By Michele Gershberg

NEW YORK (Reuters) - Social network Facebook unveiled a new advertising system on Tuesday that will let companies introduce ads into the user pages of its 50 million members, and launch dedicated pages on the site for their brands.

The privately held company has signed on several dozen partners for the system, including phone company Verizon Communications Inc , movie rental chain Blockbuster Inc and online auction market eBay Inc .

"What we're building here is a massive network of real world connections through which people can share information," Facebook Chief Executive Mark Zuckerberg told a gathering of advertising and media executives in New York.

Facebook's ad partnerships could pose a new challenge to News Corp's MySpace, the world's largest online social network, and Web search leader Google Inc .

Both seek to offer advertisers more direct and efficient ways of reaching audiences on the Web and have announced new advertising and social network programs in the last week.

Microsoft Corp took a minority investment in Facebook last month that valued the privately held company at $15 billion, largely on the expectation the social network would soon be able to mine user profiles for valuable ad data.

Facebook's new advertising system will test how willing users are to accept advertising in the most personal of media formats. Partners said users would soon make it clear what kind of advertising they wanted to hear.

"It's not about being commercial, it's about being useful," said Quincy Smith, president at CBS Interactive.

Zuckerberg was unapologetic when asked whether the influx of advertising could put off users who flocked to the site as a fun way to interact with friends.

"It's an ad-supported business," he said. "It's a free service and it's ad supported."

Other partners include media sites such as IAC/InterActiveCorp's CollegeHumor.com, New York Times Co and Sony Pictures as well as the National Basketball Association, Coca-Cola Co and Unilever Plc .

FACEBOOK ADS

Facebook users have their own profile pages, where they post updates on their daily activities, photos, hobbies, and other information. These updates are sent to the pages of their friends and social groups via a "news feed."

The news feed item is seen by dozens to hundreds of a user's friends on Facebook, creating a loose system of recommendations that is transmitted instantaneously.

The new "Facebook Ads" system will allow users to have their online behavior, including advertiser sites they visit or the products they buy, appear on the news feeds if they choose.

"It's way more organic and natural to have advertising based on what your friends are doing," Zuckerberg said. "We're going to help your brands become part of the daily conversations that are happening every day."

Advertisers that join the program can also pay for a small ad for their product to appear any time it is mentioned on a news feed. Such ads appear on a personal page that only the user sees, and not on their public profiles.

In addition, Facebook said it had launched more than 100,000 new pages on its site, representing some of the world's largest brands, local businesses and organizations. Facebook is also launching a system for advertisers to home in on audiences they want to reach through a set of keywords.

The new ad system works separately from its partnership with Microsoft, which serves up banner and other display advertising on Facebook pages.

Once a destination for college students to share experiences and plan social outings, Facebook has grown by opening its doors to the general public to set up personal pages, and to software developers to offer applications.

Zuckerberg said Facebook reached the 50-million mark two months ahead of its expectations.
© Copyright 2007 Reuters.