Social Networking: This Tech Bubble Is Different

Tech bubbles happen, but we usually gain from the innovation left behind. This one — driven by social networking — could leave us empty-handedAs a 23-year-old math genius one year out of Harvard, Jeff Hammerbacher arrived at Facebook when the company was still in its infancy. This was in April 2006, and Mark Zuckerberg gave Hammerbacher — one of Facebook’s first 100 employees — the lofty title of research scientist and put him to work analyzing how people used the social networking service. Specifically, he was given the assignment of uncovering why Facebook took off at some universities and flopped at others. The company also wanted to track differences in behavior between high-school-age kids and older, drunker college students. “I was there to answer these high-level questions, and they really didn’t have any tools to do that yet,” he says.Over the next two years, Hammerbacher assembled a team to build a new class of analytical technology. His crew gathered huge volumes of data, pored over it, and learned much about people’s relationships, tendencies, and desires. Facebook has since turned these insights into precision advertising, the foundation of its business. It offers companies access to a captive pool of people who have effectively volunteered to have their actions monitored like so many lab rats. The hope — as signified by Facebook’s value, now at $65 billion according to research firm Nyppex — is that more data translate into better ads and higher sales.
http://www.businessweek.com/magazine/content/11_17/b4225060960537.htm

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