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Google Inc (GOOG): Is Its Facebook Inc (FB) Nightmare Beginning?

In April 2011, Google Inc (NASDAQ:GOOG) CEO Larry Page made a move that left no doubt how serious the company thought of social media as a threat. He sent out a companywide memo announcing that 25% of the bonus for all employees, no matter their department, was based on the company’s success in mobile.

Google Inc (NASDAQ:GOOG) clearly sees social and Facebook Inc (NASDAQ:FB) as one of the great threats facing the company. With Facebook launching its Facebook Home user interface, which sits on top Android, how threatened should Google feel? While Facebook Home still operates on Android, it also makes Facebook the center of mobile devices. The scary thought for Google is that early versions of Facebook Inc (NASDAQ:FB) Home are just examples of “toeing the water,” and future releases could go deeper into minimizing Google’s own services while featuring Facebook’s.

Facebook Home in action.

Is Facebook Inc (NASDAQ:FB) becoming the realization of what Larry Page fears? Is search even the main battleground that will emerge between these companies in the next couple years? Let’s take a look at Facebook Home and the threats facing Google today.

Google Inc (NASDAQ:GOOG)’s best weapon: being the best
Back in 2011, when Page went all hands on deck in the battle against Facebook, Google Inc (NASDAQ:GOOG) was scared. It was scared because the identity and user habits provided by all the actions taken within Facebook has the potential to be such a strong determinant of search quality. While many see Google now as an entrenched habit of users — it’s not uncommon to say “just Google it” when referring to broad search — the threat is twofold.

First, if social search could better tap into user habits to offer more relevant results, the company is more susceptible than ever to competitors. The most common threat mentioned when it comes to Google is Microsoft Corporation (NASDAQ:MSFT)‘s Bing, but that threat might be too obvious.

Instead, consider the recent reports from The Wall Street Journal that Apple Inc. (NASDAQ:AAPL) is in negotiations with Yahoo! Inc. (NASDAQ:YHOO) to feature its content in more iOS applications. The reports note that Yahoo! Inc. (NASDAQ:YHOO) has been contemplating ways to strengthen a search alliance with Apple, but one of the major sticking points is that leaving Google would “sacrifice the quality of search results.” Google’s greatest threat right now isn’t necessarily Microsoft Corporation (NASDAQ:MSFT); it’s the frayed relationship it has with Apple.

Apple Inc. (NASDAQ:AAPL) is a company that would love to abandon Google Inc (NASDAQ:GOOG) from a strategic standpoint but doesn’t have options to do so. Google’s greatest weapon remains not its brand, but its quality and lead in search.

The early innings of Facebook Inc (NASDAQ:FB) and search
A second idea that’s connected to the first is how much time users spend on Facebook Inc (NASDAQ:FB). Not only does that allow Facebook to collect excellent data on user habits, but it also means Facebook can offer search or other products without needing to boot Google out of being the default search on a browser. If a user is frequently on Facebook and the company offered a unique search offering, it could display a search box prominently within the content of the page.

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