Andreas Weigend, Social Data Revolution | MS&E 237, Stanford University, Spring 2011 | Course Wiki

Class_03: The Business of Social Data

Date: April 5, 2011
Audio: weigend_stanford2011.03_2011.04.5.mp3
Initial authors:[Jason Yu,], [Benjamin Ying,], [Alex Cheng,]

Key Points

  • From Web 1.0 to Web 3.0:
    • Online business evolved over time from company centric to consumer centric to community centric.
  • Companies can "flip" their businesses around by utilizing social data
    • The changes in constraints and culture allows companies to challenge traditional business models.
  • Speakers
    • Ron Chung has helped Andreas teach the course over a number of years and currently working on a social data start-up.
    • Rick Smolen is a photographer and author of the "Day in the Life" series currently working on a new social data project entitled "Reflection in a Digital Mirror."


From Web 1.0 to Web 3.0 (Link to TechCrunch Article)

How Companies moved from an "E-Business" model to a "Me-Business" model to an now "We-Business" model

"e-Business" Model (company centric, web 1.0): Historically, companies simply utilized the web as a catalog for their products and/or services.
  • During the "dot-com" bubble, served as an example of an early "e-Business" model selling pet goods on the web.

"Me-Business" Model (consumer centric, web 2.0): Companies shift focus from themselves to their customers.
  • Insurance companies utilize the web to compete for your business based on personal information you provide.
  • Priceline's "Name Your Own Price" model allows consumers to "bid" for hotels. Hotel companies, in turn, compete for your business based on the location and star class you select.
  • Netflix's proprietary recommendation system fits this category. The system takes in viewing history and availability of the movies in Netflix's inventory to recommend titles to customers, making their decisions easier.
  • //The Cluetrain Manifesto// Written in 1999, the premise of the manifesto was that the internet was a forum that established a forum for markets and organizations to communicate with each other in a way that was previously unavailable. The importance of this is that it gave the companies a better understanding of the consumers' needs, thus creating a consumer-centric environment.

"We-Business" Model (community centric, web 3.0, businessweek): The focus shifts from the individual to the community.The model is an "architecture of community."
  • Groupon users utilize "collective buying power" to purchase goods and/or services at steep discounts from merchants.
  • Instagram - A photo sharing application for the iPhone. It allows you to quickly take pictures, apply a filter, and share it on the service or with a number of other services.
  • Yelp - Users write and read reviews about local business from hole-in-the-wall restaurants to yoga studios and car mechanics. Additionally the company offers a community-oriented experience and social networking features: the ability to add friends, attend events and message contacts.
  • Airbnb and Couchsurfing both strongly rely on the community of users to populate its respective databases and carry out transactions on them
  • GrubWithUs offers group meals to encourage serendipitous meetings of people with similar interests and great meal deals at the same time.

TechCrunch Article:
  • Defines web 1.0 as making information available, 2.0 made data gathering more robust, and 3.0 will predict our behaviors.
  • Not just "social"
    • Obama's digitization of personal health records, (as mentioned in class)
    • Costs of sequencing human genome has gone from millions to approximately $10,000 in 2011.
  • India is spending the most resources on collecting an identity database on its citizens
    • Information on blood, iris, fingerprints for its 1.2 billion people

The "DNA" of Companies that use Social Data effectively

Key Components

1) Innovation: Companies have "permeable membranes" in which information flows freely between users and businesses. Innovation comes from external sources instead of internally. For example, Facebook opened up its API to developers. Doing so allowed for innovations that provided services to consumers such as social gaming (RockYou) that wouldn't have been developed in-house because it was not part of their core competency. This also allowed Facebook to introduce a new revenue stream: Facebook credit.

2) Data: Companies need to make sense of the data they collect to make meaningful business decisions that can drive new growth or innovation. For example, the US government collects public information about its citizens through things like the census. With, companies and entrepreneurs can use this information to derive trends in health (i.e. diabetes).

3) Experiments: Companies can run cheap experiments on their products to see what is the most effective to tailor their products for consumer tastes. Zynga uses "ghetto testing" (example below) to adapt their games to optimize acquisition of new customers, retaining existing customers, and to monetize their user base. Therefore, a new approach of "launch and learn" allows beta tests to be put out in the market where the product can be constantly refined through social data.

Examples of companies

1) Facebook
Customers knowingly and willingly give data to the company in order to connect with friends. Initially, the website acted as a repository of information with user's background information. As a web 3.0 company, it made the data more interactive with not just a background of the customer, but also what they are currently doing (Facebook Places, News Feed, "Like" button). It has improved from a static page to where customers were able to differentiate themselves and enabled self expression.

An example of self expression, interests, and background information.

2) Zynga
  • Customer metrics first, company metrics second.
  • Company philosophy is focused on optimizing customer engagement.

Zynga CEO Mark Pincus discussing "ghetto testing," which is the process of rolling out a quick, crude version of a new product to a small percentage of the user base in order to generate immediate customer response to the new product (start at 1h3m55s):

3) Amazon
Using data from clicks, previous purchases, viewing history etc, Amazon generates personalized recommendations for "You" made by Amazon:


4) Rapleaf Inc
Rapleaf is a social data mining company headquartered in San Francisco that turns people's chatter and network into a behavioral pattern and then sells this valuable data about individuals to companies that want to learn about their customers and what their customers do online. Among Rapleaf's customers are also airlines, politicians, and even non-profits that use social data for finding new customers or targeting products to existing ones. Financial services companies such as banks and lenders are also using the same data mining services for marketing purposes and to make better lending decisions.


