A new type of web advertising that interacts with the site on which it appears is to make its debut on Last.fm, the social music site.

Last.fm, which announces a major relaunch today, will start showing advertising that can tap into the community features of the site, making adverts more engaging, the site said.

An example of the new "smart" adverts displays an image of a mobile phone handset which changes according to what the Last.fm user is doing. For instance, if someone is listening to Bon Jovi, the phone would appear to start playing a Bon Jovi track, showing off its MP3 player.

Hotel chains will be able to tap into a Last.fm user's list of favourite artists and display adverts for hotels in cities where those artists have upcoming gigs. Train companies, similarly, will be able to advertise services running to other music-based events that may be of interest to the user.

"It's really about using the functionality of the site to help the brand come up with an ad that is more immersive, and entertaining," Spencer Hyman, the chief operating officer of Last.fm, said.

He cited a recent example of a partnership with Motorola, where the company sponsored a new feature on the site which allowed a user to get a customised print-out of a festival programme, showing bands they were likely to enjoy based on their music collection.

Last.fm's technology enables the site to recommend music to its users by analysing what they have in their collections and how often they play songs. That information is then compared with similar data from other users who listen to the same music, via a process the site calls "scrobbling".

The site interacts with iTunes, Apple's music software, and updates its recommendations every time a user listens to music using the program. It also employs a team of "music scientists", who constantly mine the data produced by the site to match particular genres of music with certain demographics.

Advertising that targets groups or individuals by monitoring their web behaviour has attracted criticism from privacy campaigners. Phorm, which conducted trials of targeted advertising earlier this year, was accused of invading people's privacy by tracking every website that they visited.

The Information Commissioner's Office ruled that Phorm did not breach pricacy because it did not collect information that would identify individual users, but the system may now face a challenge from Europe. Viviane Reding, the EU communications commissioner, said yesterday that she was concerned about the British Government's lack of action.

"It is very clear in EU directives that unless someone specifically gives authorisation [for web tracking] then you don't have the right to do that," Ms Reding said, according to the Dow Jones Newswire.

Mr Hyman said that web advertising had always been able to target customers because of the information sites had about their users, citing Google, which tailors adverts according to what a person is searching for.

Last.fm, too, had run targeted ads, he said, giving the example of a British bank which wanted to target Polish builders. The site was able to deliver adverts to people who listened to Polish music or who were in the UK but using the Polish language version of the site.

Increasingly, however, the success of web adverts would depend on making them more engaging, Mr Hyman said. "The reason TV ads have been so effective is because there has been a whole creative industry behind them," he said, suggesting the web had been slow to catch up.

Among the features of the newly relaunched Last.fm is a "recent activity" list which alerts users to what their friends have been listening to, a bit like the news feed on Facebook and the ability to share recommendations more easily.

Last.fm, which is based in London, has more than 1.5 million users in Europe, according to Nielsen Online, 10 per cent of which are in the UK. The site was bought by CBS, the US television network, for $280 million in May last year.

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