Mining the social graph

Is it possible for one company's PR problem to be another company's billion-dollar business model?

When it comes to telecom and Web companies sharing and leveraging information about their users, this indeed seems to be the case. And it's not hard to guess which industry is getting the short end of the public perception stick.

At issue is the use of customer data to drive bundled services and new, more targeted advertising opportunities.

In the world of the Web and social networks, this information goes by a catchy name: the “social graph.” Coined by Mark Zuckerberg, CEO of Facebook, the social graph represents a social network's crown jewel: the Web of connections between all the users on the site. The social graph goes beyond customer records or profile information to map connections an individual user has with other users — and not just to the first degree, but several degrees deep.

The social graph, in a nutshell, is what makes social networks so powerful. It also makes them profitable — or at least in these early days, gives them a ridiculous market capitalization (in Facebook's case, more than $15 billion on just $150 million in revenue).

The key to such valuations is the still-nascent ability to leverage the social graph to make money. Facebook is rolling out its “social ad” strategy on Nov. 6, and it is rumored Google will tout its plans in the same time frame. The idea is that advertisers would be able to leverage the social graph to target users with specific ads based on their profiles, their behavior and their connections.

Do telecom service providers own anything equivalent to a social network's social graph? Clearly they do: customer proprietary network information (CPNI) — the data-rich call detail records that enable service providers to track (and bill) for small actions at an individual level. Cellular providers' location-based service (LBS) databases can go even further, tying user activity to specific locations.

Here is where the double standard comes into play. While Web properties are lauded for their innovative business models leveraging user information, the law forbids service providers to share this data without specific user permission. When Verizon recently began sending letters to customers offering them the chance to opt-out of having their CPNI data shared with third parties — per FCC rules — privacy advocates roared with disapproval. Verizon subsequently clarified it only wanted to share such information between business units, though clearly it — or any other service provider — would like to do more.

How will this all play out? Will Web companies get put in cuffs? Will service providers gain a bit more leeway? The issue is crucial, and not one in which service providers can afford to sit back and take PR hits while Web companies play the white knight. There's too much at stake.