- Brian Morrissey

NEW YORK When it comes to social-media sites, current ad network targeting methods are falling short in the eyes of Andy Monfried, CEO of Lotame. The biggest problem: broad-reach ad networks are trying to use the same tricks that brought them success showing ads on content sites.

"We've tried to apply the horse-and-buggy mentality to the automobile," Monfried said.

Lotame, a New York-based network run by veterans of network giant Advertising.com, wants to change that by placing ads based on demographic factors like age and gender. More important, the network uses interests and social activity -- the propensity to comment, for instance -- to ferret out influencers. It recently closed a $13 million round of investment to expand its network further from its current 20 sites, representing a potential audience of 50 million users.

Interest in turning social media's growing number of eyeballs into sustainable ad businesses is high. Despite its skyrocketing audience numbers, social-network giant Facebook is reportedly only expecting to generate $300-350 million in revenue this year. MySpace missed financial targets from parent company News Corp. Lotame is concentrating on the second-tier of social sites, running its ads on a network of sites like Flixster, Fotolog and Bebo.

People are using metrics around content," Monfried said. "They're using frequency caps and contextual [targeting]. That's why Google has struggled. What does work is figuring how people are interacting with the platforms.

Lotame, which is two years old and has 52 employees, now has taken $23 million in venture capital. Emergence Capital Partners led the latest round. In addition to product expansion, Lotame plans to use the money to beef up marketing and for international expansion.

The typical campaign for Lotame, as described by Monfried, would be a consumer goods brand looking to reach a young urban audience. Lotame would use the data it collects on social sites to construct a profile of 500,000 users who have played a video game in the past 48 hours or commented on or shared entertainment content. Unlike networks that charge based on impressions or clicks, Lotame combines time spent with an engagement measurement.

"We get to really see how people are using the platforms and the way people engage and interact with each site," Monfried said.