Before revision:   The results in this paper provide a foundation to estimate the effect of observed covariates as well as unobserved latent community structure on the probability of link formation in networks.
After revision:  Monte Carlo experiments suggest that the estimator performs well under different data generating processes. Our application to Facebook data shows evidence of homophily in gender, role and campus-residence, while allowing us to discover unobserved communities. The results in this paper provide a foundation to estimate the effect of observed covariates as well as unobserved latent community structure on the probability of link formation in networks.