Jim Larkin felt like he bought a diamond for a dime last month after he came across music site Hypster.com.

Larkin is owner of BaronsMedia, a small online advertising network in Burbank that places ads on about 250 independently published sites. After a long hunt for a bargain website, he decided to become a web publisher himself by purchasing Hypster.

“The site was really inexpensive, almost too good to be true,” said Larkin, although he declined to specify the price. “But it was profitable the day we bought it.”

The announcement last week that Myspace, the downtrodden social network, has added more than 1 million members in the 30 days since debuting its new music-listening format confirmed Larkin’s hunch about his purchase. He and others see plenty of opportunities to buy sites and quickly turn them around with some marketing know-how.

Hypster is a music-sharing site where registered listeners can build playlists of songs and share them with their friends through social network sites. The listeners don’t download songs, but have access to the music that they stream through the site. Registration is free.

Banner advertisements appear on screen during the songs and provide revenue for the site. However, to avoid paying royalties on the music like radio stations do, the site doesn’t allow audible advertising.

“We can monetize the site, not the music,” Larkin said.

Between 5,000 and 10,000 listeners sign up on the site every day, joining a membership list of more than 3 million people. Hypster shows about 1 million ads every day.

While Larkin credits the former owner, Burned Media Ltd. in New York, with creating easy-to-use technology, he describes that company as a group of tech buffs who didn’t know how to monetize Web traffic.

By combining Hypster’s music technology with his expertise in online advertising, Larkin believes he can increase the revenue and profitability of the site.

Rates for online advertisements are measured in cost per thousand viewers, or CPM in marketing lingo. Under the former owners, the site earned between 3 cents and 57 cents per thousand listeners. But because Larkin knows which advertisers to tap and how to arrange the ad placement on the screen, he expects to earn a minimum of 75 cents CPM.

Brian Fitzgerald, co-founder of multiple site publisher and online ad sales firm Evolve Media Corp. in Los Angeles, said that 75 cents was a realistic goal if the site becomes another member of BaronsMedia’s ad network. If the site develops its sales force to get advertising directly from companies, the price could jump as high as $3 to $4.

“The challenge is the music category,” Fitzgerald said. “It’s a very competitive ad marketplace with massive sites like Spotify, Myspace and Pandora. Those sites have a huge inventory of advertising spaces that saturate the market and drive the CPM down.”

In addition to on-site ads, e-mail marketing could provide a big burst of revenue for Hypster and increase the value of the site. Larkin points to Daily Candy, a fashion Website purchased by Comcast in 2008 for $125 million. The value of the site was its arsenal of e-mail newsletters that reached about 2.5 million people each week at the time of the sale. Advertisers pay premium prices to include their ads in e-mail newsletters.

“Daily Candy sold for that amount because of the data,” Larkin said. “When a site like Hypster has 5,000 to 10,000 new users per day and you can send them third-party e-mail offers, you can really maximize the money.”

Myspace Success

A closer-to-home example is the recent turnaround at Myspace. Once the dominant social network, Myspace was purchased by News Corp. for $580 million in 2005. But in the following years, Facebook surpassed Myspace and News Corp. last June sold the site to Specific Media, an ad network in Irvine, for $35 million.

The new owners turned it into a music-sharing site similar to Hypster’s model and secured fresh capital from singer Justin Timberlake and other partners. Since launching its music-playing technology in January, the site has added more than 40,000 users per day to bring its total to more than 25 million.

Larkin sees the turnaround at Myspace as an indication of his site’s potential.

“Myspace is growing fast and we want to take advantage of that trend,” said Larkin, who added that Hypster is in talks with Myspace for a partnership that would combine their music libraries.

Evolve’s Fitzgerald sees plenty of turnaround opportunities similar to Hypster for marketing-savvy Web entrepreneurs.

“Are there sites that have attractive audiences, growing user bases, insufficient capital and poor monetization with a very nice upside?” Fitzgerald asked. “Yes. Sites like that are all over the web and we are looking to buy them.”

He said that many sites owned by venture capital firms haven’t lived up to expectations. Even if the revenue is growing slowly and steadily, the investors may want their cash back and decide to put the site up for sale.

Larkin sees opportunities at lower price levels, but he cautioned that buyers should keep shopping until they find a bargain. He looked at several sites and walked away from them before buying Hypster.

“These opportunities exist,” he said, “but you just have to be patient.”