The study "Network-Based Marketing: Identifying Likely Adopters via Consumer Networks," from Wharton professor Shawndra Hill and NYU Stern professor Foster Provost shows that data mined from social networks--like chat or email conversations between friends--allows companies to find more likely targets for their products and services. Who you associate with is a great indicator of what kinds of products you're likely to buy: No form of advertising is more powerful than word of mouth.

Of course the problem for marketers is that the data belongs to the social networks, which aren't ad brokers. It isn't inconceivable, however, that they could merge with an ad network and thus apply user data to a publishing network. This could also be a huge play for a company like Google, which, through its search partnership with MySpace, can use social-networking data to make its search ads more relevant to each user.

Read the whole story at Knowledge@Wharton.

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