They say you can tell a lot about a person by the company they keep. Joel Jewitt is inclined to agree.
Upon reviewing your social networking friend list, Jewitt and his colleagues at the San Francisco-based data-mining firm Rapleaf  say they can help predict which ads you'll pay attention to and whether or not you're a worthwhile risk for a credit card or a loan--all without hacking into any accounts or breaking any laws.
"Who you hang around with has empirical implications with how you behave," says Jewitt, Rapleaf's vice president of business development. "This is a new type of information. It's still an evolving science, but the results have been positive."
Rapleaf is one of a multitude of innovative start-ups currently driving the burgeoning social media monitoring (SMM) space. Going by names like Trendrr, Trackur, and Sentiment Metrics, SMM firms use sophisticated algorithms to collect and analyze the vast amount of personal data consumers leave in their online wake. Post a comment about a book on Amazon? Review a restaurant on Yelp? Rapleaf's computers analyze your words and file them away in your "social graph."
The mother lode of personal data comes from sites like Twitter, Facebook, and MySpace--virtual bazaars of user-generated content where status updates, pictures, and any other political, religious, or sexual information not specifically deemed private is accessible to all. Most of it is useless junk--silly status updates and comment streams littered with emoticons and acronyms--but in the world of SMM, there's no such thing as TMI.
Until recently, such data has largely been applied towards "reputation management," helping brands, advertising agencies, and public relations firms hear what we're saying about them. But as the volume of consumer data has grown, and the technology employed to gather, sift, and analyze it has advanced, organizations are turning the tables, asking what the data says about us. There is mounting evidence suggesting that your friends influence everything  from your weight to your happiness. Researchers at Victoria University recently proposed  using SMM "to identify and monitor bloggers who are depressed and may be at risk of suicide, self harm or harming others." Even the CIA  and NSA  have reportedly made forays into SMM in the interest of national security.
As one might expect, SMM presents the greatest potential value to those who do business online--a fact that hasn't escaped the attention of some major names. Google and Microsoft have each announced SMM services of their own, dubbed Social Search and Looking Glass, respectively. And despite the unforgettable uproar over Facebook's Beacon, and a related class-action lawsuit where the company was ordered to pay $9.5 million to a nonprofit privacy foundation, Facebook just launched "Friends of Connections ," a service that enables brands to serve up ads to the friends of fans.
"It's only logical that marketers would be looking for value in that information," says Jim Dempsey, vice president for public policy at the Center for Democracy and Technology. "The question is does the consumer have some awareness and control about what's being collected?"
The CDT is just one of a growing number of privacy advocates and government regulators monitoring the social media monitors. In February, FTC Commissioner Jon Leibowitz sent a tremor  through the online advertising industry when he noted that the commission's revised set of voluntary principles may represent the "last clear chance to show that self-regulation can--and will--effectively protect consumers' privacy." On November 5, the U.S. Judiciary Committee passed two bills  (the Personal Data Privacy and Security Act and the Data Breach Notification Act) that would increase penalties for data theft and broaden consumers' privacy rights as they pertain to information collected and distributed by "commercial data brokers."
Jewitt emphasizes that Rapleaf only aggregates publicly available information, and that consumers can opt out  or register  "to discover what information about you is available online and to edit your Internet footprint"--though he stresses that Rapleaf is ultimately making ecommerce faster, cheaper, and easier for consumers and businesses alike.
By accessing its database of 378,968,953 consumer email profiles, banks, retailers, and anti-fraud firms (all of which are counts among its clients) Rapleaf can quickly confirm legitimate customers and weed out scammers, cutting verification costs and improving the user experience. "Companies spend as much as $100 getting customers to their site. The goal is to filter out the bad people and keep as many good people as possible," Jewitt says. "If a customer's email address is attached to three or four social networking sites with 300 friends, the email likely isn't fake and the retailer can put that person in the 'good' pile."
Beyond simply helping verify your identity, Rapleaf claims information about your friends' behavior can be used to better predict your behavior. For one company, Rapleaf adapted ads based on friends' responses, ultimately tripling the click-through rate. Rapleaf's Web site even suggests that clients "use friend networks to enhance ... credit scoring." Jewitt explains: "Say someone would have been rejected for a credit card, but their social graph says their friends are good payers. Instead of saying 'Rats, we couldn't give this guy the card,' they'll be approved."
It's a compelling example, but with 70% of U.S. consumers claiming  they "definitely would not" allow advertisers to track their online behavior--even if they remained anonymous--its unlikely consumers will react favorably to businesses monitoring and ranking their social "footprints." According to the CDT's Dempsey, further oversight is inevitable, and will likely lead to more transparency. Ultimately, however, Dempsey believes consumers get what they pay for.
"Social networking is part of the advertising-supported Internet," he says. "It's one of the free services we all enjoy. Now people are becoming aware there is a cost."