After yesterday’s introduction of Facebook’s Graph Search, Facebook’s shares fell 3 percent partly over concerns about whether Facebook can turn out larger profits with a search engine that does a good job enhancing social exchanges but still falls short with increasing short-term advertising revenue.
Since Graph Search is slowly being rolled out and won’t be available on mobile any time soon, the reality is that it could take many more months before Facebook experiences a financial boost from their new search engine.
As Facebook encounters lower growth rates among new users while other social networking sites like Twitter, Amazon, and Google + move in and fight for greater social networking leverage, Facebook CEO Mark Zuckerberg is under increasing pressure to utilize the huge volume of personal data that Facebook has collected over the years from their users and “turn lemons into lemonade” for Facebook investors.
With a 65 billion market cap and more than a billion users, tech analysts and investors alike are watching how much attention Facebook CEO Mark Zuckerberg will gives to designing Graph Search around not only making Facebook a social graph of people, photos, places, and interests but also a commerce place where advertising and business profits can increase year over year.
Google already receives more revenue per user and per ad than Facebook does. Google generates nearly all of its $40 billion in annual revenue world-wide from selling ads on its search engine.
Facebook is faced with having to find new avenues to increase revenue per user, especially after Graph Search becomes a more dominant search tool to link friends and acquaintances around products and preferences inside Facebook.
If Facebook users don’t become too restrictive with their privacy settings after Graph Search is fully rolled out and new connections flourish based on Facebook users’ likes or preferences, it could allow for the exchange of valuable consumer data about products that e-commerce businesses could benefit from, leading to sending out targeted ads tailored to the clustered groups of connected Facebook consumers who span across Facebook’s vast social network.
Offering daily deals and discounted Groupons that become valid when a new community of Facebook users sign up for new product offerings that were previously liked together on the site, could prove to be an effective way of generating more business activity on Facebook.
Receiving shared recommendations from your Facebook friends about a new restaurant or spa downtown may also give a Facebook user more confidence to try out the restaurant, since the recommendations come directly from a more trustworthy source on the site rather than some random person on other review sites where spam can emerge and mislead the consumer.