Fortunes of Facebook may hinge on searches

By Somini Sengupta, The New York Times | Updated: 15 January 2013 12:35 IST

Nearly a year after it announced its bid to go public, Facebook is confronting the ultimate burden of the information age how to help its users find what they are looking for amid the billions of pictures, "likes" and status updates they post every day.

Ferreting out treasure from junk is its biggest challenge - and potentially its most lucrative opportunity, a chance to topple Google as the king of search.

If you're looking for, say, a movie to watch next weekend, Google can provide long lists of movie reviews from strangers. Facebook, though, could theoretically tell you what movies your friends liked - and what, by extension, you may be predisposed to like. That kind of service would delight advertisers - and, by extension, Wall Street.

"If Facebook would decide to become serious about search, it would be in a position to give Google a run for its money," said Karsten Weide, an analyst with IDC, a financial research company.

Facebook has had a tumultuous run on Wall Street. It made its public debut last May at $38 a share, the most highly valued technology stock in history, but it plummeted almost immediately. But the stock has been climbing for the last month, benefiting from a coy invitation the company sent to reporters about a product announcement scheduled for Tuesday.

"Come see what we're building," the invitation read. It promptly set off speculation and sent the stock flying. Shares opened Monday at $32, the highest in six months, and closed at $30.95.

Facebook declined to comment for this article.

The stock rally has occurred as Facebook has zeroed in on new ways to make money for a skeptical Wall Street. It is showing many more ads on its mobile news feed. It has expanded a lucrative form of advertising known as retargeting, which tracks what users search for outside the Facebook platform and tailors advertisements accordingly when users return to Facebook.

It has encouraged users to buy gifts for their friends, and it has charged users to make sure a post or message is seen by more of their friends.

The next frontier that Facebook needs to conquer, analysts say, is search. That would help it significantly expand revenues and, in turn, its market value. "Search, I would say, is a very high priority for Facebook," Colin Sebastian, an analyst for Robert W. Baird & Company said. "Facebook has this incredible treasure trove of unstructured data on the site."

Even a tease about search from Facebook's chief executive, Mark Zuckerberg, last September sent the shares up.

Speaking at a conference sponsored by the industry blog TechCrunch, Mr. Zuckerberg dropped hints about how Facebook search might look.

"I think search engines are really evolving to give you a set of answers, not just 'type in something and show me some relevant stuff', but 'I have this specific question, answer this question for me,' " he said. "When you think about it from that perspective, Facebook is pretty uniquely positioned to answer the questions people have."

But building a search tool is a challenge. Try finding on Facebook what's-his-name who worked in accounting last year, let alone a list of movies that your friends raved about last weekend.

To tackle the problem, Facebook has aggressively expanded its staff of search engineers in recent months. It now has nearly 100 devoted to cracking the search puzzle, led by a former Google engineer, Lars Rasmussen.

It has also tried to acquire at least one start-up focused on search, Ark, which is building a tool to help users find people whose names they do not know, but whose skills or interests they would find useful. It also has rolled out a number of new features to help Facebook users better discover information on the site.

The search challenge confronts every Internet platform company. Amazon has steadily improved how users find things to buy. Twitter has continuously tweaked how its users find news that interests them. Apple tried to upend the traditional search engines by assigning a robot named Siri to help iPhone owners answer their questions.

Patrick Riley, a founder of Ark, called search the holy grail of Web companies. "Everyone wants to get to the ultimate personal assistant - ask it any question and it can give you the right answer," Mr. Riley said. "Facebook has the advantage of social data. No other company has that kind of social data."

Mr. Riley turned down Facebook's acquisition offer last spring, saying he preferred to build a "neutral" people search tool that would not be tethered to any one Internet platform. Facebook, more than any other platform, has a singular and huge data collection; its users gush about what they like and listen to, whom they admire, where they jog, even what they eat.

To leverage some of this information. Facebook has added the tab "nearby" to help users find businesses in proximity. The company has also rolled out a jobs board, to help users search for employment, in an apparent bid to compete with LinkedIn. Since last summer, it has offered businesses a chance to pay for sponsored search results. And it has reminded users in the last few weeks to review their privacy settings, to better control if and how their information on Facebook can be found.

The largest share of online advertising revenue overall comes from search, which is why Google's earnings remain nearly 10 times Facebook's. It is also why even a modest expansion of search could be enormously lucrative for the social network.

"When there is too much information, there is high value in search, navigation and discovery," said Bill Tai, a venture capitalist who has invested in some of Facebook's rivals, including Twitter. "Facebook has a lot of data, but it's very noisy data."

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