The Social Graph: The pot of gold at the end of the rainbow for marketers?

The mantra for successful ecommerce companies has really been to try find an effective way to make word of mouth marketing work. Mark Zuckerberg introduced the term “the Social Graph”, which is really about understanding the links between people, and of course also finding out who influencers are within these networks. The race for data mining this is intensifying especially between Facebook and Google, but also in a host of start-ups and other services like Yelp, Groupon as well as retailers such as Amazon and Wal-Mart.

If you have logged on to Facebook lately, you will notice that they are now starting to map family relationship, match your location with local incentives, and to use their login on pretty much any game or other social network service you consider using, and even what articles or web sites you may like. Sounds scary? With 500m users, who on average connect to 130 people and 80 objects (pages, groups websites) – and create 3 new pieces of data every day (pictures, likes, comments), it means there are 45 billion new pieces of data every month for Facebook to tap (Source: Gigya, Wedbush Social Graph call. See link below)

What is the race all about? Why collect all this data? Gartner recently conducted a survey where they asked the question: “What is the most important thing that you do online?” (“Gartner Predicts 2011”). The third largest activity is shopping, and social activity came in at number 8. And consider that shopping is a social experience in itself, and that advertising spend online, especially from local businesses, is way lower than the actual time spent online, you can see that there is a massive pie of advertising and commerce that is being fought over.

And where is the real battle ground going to happened? Increasingly in your hand. By 2013, the combined installed base of smartphones and browser-equipped enhanced phones will exceed 1.82 billion units.

So how do companies take advantage of the social graph? Is it really the pot of gold at the end of the rainbow? Wedbush securities recently had a call on thiswhich was great listening and offered a lot of data, but really did not provide any clear direction. The participants hailed the importance of the social graph, but did not specifically say how to take advantage of it. Some examples were mentioned, like Intuit’s experience with Turbo tax, who experienced that that when people who after completing their tax return with Turbo Tax issued a status update on Facebook saying they completed their taxes with Turbo Tax, 5 people checked out the link.

Although the example is interesting, one has to wonder what is the value for marketers? What product/service will have that effect, to cause people to want to announce it in their feed – and for friends to click on it? And at what time do we simply get tired of the spamming from friendschecking in at restaurants, or using products and filter those out? Interestingly, Facebook with all their data may actually start to become the “social graph police” and start monitoring this, as to not allow too much information and possible destroy the real users experience Facebook users are after: hanging out and snooping on their friends (excluding their shopping activities and check-ins). It is a fine line to be threaded by any company sitting on that amount of data.

Furthermore, does having all that data necessarily make you better to predict purchasing behavior and word of mouth referrals? I think the jury is out on this one. I’ve worked with recommendation engines before that worked on pattern analysis similar to what Amazon uses, and those sorts of recommendations may be much more relevant than what any friend has to say, although I have seen that when someone is properly incentivized, they can become very valuable referrers indeed. But whether people listen, depends a lot more on whether tastes are similar rather than closeness in friendship (for more on this, see “Social network collaborative filtering”, a research study by Zheng, Wilkinson and Provost at NYU).

Also, consider if everyone gets access to the same data, there simply will be an over saturation for people being prompted to put things in their feed, as clever marketers will do their analysis, provide incentives, and try to get you to upload anything into your feed. So the social graph is interesting indeed, but may not be the pot of gold many marketers believe it to be, or at least only for a few.