BI This Week
BI Experts: Big Data Goes Public
Facebook's IPO has drawn attention to the importance of social media data.
By David Stodder
In a presidential election year, few other events have enough power to sweep the fevered primary battles off the front pages. However, on February 1, Facebook did just that. The company filed for an initial public offering "that could value the social network between $75 billion and $100 billion," according to The Wall Street Journal.
Suddenly, on every media channel, discussion focused on "the wave of wealth" that will hit Silicon Valley once the IPO turns Facebook's shareholder employees and investors into millionaires. The IPO will be a stimulating event for Wall Street as well, with upwards of $100 million in fees headed to Morgan Stanley, J.P. Morgan Chase & Co., and other banks scheduled to manage the offering.
Yes, there is a presidential election in 2012, but if Facebook's mega IPO indeed occurs, it will vie for event of the year.
Once media discussions get past the millionaire bonanza, the focus frequently turns to a topic near and dear to professionals in the TDWI community: big data. It has been interesting to read and hear news commentators trying to get their minds around the sheer quantity of content created and shared daily by Facebook users (reportedly numbering 845 million people), as well as the company's business model for monetizing such data assets.
That model is to generate revenue primarily by attracting advertising. As author and investment manager Andy Kessler wrote in a commentary published by the Journal, "Advertising's nirvana is an ad chosen especially for you. Of all the players, [with its 'Like' button feature] Facebook is the closest to delivering."
The key to success is social media analytics, a field in which Facebook is, of course, a pioneer. According to a company blog post last July by engineer Paul Yang, Facebook's data infrastructure team directed the migration of 30 petabytes of data into a massive Hadoop cluster located at the new data center it opened in 2011 in Prineville, Oregon. No doubt there are millions more files, directories, and Hive objects in the system now.
Facebook is betting that these assets will generate the kind of business growth and margins that will deliver steady quarterly earnings for investors. Infused with cash from the IPO, Facebook will probably spread its reach through acquisitions to enable increasingly sophisticated social media analytics, access to even more data, and development of additional attractions for advertisers.
Anyone who has had their head in the sand about the importance of big data and social media analytics need only look at the petabytes being generated by Facebook, Twitter, LinkedIn, and a growing number of firms with an active social media presence. To gain insight from social media data, organizations are hiring data scientists and are evaluating tools such as MicroStrategy's newly announced Social Intelligence products for analyzing Facebook data (read Cindi Howson's blog on this and other MicroStrategy announcements here. Organizations in media, retail, consumer goods, health care, and other industries are themselves generating social media data; these firms have the potential to enrich their own customer and business analysis and take a page out of Facebook's playbook to develop business-to-business data services and advertising opportunities.
Social Media Data: Deciphering the Value
How much of this data is valuable and how much is just noise? Is it more valuable than internal customer transaction databases, service history files, and other existing sources of customer information? For most organizations, it's too soon to know the answers. For some, however, social media data could offer a richer view of customer buying behavior than they can get from internal data stuck in disparate and disconnected silos. Using sentiment analysis tools, organizations can look beyond the limits of internal sources to see their current and prospective customers in a social context. They can learn how their brands are perceived in comparison with those from competitors and find out about problems and trends sooner so they can address them immediately.
The Facebook IPO will keep social media analytics in the forefront all year, including in the minds of CEOs as they seek new ways to generate revenues. Here are quick takes on three areas that deserve focus as the field matures. (I will be delving into these topics more in an upcoming TDWI Best Practices Report, Customer Analytics in the Age of Social Media.)
Social media analysis needs to be integrated with CRM and customer analytics. Organizations should look at social media data as an opportunity to fill in the blanks. CRM and existing customer analysis usually revolve around historical transaction records. Social media can provide complementary clues about customer interests and behavior that lead up to transactions.
Social media opens a new vista on influencers, followers, and networks. Unlike customer data records that are about individual actions, the context of social media data is networks, communication, and collaboration. Network, social graph, and link analytics are evolving rapidly and could provide organizations with potentially breakthrough insights.
Social media data could help organizations discover new points of differentiation. Although integration with existing CRM and customer analytics is important, organizations should keep in mind that social media networks are the frontier. Hadoop, MapReduce, and other technologies enable organizations to try new hypotheses and test predictive models. IT should provide space for such experimentation, which could lead to new competitive advantages.
Although the Facebook IPO may be a crowning moment signifying the end of the beginning of social media's story, there are clearly many chapters yet to be written.