There was a big press conference held by Facebook(FB) on Tuesday at which they announced “Graph Search.” Although 95% of people
on my Twitter stream made fun of it, it’s important. It was Facebook’s baby step towards getting a big piece of Google’s (GOOG) lucrative search ad revenue stream, as well as future search revenue that doesn’t even exist today.
Confused? Read on. These are the 9 things we learned from today’s press conference.
2. The fact that people were so disappointed that Facebook didn’t show off a phone indicates how much value would be created in the company if they did launch a phone. The biggest apparent disappointment of Tuesday’s announcement was that it wasn’t a Facebook Phone. The fact that there was such disappointment makes clear how big a deal it would be if Facebook in fact had a phone. Therefore, ignore Mark Zuckerberg’s prior claims that Facebook would never do that. Facebook can and will. When they do, it will be a big deal.
3. They just took baby steps to have their own version of search that will be very valuable. This is probably the biggest takeaway from today, which is why I put it up top in the intro to this. Again, people were disappointed they didn’t release a full-blown search engine. Guess what? That’s impossible to do from a standing start. So, they’re taking the first steps towards search in a way that plays to their strengths. The real question is where will this path take them over the next two years? My best guess? Towards a lot of money.
4. In the mobile world we now live in, a big part of search is what’s around you (local) and who’s around you (social). Facebook can play in both of those spaces. Facebook can’t do knowledge graph search. But they can tell you stuff about your friends. And now that they’ve launched a good mobile app with “Nearby” capabilities, they can tell you about what your friends are doing in real-time, as well as indexed by their interests. This isn’t knowledge of everything about the world. But it turns out this info is highly relevant to our mobile world today.
5. Classical search – as practiced by Google – is hard. Tuesday’s press conference shows that Facebook couldn’t even come close to launching a comparable product to Google search right out of the gate and therefore had to settle for this baby step. It’s smart not to go toe-to-toe with Google when Facebook will fail. So they’re taking an incremental approach which plays to their strengths.
6. Foursquare and Yelp (YELP) just got more valuable. I know Yelp’s stock crashed during and after the Facebook presentation. However, Facebook’s move to tell you a lot more about the world around you and what your friends like doing in it is a big validation of both Foursquare and Yelp. Those companies are more valuable now than they were this morning because there is a scarcity of companies that know what they know. It seems like Foursquare is on the verge of a partnership with Apple (AAPL). Yelp already has one. Either could be bought by Google, Facebook, Apple, or others. Eventually - and maybe by year end – both might be bought.
7. Facebook has a big market cap and can buy a lot of small interesting companies for $1 billion each (a la Instagram) or for a lot less. Right now, Facebook is worth about 3x what Yahoo (YHOO) is worth. They can do a lot of buying of interesting companies with that money. A big part of today’s news dates back to Gowalla’s acquisition by Facebook over a year ago. It didn’t cost a lot but, that company’s location info became worth a lot as part of Facebook. Facebook used its currency to buy Instagram but they can keep going and make more interesting acquisitions that will boost its shares more than what they have to pay for them.
8. Bing isn’t totally dead. The Microsoft (MSFT) – Facebook partnership continues. Now, Bing is featured heavily as part of Facebook. That’s great for Microsoft. They’re not dead yet in search. Does it mean we will see Google share drop significantly in the next few quarters? No. But it’s still a great move by Microsoft (and smart for Facebook).
9. My guess is that – two years from now – Facebook will have a very beefed up version of search tailored to its service, as well as its own phone.Watch.
[Long AAPL, YHOO and YELP]
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