Analysts’ doubts over success of Facebook’s search tool

FACEBOOK’S new search tool has strong potential to generate revenue for the social networking company, though it is unlikely to challenge Google as the world’s dominant search engine, according to analysts.

Graph search lets Facebook’s one billion-plus users trawl their network of friends to find everything from restaurants to film recommendations and is the company’s biggest foray into online search.

The tool contains some category suggestions that can be easily monetised, Bank of America Merrill Lynch analysts said in a note. “It should be easy to incorporate commercial search results via Facebook’s partnership with Bing,” they added.

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Facebook currently has a partnership with Microsoft, whose Bing search engine provides search results for external websites. Microsoft also integrates certain Facebook results into its Bing search results.

The analysts estimated Facebook could add $500m in annual revenue if it can generate just one paid click per user per year.

However, analysts at JP Morgan Securities said the lack of a timeline for the possible launch of graph search on mobile devices may weigh on the tool’s prospects.

The success of the graph search, which will rely heavily on local information, depends on Facebook launching a mobile product, the analysts said.

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Half of all searches on mobile devices seek local information, according to Google.

Graph search also lacks the depth of review content of Yelp Inc, the analysts added.

Pivotal Research Group analyst Brian Wieser said monetisation potential would be largely determined by Facebook’s ability to generate a significant portion of search query share volumes and he expects that quantity to be relatively low.

“Consumers are likely to continue prioritising other sources, like Google.

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“Advertisers would consequently only use search if they can, or are perceived to, satisfy their goals efficiently with Facebook,” Mr Wieser said.

Internet search, social networking tools and e-commerce are among the biggest weapons that companies like Facebook, Google and Amazon have in their battle for supremacy.

A successful combination of the three could win the day for them.