Facebook's announcement no big deal

The news didn't answer the continuing question: How will the company make money from its users?

By Jim J. Jubak Jan 15, 2013 5:27PM
Image: Man with laptop (Ken Seet/SuperStock)Facebook’s (FB) big announcement Tuesday turned into much ado about not very much.

The initial take was that Facebook would finally be getting into the search business. That would be a huge (eventual) challenge to Google (GOOG) since Facebook would be able, analysts projected, to generate search results that would be personalized by a users network of friends. Google’s shares initially fell as Facebook’s event began.

But it turns out that Facebook’s product, called Graph Search, isn’t a full-scale search engine. (Google shares moved up as investors digested that.)

Instead it is a narrow focus search that will allow users to search their network of friends for photos, people, places, and interests. That will put Facebook directly into competition with focused review aggregators such as Yelp (YELP). 

On Facebook, a search on Mexican restaurants in Los Angeles would pull up recommendations from Facebook friends of the user. That might be more useful than reviews on Yelp that come from strangers. Or depending on a user’s friends, of course, Yelp might offer considerably more information than a Facebook search for restaurant recommendations. This all led to selling pressure on stocks of companies such as Yelp, LinkedIn (LNKD) and Zynga (ZNGA).

And then, as analysts focused on Facbook CEO Mark Zuckerberg’s vagueness (to be kind) about how Facebook might actually monetize Graph Search, Facebook shares themselves fell. "This could potentially be a business over time," Zuckerberg said during the question and answer session.

It didn’t help either that Graph Search, as introduced Tuesday, will run only on desktop computers. A version for mobile devices is something Facebook will work on next, Zuckerberg said. He did not give a timetable for delivering Graph Search to mobile devices.

In other words, Facebook’s big product introduction, the company’s first since its IPO, didn’t really answer the big continuing question about Facebook: How will the company make money from its huge number of users?

Shares of Google closed up 0.05% for the day. Shares of Yelp were down 5.6%; and shares of
Zinga were off 1.53%. LinkedIn closed with a 0.2% gain. Facebook itself retreated 2.42% on the
day.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did not own shares of any stock mentioned in this post as of the end of September. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 

Tags: FBGOOGJim JubakLNKDYELPZNGA
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10Comments
vb_ironchef
Jan 15, 2013 6:02PM
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Msn is blocking posts that relate to negiitive input for Facebook.  
Someone
Jan 15, 2013 5:37PM
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As Bart Simpson might say, "It's Craptacular".

 

But, hey, what do you want for $100 billion.

TemplarZ
Jan 15, 2013 7:07PM
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Graph Search = Boring.
oldchum
Jan 15, 2013 5:56PM
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I can just imagine the local coffee shop filled with reporters after the announcement, "So this is the big news Zuck dragged us out here for, this is BS". The stock should have a big sell off.
JB Quincy
Jan 15, 2013 6:24PM
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One reaction: Underwhelmed! In-house websearch. That's it?  It's clear Zuckerberg hasn't learned a thing on how to promote his own company. You lead with BING!  You get everyone's attention.  You make Google sweat.  Then you present this crap!  You don't come back a half hour later and say, "by the way!"  If he's gonna promote something -- do it right!!  You'd think after the pummeling the IPO took that these Facebook honchos would now be the masters of their own domain and actually support the many loyal shareholders who have taken it on the chin.
Kenster66
Jan 15, 2013 7:11PM
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Today's events should send a strong message to wall street that facebook has no idea of how to monetize it's user base. Any changes or new ideas should not take months, Zuckerberg and friends are scrambling to come up with any ideas to satisfy investors. The IPO was a flop, Instagram changes annoyed everyone and today's press release of "come and see what we've built" is another dud. Zuckerberg has no idea what he's doing. This stock is a "sell" until they replace the CEO and COO. My advice is this; sell all your interests in FB, it's dead. Teens are deleting their accounts and users in the U.K have dropped by a few million. This is the sign of the end of FB. By this time next year, the share price will hover around 12$.
Hedonist13
Jan 15, 2013 6:52PM
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For the life of me, I do NOT understand how FB can put out stock...they don't 'DO" anything!
JBK007
Jan 15, 2013 5:47PM
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FB should try to implement small, useful changes first; e.g. the ability to comment directly under a friend's comment posted on your timeline, instead of having to reference the person below with an ampersand:  @facebook - the new search engine is not as useful as this suggestion ;)
VERITAS VINCIT
Jan 16, 2013 12:01PM
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No mystery here - FB tells the world it has a big announcement coming in a couple of weeks - the stock goes up and lo and behold some  insiders sell a bunch of shares ......

Methinks they are going to have a sh*tty quarter .......
FedUp656
Jan 16, 2013 9:41AM
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Facebook is a cancer that must be eradicated.  Period.
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