Graph Search Makes Facebook Jump -- and Fall


People love to hate Facebook , even when they're constantly checking its mini-feeds. After the dramatic unveiling of the social media empire's new search engine yesterday -- "Graph Search" -- Facebook's stock price went up 2%. Then, ever the fickle beast, the market dropped Facebook 0.5% below its pre-announcement price, all in that same day. Could Graph Search help Facebook eventually work its way back into the market's good graces? And should Google be worried?

You'd think they'd give it a zippier name
The ambitions for Graph Search are ginormous, and that's putting it lightly. With the new tool, users can search on Facebook for any number of subjects (like restaurants, as CEO Mark Zuckerberg demonstrated). The website then pulls up recent relevant results, as posted and "liked" by the user's friends.

The search engine is Facebook's first stab at trying to convert its massive amount of content into the huge potential it had long been acknowledged to have in search. Having a search engine would give advertisers even more incentive to promote with the website than before, because now, instead of getting a number of half-hearted "likes," companies working with Facebook will have a direct line of users interested in their services.

If this proposed situation works, Facebook will have accomplished what Google never could with its own Google+: it will have created a successful, searchable social network. Since Google borrowed heavily from what made Facebook unique to create Google+ (i.e., the concept of posting content for one's social contacts to see), it's no surprise that Zuckerberg would want to return the favor and see if he can do it better... and well make some money in the process.

Bitterness lingers after the IPO burn
It's difficult to analyze Facebook's ins and outs as a company when it hasn't even been public long enough to release a 10-K. Judging from the figures in its latest 10-Q, the company has gained revenue of over $1.3 billion. This may be nothing to sneeze at, but it's also small potatoes compared to Google's most recent quarterly revenue of $14 billion.

The audience for Graph Search's announcement is huge, but the aftermath of the IPO debacle seems to have left all of them jaded. Zuckerberg also has yet to provide any solid evidence that Facebook will be able to reach this level of income. Graph Search could be the next big thing for Facebook, but Wall Street will believe it when they see it.

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Fool contributor Caroline Bennett has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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