To learn more about how companies are using social media read this article:

Changing constraints
  • Traditional companies are optimized to operate under a particular set of constraints.
    • A new technology might change the set of constraints, and these companies may not be in an ideal position to respond to these changes. (They may not even realize the set of constraints is different). Things that were true before, may no longer hold.
      • An example used in class is that AT&T does not utilize its own customers to determine where signal strength is weak. In a traditional company, it would send out its own servicemen to test where service was lacking. This cost time, money, and frustration from the customer's point of view. However, if AT&T were a "Web 2.0" model, it could utilize the collective power of its customers to pinpoint weak signals on a phone app at a much lower cost. (As a note, AT&T specifically does do this. They have an app called Mark the Spot ( which allows users on their iPhones and iPads to report holes or weaknesses in AT&T coverage.)
      • With changing constraints, it opens up new opportunities that allows companies like Facebook, Amazon, and Zynga etc. to be created.

Shifts in Business Culture

Organizations at the forefront of social data have evolved their business practices to accommodate changes in data, product, and company culture:
  • Data
    • Data has become more open; creates transparency between organizations
  • Product
    • Ultimate goal is to allow customers to make a better and more informed decision for themselves
    • Use social data to make incremental improvements on products
    • Example: The traditional e-business model was to push as much product out as possible; however, Amazon "flipped" that idea around and used social data to provide the consumer with the an informed decision to buy their products.
  • Company
    • Creating a more open company culture which in turns induces customers to share more information about themselves to contribute to the bigger picture.

Consumers and markets appreciate companies that do social data right!
  • Those companies that deeply understand how to utilize social data (i.e. Amazon, Google, etc.) have generally performed better than those that don't (i.e. Nokia) as measured by P/E (Price/Earnings) ratios. P/E Ratio


  • Current consumers and markets appreciate social data so much so that Facebook's valuation is synonymous with the price of people's identities. The average cost of a passport is the order of 100 dollars. There are close to 500 million people on Facebook today. Facebook's valuation = 500 million * ~100 ~ 50 billion!
  • As said in class, being open and transparent with users with the data they gather is very important. An example is Google, it is known that they gather a lot of data from your web searches, clicks, etc. and use it to provide targeted and more relevant ads. Every Google user can set ad preferences for their account, opting out from Google storing their interests to letting them manage their ad preferences / interests. For those that have never seen this feature, check this website:
  • It has been said that "persuasion profiling" may soon follow the current "taste profiling" that companies like Google and Amazon use now as a means of advertising more efficiently to their clients. Persuasion profiling means that companies will use more social data to not only personalize what they advertise to you, but how they advertise to you as well.
  • This serves as an interesting illustration of the potency of social data. That said, it remains a hypothesis, and is thus contestable. (the pinch of salt!)


Ron Chung

  • Ron Chung has helped Andreas teach the course at both Stanford and Berkeley over a number of years.
  • Currently working on a start-up focused on personalized social data:
    • How do we as individuals deal with “data overlap” (i.e. how do we determine what information from email, Facebook, Twitter, LinkedIn, etc., is most important to us at a given moment?)
    • Working on creating better filters to decide what data to prioritize.
    • Looking for CS/NLP students for founding team to continue building out product & technology.

Rick Smolan

  • Rick Smolan is a former Time, Life, and National Geographic photographer best known as the creator of the "Day in the Life" book series. Every year, Rick and a team of hundreds of journalists focus their attention on emerging trends and topics using state-of-the-art technology to capture the "human face" of that topic. His projects include The Obama Time Capsule, America at Home, Blue Planet Run, America 24/7, One Digital Day, 24 Hours in Cyberspace, The Power to Heal and From Alice to Ocean.

His next project will involve the use of "BIG DATA".

  • "Reflections in a Digital Mirror" Project Overview (link to lecture)
    • The project will ask 10 million participants a series of 24 questions daily (or one question an hour) for an year starting October 17. 2011.
    • The data will then be published online.
    • The project hopes to use the data generated to tackle the 'wicked' problems of the world.
  • 5 Questions for the class
    1. How do we make this experience fun so that we can penetrate the noise level?
    2. How do we get this project viral?
    3. What are the questions we should be asking the participants? (DF#1)
    4. With the 1000 journalists involved, what assignments should we give them to help illuminate how this data has affected people's lives?
    5. How can students and teachers interact with this data and help improve their own communities? Can you come up with compelling project ideas for this purpose?

Administrative Issues

Social Data Lab
  • Will Start Next Thursday
  • 3 Constituents
    • 10 Big Companies (Nike, Allstate, Others)
    • Employees of Tech companies (Facebook, Google)
    • Students who want to work with Data
  • NOT Extra Credit

Dog Food #1

  • Due Thursday using Google Forms.
  • What "Big Data" questions should we be asking participants in the "Reflections in a Digital Mirror" project?

QR Code / Assignment
  • Signed up for t-shirt sizes in class. The shirts will each come with unique QR code that will be used for a future assignment.
  • There are two main goals for this assignment:
    • Find a way to design incentives to get people to scan your unique QR code on your t-shirt.
    • Understands the basics of geolocation and how it is determined.

Scan this!