What’s the biggest buzzword around social networking right now? If you guessed location-based services, it would be hard to argue with you. If we ask you again in six months, chances are good you’ll answer the social graph.

The social graph questions keep coming up in client and prospect meetings. What is the social graph? What do we need to know about the social graph? How can we use the social graph to deepen relationships with customers? So on and so forth...

While I can’t answer every question you have about the social graph, I can help to start framing the conversation for executives struggling to gain a deeper understanding of the impact social graphs will have on their business.

For starters, the social graph is just a fancy way of describing relationships or connections with people, places and things. It’s a map of your social connections and preferences – a visual data model if you will, with hubs and nodes. For you, your social graph could be the Connections you have on LinkedIn, the places you’ve checked in on FourSquare, or the brands you’ve ‘liked’ on Facebook.

For illustrative purposes, there a few dozen lacrosse fans who are my Friends on Facebook. How many of them are from upstate New York? Syracuse fans? Of those, how many also listened to a lot of grunge in college, now live in Atlanta and work in marketing for an integrated interactive agency?

Granted, there’s probably not another one of me – at least not that specific, but you can see the potential. You’ve never been able to slice and dice data with this level of precision before. It’s this unprecedented level of targeting that gets innovative marketers excited, while privacy advocates reach for their pitchforks and torches.

Of course, my example above only illustrates relationships between connections and doesn’t get into activity, preference or myriad other social graphs that can be linked to one another. For example, who likes the same things or has been the same places as me? Who’s reading this article at the same time you are? These are questions you will be able to answer as social graphs get more sophisticated.

Where Did The Social Graph Come From?

Social graph has been popularized by Facebook, the world’s largest social network and the company most likely to serve as the epicenter for social graphs. While Facebook has plans to be the only social graph, recent announcements like its “Open Graph” suggest the company is happy remaining the epicenter of all social activity online. Plus, it’s unrealistic that Facebook could sustain a monopoly over the social graph – we all want to use other stuff.

With offerings like “Open Graph”, any electronic asset online can be linked to an individual’s social graph. In the months to come, look for this to include every place you go, everything you do, and everything you buy.

While Facebook has a lot of influence, there are no rules to the social graph. Any piece of social data can be woven into your graph to provide a more accurate picture of the interdependencies between your relationships and preferences. Privacy concerns aside (a future post perhaps), this stuff is truly amazing.

In the first wave of the Web, we were excited to discover new websites via links to other sites or search results. Early social networks encouraged us to link to one another, which dramatically accelerated our discovery of mutual relationships and made networking (the human kind) much faster – and in many ways enjoyable. Now everything is getting out there.

What’s All This Mean for Business?

For starters, you’ll start to have a crystal clear view into who your potential and current customers are. In the short-term, this will provide you with tremendous targeting advantages over your competition. For the 1st time ever, you’ll be able to customize incentives for all the 32 year old homemaker motor cross fans that have purchased a tofu burger from you in the past year.

Keep in mind, the more accurate you can target customers, the more accurate customers can target you. It is yet to be determined how consumers will react to the knowledge that they are your best customer. How much longer will it be before Foursquare mayors start demanding more incentives for the role they play in your viral marketing? What happens when Blippy users start demanding special incentives for all the purchases they’ve made?
These are good problems to have. Smarter brands and smarter consumers always forces us to innovate and push the needle farther. And who doesn’t love a good challenge?

Bottom line? The social graph takes a lot of the fun out of the guessing game of life – learning about people and things over time. Only time will tell whether or not instant gratification is a good thing or not. As marketers, it’s hard not to get excited about the potential to target with the greatest accuracy, reliability and ease ever. Bring it on.

At the same time, let’s tread forward lightly. We don’t want to create such huge concerns over privacy that regulation and oversight come in to drain the life out of the creative process.

What do you think? Are social graphs a good thing or a bad thing? Do you want people to know what kind of ice cream you like or what kind of car you drive? How much sharing is too much?