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What does Facebook’s new search mean for the social media giant?
First, I won’t say this is a Google killer the same way I wouldn’t say Google Plus is a Facebook killer. I think the major difference here though is what this means for Facebook, not their competition. Facebook has a massive network where capitalizing on revenue can be somewhat tricky. Not tricky in the sense that they can’t do it but tricky in that monetizing too much into a social environment can have significant long term negative consequences on your user base. But as a business, you have to find a balance and produce revenue or you won’t be able to support your operations.
By introducing and integrating a web search into their interface they are opening a new revenue stream that can be highly monetized without negatively affecting the social experience with too much advertising. The monetary value of a Pageview on the feed page or a photo page is minimal in comparison to a Google search results page. So if Facebook even sees a 10% growth in page views due to a 5% steal in market share from Google, it will mean significantly more revenue for the company than expanding their social network into 5-10% new users or even 5-10% more interaction within their social interface. So they don’t need to take much market share at all to see significant gains in revenue.
Microsoft’s Bing brand lends initial credibility to their results but I am guessing with all the user generated votes of approvals (likes), their algorithm will quickly become very smart. Google would have loved to have gotten their hands on this data years ago and even attempted such systems with the roll-out of the Plus widgets but it didn’t see mainstream adoption. I’ve heard the arguments that their graph search isn’t that good but the reality is it doesn’t have to be that good at first. They have time to improve that. That’s not the major news here in my opinion anyways. The convenience of a web search within their interface is what I predict will be the major revenue channel for FB.
In addition to the direct impact on revenue, Facebook’s new search will have an indirect impact that I think will be even larger in the long run. By integrating search, you learn more about the user’s wants, desires, and intents. Businesses are keen to advertise based on this because it’s a highly effective method of targeting your audience. Gaining the ability to segment your target audience based on their searches and then re-market into their social experience with brand or promotional messaging will surely prove to be a huge enticement of new advertisers to this channel that previously have avoided it due to the generally low ROI general display advertising creates. Having worked at a digital agency for several years I can see this first hand. I have several clients who will jump at the chance for new impression share in search but won’t allocate money to social PPC due to fear of lack of ROI.
So in short, Facebook stock looks like a steal to me at the $25 -$30 range considering the new revenue generating capabilities they have created by integrating a web search. I’m not a stock analyst or financial consultant so don’t take this as financial advice but I would guess FB will see a nice increase in value over the next 18 months to be in the $40-$50 range as they roll this out and begin to further monetize with search PPC.