Wednesday, January 23, 2013

Global 2013: Facebook on Collision Course With Google on Web Searches

Mark Zuckerberg, founder and CEO of Facebook
Mark Zuckerberg, founder and CEO of Facebook (Photo credit: Wikipedia)

After years of collecting photos and personal data from its billion-plus members, Facebook Inc. (FB) Tuesday unveiled a search tool that sifts through people's profiles—and pushes the social network deeper into Google Inc.'s (GOOG) home turf.

The two companies are vying to become the primary gateway to the Internet. Google has long served as a destination to find websites and information; Facebook, to share gossip and photos with friends. But those distinctions are increasingly blurring, and billions in advertising dollars are at stake.

The social network said Tuesday it will enable members to conduct complex queries related to their friends' profiles, such as "tourist attractions in France visited by my friends."

In doing so, Facebook is attacking Google's core strength and its most lucrative product—search—in a bid to convince people they might not need to use Google to find information.

Google generates the majority of its $40 billion in annual revenue world-wide from selling ads on its search engine. In the U.S., Google was projected to make more than $13 billion in search-ad revenue, or 75% of the entire market, in 2012, according to research firm eMarketer Inc.

Google's repository of information remains unmatched. It said it has indexed 30 trillion unique Web pages across 230 million sites.

Having witnessed Facebook's rise and anticipating its move into search, Google built its own social-networking service, Google+, in 2011 to obtain data about specific individuals by name, their personal interests and the identities of their friends.

A Google spokesman declined to comment.

But Facebook has a far larger social network and a sizable head-start after spending years encouraging its members to add photos and all sorts of personal information to their profiles, from basic data like location and interests to more sensitive details such as religion and romantic status.

Much of that data is now searchable using Facebook's new "Graph Search" feature after more than a year in development. Facebook began rolling it out Tuesday as a test to a limited number of users. For Web searches that Facebook can't deliver, the queries are served by Bing, the search engine from Facebook partner Microsoft Corp. (MSFT).

Facebook's move into search could disrupt a number of other Internet businesses, such as Yelp Inc. (YELP), LinkedIn Corp. (LNKD) and Inc. (AMZN), which people use to find local places, business connections and products, respectively.

Amazon and LinkedIn declined to comment. A spokesman for Yelp, whose shares dropped more than 7% in the wake of Facebook's announcement, wasn't immediately available for comment.

"I don't think one query will take down a whole business today, but (many of) these businesses have to be worried because they are social in nature," said Brian Blau, a Gartner analyst.

Facebook didn't announce any business initiatives connected with the new capability, which won't initially be available on mobile devices—where a growing number of users are tapping into the service.

But the product will likely open moneymaking opportunities down the road for Facebook in the form of search advertising, as the company works to boost its revenue following its botched initial public offering last May.

Facebook currently makes most of its revenue by selling small graphical, or display, ads on its site.

Facebook Chief Executive Mark Zuckerberg acknowledged that Graph Search could help Facebook make more money, but demurred on when the company might capitalize on those opportunities.

"This could potentially be a business over time, but for now we've really focused on building out this user experience," Mr. Zuckerberg said at the product's launch event at Facebook's Menlo Park, Calif., headquarters, adding that the company has no specific targets for making the search service more widely available.

Investors didn't appear to be surprised by the news, which followed days of speculation online that Facebook would announce a search tool. Facebook's shares, which have risen more than 75% since their September nadir, fell 2.7% to close Tuesday at $30.10.

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