10/31/2012 11:57 am ET Updated Dec 31, 2012

The Reputation Graph Is Going to Take Over the World

I think Klout has greater potential than any other company in the world. Greater than Apple, Exxon, or Facebook. I think we'll see some form of the reputation graph become integrated with almost every transaction and interaction we have. The problems it could solve range from politics to corporate governance to education to lending. The potential depth of coverage is in the trillions of dollars.

The reputation graph, in a variety of forms, is already creating fundamental changes in the way people interact. Power is moving from government and brands down to individuals. Individuals can express themselves and drive society in ways they couldn't before. For example, when market participants trust one another (through the vehicle of a reputation system) many transactions that wouldn't happen do happen. This illustrated in the rise in popularity of collaborative consumption platforms and peer to peer marketplaces.

Initial Applications

Salesforce lets companies monitor the Klout scores of customers who tweet compliments and complaints; those with the highest scores will presumably get swifter, friendlier attention from customer service representatives, thus enhancing the return on investment of their customer service efforts.

Gilt Groupe began offering discounts proportional to a customer's Klout score. Companies have always attempted to woo influential people, but until the dawn of social media, there was no way to pinpoint society's hidden influencers.

Through Klout, brands provide special offers, called "Perks," to influencers and pay a fee to make those offers.

Klout Moments surfaces users' social media post that were most engaging. You can go to someone's Moments page to quickly get an idea of someone's personality. Users can also learn about what their friends and followers are interested in.

These applications are really only the tip of the iceberg.

Klout recently announced a partnership with Microsoft's Bing search engine. The partnership powers the discovery of influencers, people that are the most passionate and knowledgeable on given topics. Bing will display Klout scores for friends in the "People Who Know" section of the right-hand column, alongside other third parties already in there, including Twitter and Quora. Search for a hot topic and you'll see people with socially-proven expertise showing up and those experts will get a boost in Klout score. The partnership could be huge for advertisers, content creators and subject matter experts.

The Future

Says Job Bischke:

"In our everyday lives we make an extraordinary number of decisions about people. These range from who to hire for a specific job to who to let into a certain college. Billions of dollars are spent daily on making decisions about people and the costs of poor decisions are tremendous. And yet, the "science" through which we make these decisions is far from perfect."

Companies that effectively build the reputation graph will have an amazing opportunity to take advantage of these inefficiencies and to enable fundamentally new interactions within society. I hope that people will stop getting stuck up on the imperfection of the algorithms and start thinking big picture. We're in the top of the first inning of this trend. There is enormous potential here.