Ad firm SocialMedia.com and MySpace announced the launch of Interaction Ads, a variation on SocialMedia.com’s word of mouth (WOM) social ads, released in March.

Interaction Ads invites MySpace members to enter information about themselves, which is then used in conjunction with social graph data to customize the advertising shown to their friends.

Users who visit a page on MySpace Music, for example, may see an ad that asks if they preferred rock or rap music, with checkboxes where they can indicate their favorite genre. Friends on MySpace will then see an ad that says "Murphy likes Rock and Roll! Which do you like?"

Although some users may find this level of customization unsettling at first, the ads are more engaging than typical banner ads. It also mimics an existing Facebook strategy, where fan pages, brands or groups favored by friends appear on a user's sidebar.

SocialMedia.com is running the campaigns for major brands; MySpace is collaborating with the company to sell the ads. Working with third parties will maximize revenue opportunities for MySpace, especially as its user growth begins to stall, compared to last summer.

Last month, an eMarketer report projected US ad spend on social networks would slide 3% to $1.14 billion in 2009, due primarily to problems at MySpace.

Overall, interactive advertising is still headed for growth in the next seven years, according to an April forecast.