Why companies crave your social networking data

Breanna Hughes, a prolific blogger and product manager at Artez Interactive in Toronto was surprised to receive an offer from Virgin America for free round-trip airfare between Toronto and San Francisco or Los Angeles. She hadn’t entered any competitions recently. The reason she got the offer? She was categorised as influential in her social network and had authority on topics related to travel.

Companies are utilising new developments in predictive analysis to make startlingly accurate assumptions about their customers. Beyond using customer’s personal information for targeted online advertising, organisations are utilising data about our social network interactions to make predictions about our behaviour.

Privacy, or the lack thereof, is a big deal. Recently, the American non-profit consumer rights organization, Consumer Watchdog, took a nonpartisan stance on data-mining by taking its online privacy campaign to New York’s Times Square. It purchased a 540 sq. ft. Jumbotron digital advertisement to promote an animated video satirising Google CEO ’s attitude toward consumer privacy.

Whether or not one agrees with the video’s sentiment, campaigns such as these ensure that customers and companies alike remain conscious of issues surrounding privacy. On September 7th, Schmidt announced his vision for the future of search.

Here’s the key quote via PaidContent :

“Ultimately, search is not just the web but literally all of your information – your email, the things you care about, with your permission – this is personal search, for you and only for you.”

This idea will power what Schmidt refers to as “autonomous search”; the automatic delivery of personalized information based on your physical location and interests. As a consumer, it is in your best interests to remain conscious of the information you knowingly provide to companies in exchange for services, and the ripple effect thereof.

Lately however, companies are starting to utilise information that we do not explicitly provide them with. Our interactions within the context of our social networks are becoming increasingly valuable to businesses. According to an article in The Economist , telecoms operators, for example, are investing in sophisticated “network analysis” systems to identify influencers who often persuade their friends, family and colleagues to follow them when they switch to a rival operator.

Here’s how they identify clients with social clout:

“People at the top of the office or social pecking order often receive quick callbacks, do not worry about calling other people late at night and tend to get more calls at times when social events are most often organised, such as Friday afternoons. Influential customers also reveal their clout by making long calls, while the calls they receive are generally short.”

Having identified these trendsetting subscribers, the idea is to approach them with special discounts and promotional offers to retain their patronage.

With the recent uproar over perceived disregard for Net Neutrality during talks by Google and Verizon, the idea that all internet traffic should be treated equally remains an important issue. If our social networking interactions are analysed to make assumptions and predictions about us without our consent, a new type of inequality in service delivery could arise. Two customers paying for an identical level of service could potentially receive different quality of service depending on their social clout.

In other scenarios, The Economist mentions software that identifies risky borrowers by examining their social networks, and companies that study email exchanges to create social graphs of their employees in order to identify candidates for promotion. It also describes network analysis being used to uncover fraud and predict crimes by identifying non-obvious relationships and analysing the social networks around suspects.

In the end, data mining of your personal and social data is a subjective matter. Whether you readily hand over your personal information, or have a more cautious approach, to some degree we are all required to sacrifice privacy in order to reap the benefit of personalised services. Whatever your outlook, it remains your right as a consumer to hold companies to their privacy policies, and to remain aloof about how your information and social interactions are analysed, perceived and distributed.

On a personal note, put me down as intrigued. If companies remain conscious of honouring service neutrality while predicting what I need before I need it, I welcome the future. Also, waking up to a freebie because I’m seen as an influencer wouldn’t be that bad either. By the way, feel free to follow me on Twitter or Facebook.