Facebook vs. Google – Second Round
Lior is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The recent announcement of Facebook (NASDAQ: FB) to launch next year its graph search didn't seem impress investors as the company's stock tumbled down on the day of the announcement. Perhaps many were hoping the company will try and tackle its lack of growth in revenues from mobile. In any case, this step is putting Facebook one step closer to Google (NASDAQ: GOOG) as a search engine. This rivalry between these two giants, in which each company is trying to encroach to the other's wheelhouse, doesn’t seem to bring much growth in sales. In the meantime, users benefit from these wars; Investors, not as much.
Google+ vs Facebook
Google is still trying to find its way in the social media business with little success up to now. The number of Google+ users continue to grow but the "community feeling" that there is in Facebook still lacks in Google+. This is plausibly why Google+ users spend only 3 minutes per month while Facebook users spend nearly 400 minutes. Even though many (including myself) compare FB and Google+ head to head, these platforms are used for different purposes. One report suggests Google+ is more used as a complementary device to Google's search engine and not to socialize as in FB.
Google isn't only encroaching into FB's business but is also trying to expand to other already monopolized regions: Google isn't close to knocking off Baidu.com that dominates the Chinese search engine market with nearly 80% market share compared to less than 15% of Google's market share.
Facebook Graph vs. Google
The new Facebook graph search is likely to be used differently than the Google search is currently used. In such a case, the graph search might not compete head on with Google's search engine, but will take one step closer to Google's core business. Even so, I'm not certain this new service will augment FB's revenues. For one thing, I think it's very rare for a company to successfully encourage to an already strongly dominated business. Just ask iPhone 5 users when Apple (NASDAQ: AAPL) included its own map system instead of Google maps in the iOS 6 software. Over 200 million people downloaded this app since September 2012, but it was widely criticized. This lead Apple to resume the service of Google maps on the new iPhone. The examples I have listed above show that even companies with funds and experience won't necessarily succeed in coming up with a service that isn't its core business and is already dominated by another giant.
The new graph search is likely to keep Facebook users for even more time on its website but will it lead to growth in sales?
Mobile is King
Many investors continue to seek solutions from Facebook for monetizing its website on Mobile. The time spent on Facebook might lead to higher revenues, but this new service doesn't help advance the company's mobile revenues. At an average of nearly 7 hours (a month per user) spent on Facebook, the additional time the average user will spend on site is likely to have diminishing return; so for every extra minute a user will spend on Facebook the return will further decline. If the company will come up with a way to advance revenues for these hours spent on FB via mobile, the potential growth in revenues are likely to rise, which could reflect in the company's stock.
I think the new graph search puts Facebook closer to Google in the search engine business; this could result in better user experience and perhaps even lead users to spend more time on its website, but this isn't likely to help augment the company's revenues or monetize the time already spent on FB.
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