- Facebook has revamped its search engine to enable users to search for all content on the platform with minimal restrictions.
- This appears to FB's first step towards monetizing search, a really lucrative field.
- What is the revenue potential for Facebook monetizing search?
Facebook has been taking the fight to Google in the online video advertising space, but is the social media giant poised to take on the search giant in online search? Facebook (NASDAQ:FB) has for the first time made its more than 2 trillion posts available for search. Facebook search will now return anything that is accessible to users’ via their privacy settings using keyword based searches pretty much like how Alphabet Inc-A (NASDAQ:GOOGL) search works. And that includes public posts by all Facebook users and not just a user’s friends. Facebook’s revamped search engine will make it a formidable alternative to Twitter (NYSE:TWTR) and Google for real-time news search.
The new update by Facebook also raises the possibility that Facebook posts might, in future, be indexed and integrated into Google and Bing search results. Twitter already has such an integration deal with the two leading search engines.
Google vs Facebook - Facebook to Monetize Search?
Although Facebook has said that it’s not interested in monetizing search at the moment, keyword-based search appears to be a natural fit for the revamped platform. Notably, Facebook told TechCrunch this when asked about the possibility of monetizing its expanded search platform:
“Because the business model for search is so well understood, we know it will come when it makes sense.”
So Facebook’s latest move might be a thinly veiled attempt to move into Google’s forte: making tons of money from displaying ads next to search results.
Facebook already has the #1 requirement for a platform to truly monetize search: a massive userbase. With more than a billion users, Facebook’s platform usage easily rivals Google’s. Goggle is an extremely well-oiled machine as ar as online search goes. Google handles more than 3 billion searches per day, and more than a trillion every year. Facebook has about 968 million daily active users of its platform, which implies that it can easily achieve Google’s daily search numbers if each person did only four searches on the platform every day.
But while Facebook has the potential to facilitate as many searches as Google, there is a big reason why Facebook might not be able to monetize those search results as easily as Google does--FB is a social platform while Google is not. Google displays ads to users’ search results as a natural, and even helpful way to let users learn more about what they are searching for. Thus people actually expect and even appreciate Google ads.
But Facebook does not enjoy the same free rein as Google does. People do not go to FB expecting ads to be shoved in their Faces. In fact, Facebook has to perform a delicate balancing act when displaying ads to users to avoid cluttering its platform with too many ads and devaluing the platform to users. At the same time, Facebook has to display a certain amount of ads to make a living and of course to keep marketers happy. Facebook’s ad load factor (Ad load here refers to the percentage of search results that have ads displayed alongside) currently stands at around 10%, and is unlikely to change by much even when Facebook starts monetizing search.
That’s primarily the biggest reason why Facebook is unlikely to match Google’s search revenue. Google’s share of the $200 billion media advertising market in 2015 stands at more than 11% compared to Facebook’s 3%.
Then there is the question of marketers’ preferences. A study done in 2013 found that marketers mostly preferred search marketing to Facebook marketing because of what they termed as Facebook’s low ad load, which translates to a poorer ROI for marketers compared to search marketers such as Google.
Since then Facebook has done a lot to improve its targeting methods. This has helped Facebook ads to command increasingly higher CPM rates at a time when Google’s CPM rates have been on a free fall.
Facebook vs Google - What Facebook Needs To Do
If Facebook ads can command CPM rates about twice those by Google while Facebook’s ad load remains at 10% for search ads, then the company can realize about 20% what Google makes from search ads, or roughly $10 billion. (Facebook can probably get as many searches as Google, but its ad load is likely to remain low due to its nature as a social media platform. Facebook's CPM rates, however, are likely to remain much higher than Google's). Of course this figure could be way off the ballpark, but at least it demonstrates that monetizing search has the potential to become a real revenue driver for Facebook, making it more attractive than it was in a previous comparison of Google and Facebook.