If you’re a savvy social media user then you’ve already figured out that the knowledge a tool like Facebook is able to gather about your social connections is not only valuable to you. For you, Facebook’s ability to depict your network of friends and the varying strengths of those relationships supports all your mutual information sharing. For others — third parties — this “social graph” makes it possible to make personalized recommendations to you, and everyone else. For example, TripAdvisor leverages Facebook’s social graph to ensure that, when you are looking for reviews of hotels, restaurants, and so forth, any reviews posted by people you know appear right at the top.
For the social network companies, it didn’t take long to realize that the latter form of value creation should be the real focus of their business models. Early ventures like MySpace primarily focused on the social activity among their account holders, working to provide better tools to help them manage their relationships. Today’s social networks see social tools not as their end product but as a means for acquiring data. Facebook, in particular, saw the big opportunity in the “information exhaust” produced by all that user activity to produce a higher-level intelligence layer that would be useful to other businesses. Having graphed its users’ relationships and interactions, it could offer anyone else interested in those users the insight to reach them with highly targeted services.