The true genius of Facebook’s Graph Search

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Facebook Graph Search Advertising

Facebook (FB) unveiled its first crack at a search engine on Tuesday. Dubbed Graph Search, the complex new utility indexes information from more than 1 billion Facebook users and introduces intuitive new search features that put an interesting spin on digging up data. Half of the bloggers and reporters attending Facebook’s press conference practically fell asleep during the event, and investors trimmed more than 3% from Facebook’s mid-day share price. Apparently, a lot of people missed the point.

Here is a basic description of Graph Search from Facebook’s press release:

Graph Search and web search are very different. Web search is designed to take a set of keywords (for example: ‘hip hop’) and provide the best possible results that match those keywords. With Graph Search you combine phrases (for example: ‘my friends in New York who like Jay-Z’) to get that set of people, places, photos or other content that’s been shared on Facebook. We believe they have very different uses.

Several pundits and bloggers quipped that Graph Search is just a new way to stalk your Facebook friends. Cute, but not quite. Others argued that Facebook is heading in the wrong direction and it should be focusing on mobile. Mobile is indeed important, but there’s a bigger picture that many seem to have missed.

Facebook is an advertising company and Graph Search is the mother lode.

Google (GOOG) got to where it is today for two reasons. First, it builds products people love that are designed to be useful and intuitive as well as remarkably efficient at collecting important personal data. The second, equally important reason is that Google knows how to turn that data into dollars.

Like Google, Facebook provides services people love. And like Google, it makes money by analyzing user data and serving targeted ads. Google is much better at this game today, but Graph Search positions Facebook to make some serious strides.

Google is so good at selling ads to clients and serving relevant ads to users because it knows what users have done, what they are doing, and what they want to do — past, present and future. And the future is the key.

Facebook might serve an ad for a hotel in Fiji if its sees a user post updates while on vacation in Fiji. That’s great, but said user is already in Fiji and has almost certainly already found a hotel. Google, on the other hand, will have processed that user’s search for “cheap hotels in Fiji” and will have served ads from a number of hotels alongside those search results.

If you ran a hotel in Fiji, which company would you rather advertise with?

And that is the true genius of Facebook’s new Graph Search. In the early days, Facebook will focus on refining the user experience and will not monetize this new product out of the gate. Down the road, however, Graph Search is a huge deal because it finally adds the crucial third piece to Facebook’s advertising puzzle.

Facebook knows everything you’ve done and everything you’re doing, and soon it will know everything you want to do.

Look for Facebook to devote serious resources to Graph Search in the coming months and years because it ads a whole new dimension to the data it collects and uses to serve targeted advertisements. And no, it’s not a Facebook phone or a mobile operating system as many had hoped for and predicted, but this is still a huge play in the mobile industry. Graph Search will eventually be accessible from all of Facebook’s mobile apps and its mobile web site, allowing the company to continue reeling in all that important search data while users are on the go.

If you think Graph Search isn’t a big deal, you completely missed the point.

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