There aren’t many silver linings in this economy, but there are a few companies that have figured out how to profit from popularity online. In the social media space, branding specialist Buddy Media has worked with such brands as FedEx, New Balance, Time Inc. and Microsoft. As the economy has tanked, Buddy Media has seen profits grow. In the
last quarter of 2008, the company posted revenue growth over 100% and
they are set to see similar returns this year.

This week, I wrote about how app and widget makers have rebooted their business model to monetize after the economy shifted. I also caught up with Buddy Media CEO Michael Lazerow to find out what works for brands in social media and who should get canned for their lack of effort in the space.

Tell me a little about Buddy Media. You grew revenues 138% in a downturn last year. How did that happen?
We help our clients build out their presence on large social networks. When we started a year and a half ago, a big part of our business was building apps. We built out custom applications that helped companies market themselves on Facebook, MySpace, LinkedIn and other locations.
With the Buddy Media Page Management System and other things, we’ve focused on building a presence – a home away from home on social networks for companies — and then marketing it.

How has social media advertising changed in the last year?
Our primary business has stayed the same – helping companies market better in the social network space. What has changed the most is the launch of the social profile for brands. Historically for a brand to launch their presence on Facebook, you really had to do applications because the page’s product just wasn’t evolved enough. You couldn’t do that much within the Facebook pages product before March 2009. Facebook had relatively flat pages that couldn’t integrate Flash or anything. With the growth of Twitter and the growth of the Facebook page as a very viable home on the Facebook network this whole idea of a social profile for brands has become very important. We have many clients who have more people visiting their Facebook page and responding to them on Twitter than they have visiting their corporate website.

In a world where people are experiencing you through Google and finding you on social networks, you need to build out really robust destinations.

How are things different now from when you started?
Apps used to be the cake itself. Now the apps are the icing on the cake and it’s your social profiles that are the cake. Apps are more tactical than strategic. Launching your social profiles, that’s the strategy. You need to build out your presence where the user already lives.

Facebook apps are set to make more money than Facebook this year. Why is that?
There was a time when social network ads weren’t proven. We’re seeing that advertising on social networks is really starting to work. Take Bud Light – in terms of what’s out there right now, they have a page that launched in June or July with Buddy Media. It’s Facebook.com/budlight
They have 146,000 fans. Some of their updates get thousands of comments. They have 3,600 comments on their update “Bud Light would like to thank President Obama on his choice of beer.” People that took the time to post things. If Bud can scale this page to millions of fans, that becomes one of their most important channels with potential beer drinkers. I think it’s very early on – a lot of this is unproven – one of the things we know for sure is that building out your presence and marketing that presence on social media is very viable.  Facebook is doing a lot of things right. I think they’re soon going to be the biggest Internet company next to Google.

What are some things that have worked for brands in social media?
We’ve tried different ad formats within the social media application space in the past year. The one thing that has really surprised people is how active brand social profiles are. We know that when you have friends and you upload pictures people often comment. We didn’t really know that about brands. The one thing that I’m more psyched about is the level of engagement that fans or friends of brands are having on the social nets.

Long term we’ve gone from a world where we shout at consumers with the loudest and brightest ad units we can come up with to engaging them in a dialogue. We’re seeing that this connection between brands and people is real. Brands are an important part of people’s lives.

What hasn’t worked?
Running display ad units within the social media space is a huge disaster. I think that’s why you see Facebook getting into much more engaging ad units and keeping display ads out of their property. Also, not being honest and real hasn’t worked out too well. Companies that have launched stuff that isn’t true to their brand have learned that.

It’s still so early. Even though we talk about what hasn’t worked or what has, we’re still learning as we go.

But for CMOs at major businesses, it’s no longer “should we do social media,” it’s “how do we do it today in a way that will scale in the future.” If CMOs at major companies do not do social media, they are not only grossly negligent. They should be fired. It’s like not having a website in 2002. At a certain point, you just gotta do it.

What is the major lesson learned in social media over the past year?
I’ve been saying that the business of aggregating an audience and selling ads to that audience is just a colossal waste of time. There is unlimited inventory and impressions are like air. You had some monster companies that raised tremendous amounts of money trying to aggregate an audience and sell ads to them.  And they found out that just doesn’t work.