Facebook's search tool could be big money maker

Graph Search could pull in targeted advertising, say analysts

If users take to Facebook's new search tool, the social network could be in line to haul in a whole lot of advertising dollars, say industry analysts.

Earlier this week, the company announced Graph Search, a tool designed to enable users to search for information on the Facebook platform. Not a stand-alone search engine like Google Search or Microsoft Bing, Graph Search is focused on culling data from users' friends and friends of friends.

For instance, if you want to know the best hybrid bicycle under $500, or the the best cake bakery in your city, Graph Search , which is available now, will see what your social network has had to say about it.

One advantage of giving users a better search service on the social network is that it could keeps people on the site longer. If users don't have to leave Facebook and go to Google's site to get a question answered, then Facebook is rewarded with more eyeball time.

More time on the site means advertisers should be more inclined to spend their advertising dollars on Facebook.

However, there's more to this advertising scenario.

If a user searches for the best Italian restaurant in Boston, for example, Facebook can use keywords in that search to offer the user specific advertising. Companies will pay for that kind of targeted message.

"Advertising could benefit from better ad targeting as the natural language search queries will be more detailed, personal and the results will be more accurate," said Brian Blau, an analyst with Gartner. "So there will be advertising opportunities on Facebook that were not available previously."

Blau noted that Facebook executives haven't yet announced an advertising plan on Graph Search, although they are considering one.

Hadley Reynolds, an analyst with IDC, said if Graph Search is successful, it only makes sense for Facebook to focus on pulling in search ads, which would be distinct from the display ads they currently offer.

"The search ad business works because advertisers can distinguish what kind of keyword clues indicate that a searcher is in purchase mode, and so strategize to place their messages in the context of the user's search results," Reynolds said. "Facebook has to prove that some of its members will find the discovery search useful and help grow the practice of social discovery search to a scale that justifies incremental advertising investment for brands."

Google, while known worldwide for its Android phone platform, YouTube video-sharing site, and its Google Maps Google Docs applications, but generates most of its revenue from advertising tied to its search engine.

If Graph Search is successful, it could pay off in a big way for Facebook, as well.

"It's hard to estimate exactly how lucrative this could be for Facebook," said Dan Olds, an analyst with The Gabriel Consulting Group. "My best estimate is 'big' ranging to 'very big'."

That would be great news for the company that has seen its stock price struggle since its IPO last year.

"This should definitely encourage Facebook's existing shareholders," said Olds. "It shows that the company has been busy working on new and potentially game-changing features like Graph Search. I don't think we'll see a quick move in Facebook stock price. Most investors will understandably want to see some positive results before investing more in the company."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed. Her email address is sgaudin@computerworld.com.

See more by Sharon Gaudin on Computerworld.com.

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