Imagine the scenario: you’re the CEO of one of the world’s richest enterprises and you’ve recently floated on the stock market, but unfortunately your shares are taking a nose dive – what do you do?
Well, you could bail out and let someone else pick up the pieces, or you could take the fight to the so-called opposition and hint at threatening your competitor’s core business market and see what happens. It might sound a bit far-fetched, but that’s precisely what happened withCEO Mark Zuckerberg last week.
Since the IPO in May, Facebook shares have gone into free-fall.
From the record high of the spring, they were down by almost 50% by this time last week. That was until Mr Zuckerberg addressed the TechCrunch Disrupt Conference in San Francisco and casually mentioned that Facebook might consider entering the ‘search’ sector properly. The result: a 4% instant increase in Facebook’s share price on the markets. So is thegiant seriously considering entering the search market, and if it is, should the search behemoth, Google, be at all worried?
Is the threat real or simply perceived?
Well, Zuckerberg made the comment flippantly, so perhaps it was just an idle and meaningless threat. It was phrased in such a way that suggested that if Facebook’s audience was already generating 1 billion queries each day without trying, then why not give it a go. That certainly doesn’t suggest genuine intent. However, as Facebook struggles to make money out of advertising, shareholders can’t have failed to notice the effect the mere suggestion had on the markets and on its share price. Moreover, perhaps only a company the size of Facebook would have the support and resources to take on another giant like Google.
Still, if it was all down to numbers, then surely Facebook would already be a bigger company than Google. The fact is, it isn’t, and there are probably one or two good reasons for that. Facebook and Google can boast a similar sized audience, but Google generates $40 billion a year from its advertising: Facebook on the other hand struggles to generate a tenth of that. Why’s that you might wonder? Well it’s simple really. Google users go online primarily to search for specific things, like products and services: Facebook users go online predominantly to hook up with their friends and companions. Users visit Google with intent, whereas currently Facebook users browse with curiosity. How the social media channel manages to challenge this mind-set and commercialise its audience is the $64, 000 question.
Facebook may well generate a billion queries each day, but you need to look at what these queries are.
They are people searching for people. They aren’t people searching for products or services – well not unless the queries stem from recommendations from friends at least. It will prove to be extremely difficult to generate any advertising income from that type of action. Most Facebook users don’t need or want channel advertising. They may not mind being friends with brands and products, but they certainly wouldn’t be comfortable with being unpaid brand ambassadors. Therein lies the fundamental problem for both companies. Google can’t get its audience to engage with its social networking channel, Google+, and Facebook users are not clambering for either ‘hangouts’ or ‘circles’. Maybe it’s simple a matter of never the twain will meet.
Perhaps Facebook could threaten to challenge the domination of Google’s search market, but the search giant will not be sleeping any less deeply tonight, tomorrow or at any time in the foreseeable future.