Mark Zuckerberg generated some headlines last week by saying that 'at some point' Facebook wants to be in the search business.
Speaking at the TechCrunch Disrupt conference in San Francisco, 'The Zuck' said that Facebook is generating around a billion queries a day already "and we're not even trying".
His comments pushed the Facebook share price up by more than 4%. So could Facebook be a Google killer? Is search the answer to its share price malaise?
Facebook certainly has the audience and a billion queries a day, if that's accurate, is an impressive number. But if it were all about volume of users then Facebook would already be a bigger business than Google.
The reason why it's not and why it may never be is down to a few obvious fundamentals.
The question of user intent
The first and the most important of these is intent. The intent of users on Facebook is different to those on Google. That's a simple and obvious fact.
That is the sole reason why Google finds it relatively easy to generate forty billion dollars in revenue every year from its advertising program and why Facebook finds it relatively difficult to achieve one tenth of that.
The audience is the same on both websites, the same people who use Facebook use Google and vice versa. But we use Google when we want something specific and we use Facebook when we're checking in with our friends (real or imagined).
So user intent changes everything and the challenge for Facebook is that they may find it very hard to ever get around this fact.
Let's go back to the billion queries that Facebook generates every day. People are looking for people on Facebook. Not products, not services and not brands unless they are pushed or incentivised to do so by other activity, so the queries inherently have a much lower commercial value and, being a walled garden, they will always be several steps from a shopping basket.
Facebook has developed a number of different advertising products but they have to be push, not pull (unlike Adwords) and so it always feels like they are tip toing around their user base trying not to annoy them with too many ads.
Fundamentally Facebook users don't want ads, they don't want to be friends with brands and they don't want to get into a conversation with a washing powder. The click-through rates and eCPMs back this up.
Facebook and search
So Facebook has a fundamental challenge in commercialising its user base, because of their intent.
And it works both ways. Google can't get its users to engage with its social networking product and despite several attempts, not many of us are forsaking Facebook to create 'circles' and have 'hangouts' on Google+ with our friends (real or imagined). So is there really an opportunity for either company to eat the others lunch?
And therefore how excited should we as marketers be about Facebook and search?
The Zuck was very careful to point out that if Facebook did move into the search space it would not be with a copycat Google product but it would focus on the space where search is evolving.
It would be a product that would build on Facebook's strengths of social data and the huge potential of referral and recommendation from people in your social circle or those you trust. He cited an example of someone of getting answer to a question like 'What sushi restaurants have my friends visited in New York in the last six months – and liked?"
That would be powerful stuff undoubtedly but if you listen to the interview there's something in there that feels like this is very much a vision rather than anything that is close to being a reality.
Will Google lose any sleep over this? On the one hand its desperate to prove it doesn't have a monopoly in order to get the regulators off its back so anyone who is big and in this territory is actually pretty good news. Facebook's plans in search are as much a threat to Google as Google+ is a threat to Facebook - i.e. not very much.
The future for Facebook advertising
Facebook has an incredible user base and a data set that is perhaps unrivalled in its potential advertising value. Imagine layering the Facebook demographic, location and social data with recent search and other behavioural data sets that we can already integrate through Data Management Platforms (DMP) and Demand Side Platforms (DSP) to laser target your audience?
The privacy issues may mean this potential is never fully realised but recent developments point towards the intriguing prospect of giving Facebook cookie data to retarget users on their platform.
Google and Facebook are advertising funded businesses and in that respect Google will always have a distinct advantage. Google lives much more towards the 'business end' of the purchase cycle than Facebook and even its announcement this week that it is to charge advertisers for product listings in Google Shopping and at the same time drop an extra billion dollars of revenue onto to the balance sheet overnight is frankly the stuff of dreams for Facebook.
Facebook IPO'd in May and since then its shares have lost roughly half of their value. From an investor's point of view Facebook could and should have done a lot more to generate revenue. I still hold out hope.
Facebook's share price is based on the fact that, whatever its mistakes, very few companies are in the position it is in to benefit from cracking some of these challenges.
If we are talking about direct response and I'm being very pithy, I tell my team that Facebook is where you go to find Google users when they don't want to buy anything. Of course that's not always true but the fact that it resonates with many people illustrates the scale of the challenge for The Zuck in keeping users, advertisers and investors happy.
Paul Mead is Founder & Managing Director at VCCP Media and a guest blogger on Econsultancy.
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