There is clear dissatisfaction with the current state of marketing among the social media mavens.

• Fred Wilson and Union Square Ventures are looking for companies to invest in to take advantage of this.
• BuzzLogic releases their conversational ad service.
• The Inquisitr moves from AdSense to Technorati Media, indicating a potential shift at b5 Media.
• Lookery is providing demographic information that is relevant to social media providers and shaping ad presentation that way
• A completely off-the-radar person such as myself realizes that there is gold in what holds the attention, and that’s not always the latest and greatest

So what can be done? Jeff Jarvis points out that the problem lies with measurement. I agree, as there is only value in a system where all of the people involved agree on what the metric of record will be, and how it can be validly captured.

Currently CPM is the agreed upon metric. In a feed based online world, how does a CPM model work? And, most importantly, why would I continue to place your ads on my site if all your doing is advertising to people based on the words on the page, rather than who is looking at the page and how often that page is looked at.

In effect, advertisers should be the ones thrying to figure out how to get into the community, get into the conversation. As an advertiser, don’t you want to be where the action is? But how do you find an engaged audience in an online world that makes a sand castle on the beach in a hurricane look stable?

The challenge for advertisers is to be able to find the active communities and conversations effectively. The challenge for content creators and communities is to understand the value of their conversations, the interactions that people who visit the site have with the content.

In effect, a social media advertising model turns the current model on its head. Site owners and community creators gain the benefit of being attractive to advertisers because of the community, not because of the content. And site owners who understand who visits their site, what content most engages them, how they interact with the system will be able to reap the greatest rewards by selling their community as a marketable entity.

And Steven Hodson rounds out the week’s think on communities by throwing out the subversive idea that communities are not always free (as in ‘beer’, not as in ‘land of’). If a community has paid for the privilege of coming together to participate in communal events and discussions, then can’t that become an area for site owners to further control the cost of advertising on their site?

While the benefit of reduced or no marketing content is the benefit of many for-pay communities, this benefit can be used by site owners by saying that an advertiser can have access to the for-pay community at the cost of higher ad rates and smaller ads. The free community is a completely different set of rules, but there are also areas in the free community that are of higher value than others.

In summary, the current model is broken. But there is no way to measure the value of a Twitter stream, a FriendFeed conversation, a Disqus thread, or a Digg rampage. And until there is, we are stuck with an ad model that based on the words on the page, and not the community that created the words.

Fred Wilson adds his thoughts to the conversation about a more intelligent way to target blog and social media advertising. His idea plays right into the ideas I discussed yesterday, ideas that emphasize that a new and successful advertising strategy can be dictated by content creators and bloggers by basing advertising rates on the level of interaction that an audience has with a post.

Where the model I proposed is one that is based on community and conversation, Fred sees an opportunityfor fims that can effectively inject advertising and marketing directly into the conversation, not added on as an afterthought.

Today’s conversations take place in the streams of Twitter and FriendFeed, and are solidly founded on the ideas of community and conversation. They are spontaneous, unpredictable. Marketing into the stream requires a level of conversational intelligence that doesn’t exist in contextual advertising. It is not simply the words on the screen, it is how those ads are being used.

For example, there is no sense trying to advertise a product on a page or in a conversation that is actively engaged in discussing the flaws and failings of that product. It makes an advertiser look cold, insensitive, and even ridiculous.

In his post, Fred presents examples of subtle, targeted advertising that appears in the streams of an existing conversation without redirecting or changing the conversation. As a VC, he recognizes the opportunity in this area.

Community and conversation focused marketing is potentially huge and likely very effective, if done in a way that does not drive people to filter their content to prevent such advertising. The advertisers will also have to adopt a clear code of behavior that prevents them from being seen as anything more than new-age spammers.

Why will it be more effective? It plays right to the marketers sweet spot: an engaged group, with a focused interest, creating a conversation in a shared community.

If that doesn’t set of the buzzword bingo alarms, nothing will.

It is, however, also true. And the interest in this new model of advertising is solely drive by one idea: attention. I have commented on the attention economy previously, and I stick to my guns that a post, a conversation, a community that holds a person’s attention in today’s world of media and information saturation is one that needs to be explored by marketers.

Rob Crumpler and the team at BuzzLogic announced their conversation ad service yesterday (September 18 2008). This is likely the first move in this exciting new area. And Fred and his team at Union Square recognize the potential in this area.