Open Graph Search: Facebook Declares War On Google

Anindya is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Deutsche Bank recently upgraded Facebook (NASDAQ: FB) to Buy from Hold, with a $40 price target. Deutsche Bank believes Facebook has superior prospects for revenue growth due to its new Open Graph search facility. Deutsche Bank’s Ross Sandler writes that ads in users’ news feeds in the mobile version of Facebook are “the game changer” for the company, and that “the ramp-up is happening much faster than our initial estimates.”

This article will focus on how Facebook is becoming the leader in Internet search and how the company is expected to generate huge revenues from display ads.

Facebook Enters the Search Market with Open Graph

Facebook CEO Mark Zuckerberg recently announced the introduction of Internet search based on Open Graph technology. The company launched Open Graph Search in beta on Jan. 15. Zuckerberg said Facebook has partnered with Microsoft’s (NASDAQ: MSFT) Bing search engine to bring in broader results from the Web.

Open Graph helps people tell stories about their lives with the apps they use. It provides developers with the opportunity to deeply integrate their app into the core Facebook experience, which enables distribution and growth. Open Graph stories appear in the news feed and ticker of friends and on the person’s timeline. They are eligible for more engaging presentation formats and greater distribution.

Publishers are now talking about the Facebook SEO that’s possible via the Open Graph. This is the beginning of Facebook’s Internet search strategy. The race is now on for publishers to optimize their sites for Facebook’s search engine. This has become a full scale attack on Google (NASDAQ: GOOG) on all fronts at this point, as Facebook has officially entered the Internet search market.

Web Search and Graph Search are Different

Larger News Feed story layout, generated by an Open Graph post using Location Tagging, will redefine Google’s traditional search techniques. 

<img src="/media/images/user_14403/pesto_pizza_location-led_message_large.png" />

The new 200 x 200 pixel image-led stories generated by an Open Graph post will show 70% more clicks for apps that provide high quality, relevant imagery with low spam rates. This is also expected to generate up to 50 times more “Like” feedback than equivalent story types before. With Open Graph Facebook will be able to display large ads in users’ timeline, which will be highly relevant due to “like baiting.” This will lead to higher revenues from display ads for Facebook.

While many of the obvious searches involve finding people and things users already know, Facebook also hopes it'll let people find new interests with an "Extend this Search" feature that opens a search up to related queries. 

In a blog post  Facebook also appeared to position Graph Search as an alternative to business-oriented social networks like LinkedIn (NYSE: LNKD) as well. In a pitch to journalists, Facebook touts Graph Search as a way to track down individuals that work at a given company -- a common use for LinkedIn -- while also stressing the benefits that come with the insight into personal interests that Facebook brings to the table.

Why Open Graph Search will Yield more Ad Revenue

Search based on Open Graph technology will yield more ad revenue than traditional Web search for the following three reasons:

  1. More Relevant Ads: Since Open Graph depends on “likes” for displaying search results, the ads will be more relevant to the user.
  2. Large Display Ad Units: Open Graph supports large display ad units on users’ timeline. Large ads usually lead to higher yields.
  3. More Mobile Friendly: Open Graph based search tends to be more mobile friendly than traditional Google search. As a result, this will reach to more users.

The Bottom Line

There’s no doubt in my mind that Facebook will control the Internet search space three years from now. The launch of the Open Graph Search beta is a giant step in that direction. I would recommend buying shares of Facebook on every dip.

Anindya7 has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google, and LinkedIn. The Motley Fool owns shares of Facebook, Google, LinkedIn, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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