Where there’s discovery, there’s opportunity for sponsored discovery. Though there are no ads in Facebook’s new Graph Search engine yet, eventually Facebook could let advertisers pay to show their results above organic ones, just like on Google. CEO Mark Zuckerberg stressed “You build a good business by building something people want”, but said Facebook’s typeahead search ads “extend quite nicely to this.”
When I asked during the launch event’s Q&A where Facebook saw monetization opportunities in Graph Search, Zuckerberg explained the quality of the user experience comes first. Still, he admitted “This could potentially be a business over time.”
Facebook’s entrance into search ads has been limited to date. Right now, it has search typeahead ads so if you search Facebook for a social game like “FarmVille”, Zynga’s competitors could show ads for their farming game above the organic result for FarmVille. Getting people making more searches on Facebook could increase impressions of these ads. But more importantly, Zuckerberg said this same system could be extended into Graph Search results.
When people make a Graph Search, Facebook decides what order to show the results in. For example, a search for restaurants in San Francisco will first show ones my friends Like. But a restaurant might pay to have their result appear first. That’s because someone searching for restaurants in SF has shown purchase intent — they want to go spend money on a meal somewhere. If a restaurant can spend a dollar or two to convince people to visit and spend $30, there’s a huge return on investment and another revenue stream for Facebook.
Ads might show up beyond Places search. For example, let’s say you search for “photos taken in national parks”. If Nike had done a photo shoot in Yosemite National Park for their running shoes, its photos might show up somewhere deep within the results. But if it paid for sponsored placement, it could have those photos appear right at the top, reminding people to buy some Nike trail running sneakers.
There’s also potential for showing ads that don’t necessarily match a query, but are related. So if you search for “bars in San Francisco”, Facebook might show you an ad for Uber, which could you drive you home safe after you’re drunk. Or for that search of “Photos taken in national parks,” sporting goods companies like REI or travel websites like Kayak might want to pay to reach you because you might be buying equipment and booking a flight to a national park.
Facebook has had a partnership with Bing since 2008 that powers web search results within Facebook’s internal search engine. Bing shows sponsored results ads here just like on Bing.com, and today I confirmed with Facebook that it earns a revenue share on these ads.
That revenue is poised to grow because if you make Graph Search for something better answered by web search results, Graph Search hands you off to the old Bing results. And boy are there plenty of ads on those results. Bing shows ads both above and to the side of organic results.
Essentially, the launch of Graph Search will drive more traffic to Bing within Facebook, increasing impressions of these ads, and growing the pie that Microsoft and Facebook split.
Beyond ads, there are more ways Facebook could earn money on Graph Search. One of the examples Facebook gave for using people search was for finding people to recruit to your company. A Facebook team member demonstrated how he could Graph Search for “People who work at NASA who are friends with people who work at Facebook”. Facebook could one day offer some pro-search tools to recruiters who want to make the most of this opportunity, the way LinkedIn sells its “Recruiter” product.
Facebook also might be able to monetize people’s loneliness. Graph Search’s people filters allow you to look for “single women in San Francisco who Like Star Wars”. Graph Search will surface people who’ve set those characteristics as public visible, so it might show you people you’re not friends or even friends of friends with. So how do you contact them?
If you send them a standard Facebook Message, it might end up unseen in their “Other” Messages inbox — a little-know secondary tab of the Facebook Inbox. But last month Facebook began testing a paid messaging feature that lets you pay a few dollars to get your message shown at the top of the main inbox of someone you’re not connected to. Facebook could encourage people to use paid messaging to contact potential dates.
Circling back, the key to the monetization potential of Graph Search is purchase intent. Until now, advertisers were mostly limited to targeting people by biographic data and interests such as Liking a national park, similar restaurant, shoe maker, or “travel”. But Liking something doesn’t mean you’re trying to buy something related to it right now. News feed sponsored Stories and sidebar ads only accomplish demand generation — getting people to want to buy something eventually. The return on investment for those ads could come hours, days, or weeks later, and the purchase could be tough to attribute to the Facebook ad that inspired it.
Graph Search advertising is different. It could let Facebook tap into advertisers’ interested in demand fulfillment — getting people who are ready to buy something to buy it from them.. That’s where Google’s search ads business operates and where advertisers are willing to pay high rates because its obvious how they’ll make their money back. You click through a demand fulfillment ad and make a purchase.
Zuckerberg said the goal of Graph Search is to give you answers, not links. Graph Search could eventually let brands make sure you see their answers. Facebook’s next challenge will be striking a balance between its algorithms and its advertisers. Otherwise Graph Search could lead the world astray.
Check out more of TechCrunch’s coverage of Facebook Graph Search:
Facebook is the world’s largest social network, with over 1 billion monthly active users. Facebook was founded by Mark Zuckerberg in February 2004, initially as an exclusive network for Harvard students. It was a huge hit: in 2 weeks, half of the schools in the Boston area began demanding a Facebook network. Zuckerberg immediately recruited his friends Dustin Moskovitz, Chris Hughes, and Eduardo Saverin to help build Facebook, and within four months, Facebook added 30 more college networks. The original...