Recommender systems are becoming tools of choice to select the online information relevant to a given user. Collaborative filtering is the most popular approach to building recommender systems and has been successfully employed in many applications. With the advent of online social networks, the social network based approach to recommendation has emerged. This approach assumes a social network among users and makes recommendations for a user based on the ratings of the users who have direct or indirect social relations with the given user. As one of their major benefits, social network based approaches have been shown to reduce the problems with cold start users. In this paper, we explore a model-based approach for recommendation in social networks, employing matrix factorization techniques. Advancing previous work, we incorporate the mechanism of trust propagation into the model in a principled way. Trust propagation has been shown to be a crucial phenomenon in the social sciences, in social network analysis and in trust-based recommendation. We have conducted experiments on two real life data sets. Our experiments demonstrate that modeling trust propagation leads to a substantial increase in recommendation accuracy, in particular for cold start users.