Facebook's Trying To Steal Google's Thunder
Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Facebook (NASDAQ: FB) has been more media circus than investment opportunity since it came public. So it isn't surprising that its new search tool, Graph Search, is making big waves. While the new tool is clearly aimed at making more money, it doesn't look like it will unseat Google (NASDAQ: GOOG) from the top Internet search spot.
Gateway drugs... Er, sites
Search is a very big deal on the Internet, which is basically just a big collection of information with little if any cohesion. Libraries have the Dewy Decimal system to help patrons get around, the web has nothing. That's why the creation of Yahoo! (NASDAQ: YHOO) was such a game changing event. It gave at least some logical cohesion to the information.
After Yahoo! there was a surge of websites trying to do the same exact thing. The reason was that people looking for anything went to search sites first, making them gateways to the web. Since advertising was how many sites tried to make their money, being the first site that consumers hit had notable value. Particularly since Yahoo! and others new what was being looked for.
For example, if a customer searched for “record album dealers in New York,” Yahoo! could sell add space to music retailers. Yahoo!, however, lost its way when it started to move more into aggregating content to be a one-stop shop of sorts. Very quickly its search tool became more and more cluttered and complicated to deal with.
Here comes the Google
Google stepped in with its clean look and feel, something it hasn't changed. Moreover, Google's search was just better; so much so that its name is often used as a verb, “Google that.” The company used its industry leading position and vast knowledge of user behavior to sell ads. Simple ads that were highly targeted and available to just about anyone in an easy to buy format. It was a winning proposition.
While Google has ventured into aggregating content, it has steadfastly protected its search tool from its other products and offerings. This has kept the company's presence pure and helped it to maintain its dominant position as the gateway to the Internet. Of course it has also worked hard to keep updating its search algorithms.
Then came social networks, where people could create their own content and share it with their friends. This created walled off like communities where like minded people congregated. Although Facebook wasn't the first social network, it has, so far anyway, been the best at exploiting the broad trend. The other big player here is Linkedin (LNKD), which basically controls the business side of the industry.
Social networks tend to get a lot of use as customers visit frequently to keep tabs on their friends and family, and share their own exploits. What has been difficult to achieve is profitability, since people haven't been willing to pay for this convenience. In fact, Facebook makes a huge amount of money off of games that people play while on its site. Advertising revenue, meanwhile, has been something of a trouble spot.
Part of the problem is the sensitive nature of the content that people place on Facebook. Basically, they are exposing their lives to only the people they want to share with. Or so that's what they want to believe. In truth, they are exposing their lives to the world in some ways. This is a treasure trove of information that Facebook has tried to use in multiple ways only to find that its customers don't want to share.
This recent foray, then, is yet another attempt to use customer information in a way that is acceptable, even desirable, so that Facebook can earn more advertising revenue. It's a good idea if it works. What it isn't likely to do is unseat Google from its throne.
Few people are going to go to their social network and search for “How do I change a light bulb.” They may search for information about the hotels their friends have stayed at while visiting Europe, but even then, at this point, that search would probably lead people to further research efforts using Google. After all, knowing the name of a nice hotel doesn't actually get you to their website, a map of the area around the hotel, additional reviews, or help you find a service that might have a discounted room rate available. Google is likely to play a role in there somewhere.
Not a game changer
At the end of the day, it's nice to see Facebook continuing to try to monetize the massive database of personal information it has about its customers (at least from a business standpoint, customers might disagree). At this point, however, Graph Search isn't a game changer. The outlook for Facebook and Google hasn't shifted.
ReubenGBrewer has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Google. 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!