Facebook's Rumored Search Engine Evidence of Competitive Market

9/11/12 | 11:29:00 AM

“Facebook Doesn’t Need to Index the Web” to Succeed;
Every Search on Facebook Is a “Query That Users Don’t Need Google For”

Facebook’s Foray Into Search Is a “Serious Threat” to Google, Evidence That “the Search Market Is Competitive,” and a Reminder That Tech Companies “Must Run Ever Faster to Stay in Place”

“[T]he rumors du jour [about Facebook search] should serve as a reminder that no corner of information technology is safe from what Joseph Schumpeter famously called "creative destruction." That, in turn, should remind us that the public policy governing what is OK to do in the marketplace and what's not is based on assumptions that rarely apply to the industries powering innovation and growth in advanced industrial economies.”

“[W]hile the management of the current crop of winning companies may be as eager as monopolists of yore to bar the doors to rivals, rapid technological change denies them the opportunity. Thus IBM's lock on mainframe computing was broken by the arrival of small-scale computing. Microsoft's dominance of business-applications software faded with the rise of the Internet.... [W]ith hindsight, it's obvious that the IT behemoths must run ever faster to stay in place—and that competition regulators can't show that their intervention has made the products of the IT industry any better or cheaper.”

“Indeed, from all accounts it appeared that the FTC was going to file suit against the Google acquisition [of AdMob] — until Apple bought Quattro Wireless.... Facebook is now analogous to Apple in that it provides a potential argument that the search market is competitive, and soon could become more so if the company launches an improved search capability (whether for site search or the web more broadly).”

“Of course, one could argue that Facebook is the threat to Google’s search that we have all been waiting for. The thinking is that Facebook is building a social graph of people’s tastes, along with their friends. And in many cases, that information can yield a much better result than a Google search.... Google may be finally facing its first serious threat in the form of Facebook, which is exciting.

Facebook’s Move Into Search Is “Not Surprising”; “Over Time, [Facebook and Google] Are Going to Be Directly Competing in Pretty Much Every Area”

"It would be more surprising if Facebook did not try and take a share of Google's search market," says Adrian Drury, a principal analyst at the research company Ovum. "Just as Google is pushing itself into the social space to increase relevance of targeted ads and its share of Web 'dwell time', so Facebook competitively must move itself into an adjacent market to expand its share of Web audiences and ad spend."

"It's not surprising that Facebook is working on doing more with search, just as it wasn't surprising to see Google push forward with Google+," said Dan Olds, an analyst at Gabriel Consulting Group. "Google and Facebook are like scorpions in a bottle. And the bottle is gradually getting smaller and smaller as both expand their reach. Over time, they're going to be directly competing in pretty much every area."

“With a more potent search engine, Facebook’s wine-loving users might be able to query the closest wineries that have been liked most often. That would give people one fewer reason to leave the site’s walled garden. Facebook could also follow the lead of companies such as Google and Microsoft and start selling relevant—and profitable—keyword ads alongside results.”

As a Public Company, Facebook Will “Face Pressure From Shareholders” to Maximize Profitability; Facebook Search Ads Represent “a Huge Amount of Revenue Waiting to be Unlocked”

“With an improved search engine, Facebook users might be able to search for, say, the most-liked restaurants in their area. The social network could also begin selling relevant keyword ads to display along with search results (like Google and Microsoft already do).... revamping its search function could allow Facebook to get a cut of the $15 billion search advertising market. This is a huge opportunity for the social network, especially as it prepares to go public and faces pressure from shareholders to maximize its options for monetization.

“Greg Sterling, a senior analyst at Opus Research, says Facebook could quickly become the second-most popular search engine if it tackles the problem in earnest. “There’s a huge amount of revenue waiting to be unlocked if they want to explore search-based pay-per-click advertising,” he says. “They can leverage the data and demographic information they already have.””

"Owning a successful search engine is one of the keys to the kingdom of Internet riches. Advertisers will flock to you and you can build a lot of ancillary products based on search. If Facebook can build a better search mousetrap, or at least a decent one, they'll have a much more compelling product to sell to advertisers," [Olds] added. Olds noted that Google has a lot of user data, but not nearly as much as Facebook. A strong Facebook search tool, therefore, could prove very attractive to potential advertisers.

“Suddenly, social, that former clown of the online marketing world, has become the most important ingredient in any marketing campaign. And oh the ad spend possibilities for Facebook! These guys have the ability to deliver a targeted paid ad like no other company in the business. Nobody can touch Facebook’s database when it comes to relativity.”

“Facebook Doesn’t Need to Index the Web” to Succeed, It Just Needs to “Make More Effective Use of [Its Social] Data”; Every Search on Facebook Is a “Query That Users Don’t Need Google For”

“Given Facebook’s enormous user base and all of the content that is posted to the social network every day, a competent search engine is needed badly.... Facebook doesn’t need to index the web the way Google does, however, to put a dent into Google’s search market share. Even if it can convince users to use its own revamped search feature for certain kinds of queries, that’s queries that users don’t need Google for. I’ve long maintained that the biggest threat to Google’s search market share is likely not the threat of a single competitor, but the diversification of search in general.”

The company has a lot of social data it can apply to the problem of organizing information. Instead of crawling and ranking the whole Web, as Google does, Facebook already allows users to avidly flag the most interesting content, such as the best articles, recipes, and shopping deals. Improving Facebook search in some ways means just making more effective use of that data.

“There’s no question that an improved search capability would benefit Facebook in several ways. It would encourage more search activity among users, who would be rewarded with a better experience, creating a self-reinforcing cycle.... Facebook doesn’t need to challenge Google directly in web search. Improving search on the Facebook site — including a better layout and presentation of results — wouldn’t be anywhere as difficult as general web search.”