Social networking feels free, but we pay for it in ways that may not be readily apparent.

The rich personal data many of us enter into these networks is a treasure trove for marketers whose job it is to target us with ever-increasing precision.

A company called Colligent mines social networks for data that it sells to record labels to help them decide which demographics or individual fans might like a particular artist, and those are just the very first nuggets marketers pull out of profiles. It and other companies track everything we publicly do on social networks and crunch it into marketing data. The company recently began signing clients outside the music industry, so your next household detergent could be marketed to you based on your appreciation of vintage Mister Clean ads.

Never before have we voluntarily publicized so much of our personal data and consumption preferences, especially not in very structured ways that ease the work of marketer's data scrapers (Compare Facebook's categorized favorites listings to old Geocities free-for-all web designs). And most of it accurately reflects what's going on in our actual lives, according to Sree Nagarajan, founder, president and CEO of Colligent, which gives marketers a way to hit us up in the offline world using information gleaned online.

"If you think about your Facebook profile," said Nagarajan, "95 percent of what you describe there is not about your online life, even though it is online. You're talking about your hobbies, you're talking about your interests, your favorite TV show or your favorite band." Social networking sites allow his company to measure content's "stickiness" – not only what you watched, but how much you liked it based on your Facebook profile, YouTube video ratings, and so on.

Traditional ways of monitoring the media you consume remain important to marketers, says Nagarajan. But those methods can't monitor our behavior when we might watch a show on television, a DVR, iTunes, YouTube, Hulu, or any other number of places. No matter where we watch something, we tend to express our preferences on public social networking sites, allowing marketers to unite our fractured media consumption habits once again – this time in far greater detail.

"Did they love the show so much that they are favoriting the shows on YouTube, saying Grey's Anatomy is one of their favorite shows on their Facebook or MySpace page, or putting the theme song on their pages?" asked Nagarajan. "Being able to measure all the engagement levels of that entertainment by consumers is going to be the next generation of measurement."

This monitoring of publicly-available data has already paid dividends. Disney's Hollywood Records label had noticed more Latin American fans at Jonas Brothers concerts than it expected to see, but until Colligent's data revealed a "statistically significant" correlation between that band and the Latin American community, it hadn't capitalized on that observation. Data from social networks convinced them to increase their marketing budget in Latin American communities, and when the next Jonas Brothers album came out, Nagarajan says, the label saw a significant uptick in sales to Latin Americans.

In that example, a broad group was identified as being more-likely-than-average to like the Jonas Brothers. But the individualized nature of social networking profile pages means that some of the resulting marketing campaigns target specific individuals too, which is what concerns privacy advocates.

"For Columbia Records, we marketed Bob Dylan's last album, not the current album, and they had a deluxe package for $130," said Nagarajan. "We reached out to hardcore superfans of Bob Dylan and let them know that this album exists, and that they can pre-order it from Columbia's site" – a strategy he says is of the utmost importance to labels as they shift from selling low-margin products to the mass market to selling high-margin products to superfan niches.

Plenty of Dylan fans were probably happy to hear about the box set, and because people post their personal information of their own free will, there may not appear to be much of a privacy issue. Colligent follows all relevant privacy rules, according to Nagarajan. His rule of thumb is that if you can find a piece of personal information through a search engine, it's fair game for marketing databases.

The problem is, people don't necessarily know their behavior is being tracked in these ways, according to Marc Rotenberg, executive director of the Electronic Privacy Information Center (EPIC.org), who bristles at the idea of marketers analyzing individual Facebook users' news feeds and the like.

"There are huge privacy concerns for social network sites," said Rotenberg. "Part of it has to do with the expectations that people have about how marketers will collect data ... The new kind of advertising, which is what happens when Facebook provides an API that allows advertisers to scrape the data stream and news feeds of individual users – that's a whole new development, with some privacy dimensions. I don't think users expect that their news feed is going to be used by marketers."

In addition, he said, there are no restrictions as to what marketers can do with the data once they've extracted it from social networks.

There's a lesson here: If you want to participate in social networks and interact with free content online, there's a clear privacy trade-off. In a way, it's a fair deal: we get free data in the form of social networks and free entertainment, while marketers get free data about who we are – and what we can't resist.

Update: Nagarajan wants to clarify that although his company collects data from social networks, it does not sell direct marketing lists, but rather a layer of services around that data. He likens the approach to a business built partially on open-source software:

"We see the public info put out by consumers as somewhat equivalent to open source (Linux, et al) that can't be sold as is. We monetize not the data but the value added services on top of this data. There is a difference and it's easy for people to think that we’re another direct marketing list provider, which we are not ... What we sell is a marketing service that wraps this consumer information with strategy, creative consulting, sending the message out, tracking results, all in addition to finding the targets. We do all of these steps ourselves. Thus we are a value added service provider on top of public consumer data (akin to, say, Salesforce.com or Google using Linux). Those value-added services are research, analysis and campaigns."

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Graphs courtesy of Colligent's sample artist report