollar signs.

The sites not only allowed owners to reach hundreds of existing and potential customers, they provided a fun – and free – way for owners to communicate with customers. Still, figuring out whether a company’s social networking efforts are working has been tough, especially since there isn’t an exact science to measure the results.

That lack of a yardstick inspired Ben Straley, owner of the Seattle-based Internet software firm, Meteor Solutions: He would create and sell technology to advertisers to help them quantify the value generated by their social media activities. Using a snippet of Javascript embedded on a client’s site, Meteor Solutions identifies and tags each site visitor, monitors the content they share, and tracks how they share it. For a monthly fee that starts at $1,500, Meteor then gives clients access to a real-time picture of what is happening with their content.

While such practices may cause some privacy advocates to chafe, Straley says that the information he tabulates for companies is dense enough to be useful but lacks personally identifiable traits. He declines to disclose his year-old company’s revenue information, but projects that Meteor Solutions will turn a profit in the first quarter of 2010.

SmartMoney asked Straley about the ups and downs of his Internet software firm. Here are his condensed answers.

How has social networking changed the online advertising model?

If you’re like me, more and more of the information that you consume finds its way to you through Twitter and links in an email message. Instead of spending time looking for stuff online, you’re spending more time responding to information that is being returned to you. That is a fundamental shift. Basically, marketers can’t just rely on people to come to their sites. Instead, they have to create content that users can link to and share with everyone they know.

Name: Ben Straley
Business: Meteor Solutions, an Internet software firm. Industry: Software
Location: Seattle
Year founded: 2009
Number of employees: 10
Web address: meteorsolutions.com

Why is it important to track how customers use the web?

According to our research, an average of 15% to 20% of our clients’ online traffic stems from shared links. What’s more, 20% of those consumers are more likely to convert — buy the product, sign up for service or register for a newsletter — than those heading to the sites via paid advertisements. The whole idea behind tracking users is to devote resources more efficiently. Owners can spend more time on programs that work, as well as potentially reward those who send links.

What is your background?

I started out in Seattle working for Starwave, a software firm launched by Paul Allen, the co-founder of Microsoft. After Walt Disney acquired the company in 1998, I went on to get my master’s degree in business administration from Northwestern University’s Kellogg School of Management. From there, I started an agency here in town. After three years, the company combined with another firm to create Meteor Solutions.

Online advertising sank during this downturn. Will it resurface? If so, how?

I don’t think the old ad model will go away completely. What will change, however, is how we advertise. No matter if you are using static banner ads or creating videos, for advertising to have a desired impact online, it has to have some sort of intrinsic utility. For example, a video has to be funny. It can also deliver training or an offer that is so good consumers can’t say no. Then, optimally, when consumers go to the site, they’ll want to share that experience with others.

Thanks to the downturn, many publishing companies saw a dramatic drop in revenue. Will these firms change as a result?

The fact is advertisers are very interested in reaching targeted audiences of people that have certain attributes. However, when marketing dollars are tight, publishers will have to work harder to draw advertisers in. They will need to sell more of the inventory that their web sites generate — or, in other words, the number of pages they can place an ad on will have to increase. To survive, they’ll need to provide greater value to advertisers, and, if they want to charge more, publishers will need to provide more innovative advertising opportunities and greater multimedia tie-ins.

And, in the future, the types of advertisements that people respond to will make more of a difference. For example, just knowing that someone has an affinity for cars or is looking to buy one is useful to advertisers. A lot of this is preliminary, but there are early signs that publishers can tap their existing relationships to fuel more targeted ads.

Won’t this technology raise red flags with privacy advocates?

The issue of privacy is not going to go away any time soon. The goal is to be respectful, ethical and transparent about what information you’re collecting and what you’re doing with it. For us, we’re bound by the privacy policies of the companies that use our software. We do not collect any personally identifiable information. We simply collect data that are anonymous, yet still helpful for companies.

Can this technology make sense for firms outside the publishing industry?

We’re starting to provide a scaled-down version of Meteor Solution’s technology to non-tech companies. For example, a franchise nail salon that just wants to get the word out about the business and send out particular offers can use our service. In addition, we’re seeing a growing market in small- and medium-sized businesses.

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