Deutsche Bank recently upgraded Facebook Inc (NASDAQ:FB) to Buy from Hold, with a $40 price target. Deutsche Bank believes Facebook has superior prospects for revenue growth due to its new Open Graph search facility. Deutsche Bank’s Ross Sandler writes that ads in users’ news feeds in the mobile version of Facebook are “the game changer” for the company, and that “the ramp-up is happening much faster than our initial estimates.”
This article will focus on how Facebook is becoming the leader in Internet search and how the company is expected to generate huge revenues from display ads.
Facebook Enters the Search Market with Open Graph
Facebook Inc (NASDAQ:FB) CEO Mark Zuckerberg recently announced the introduction of Internet search based on Open Graph technology. The company launched Open Graph Search in beta on Jan. 15. Zuckerberg said Facebook has partnered with Microsoft Corporation (NASDAQ:MSFT)’s Bing search engine to bring in broader results from the Web.
Open Graph helps people tell stories about their lives with the apps they use. It provides developers with the opportunity to deeply integrate their app into the core Facebook experience, which enables distribution and growth. Open Graph stories appear in the news feed and ticker of friends and on the person’s timeline. They are eligible for more engaging presentation formats and greater distribution.
Publishers are now talking about the Facebook SEO that’s possible via the Open Graph. This is the beginning of Facebook Inc (NASDAQ:FB)’s Internet search strategy. The race is now on for publishers to optimize their sites for Facebook’s search engine. This has become a full scale attack on Google Inc (NASDAQ:GOOG) on all fronts at this point, as Facebook has officially entered the Internet search market.
Web Search and Graph Search are Different
Larger News Feed story layout, generated by an Open Graph post using Location Tagging, will redefine Google Inc (NASDAQ:GOOG)’s traditional search techniques.
The new 200 x 200 pixel image-led stories generated by an Open Graph post will show 70% more clicks for apps that provide high quality, relevant imagery with low spam rates. This is also expected to generate up to 50 times more “Like” feedback than equivalent story types before. With Open Graph Facebook Inc (NASDAQ:FB) will be able to display large ads in users’ timeline, which will be highly relevant due to “like baiting.” This will lead to higher revenues from display ads for Facebook.