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What Facebook Inc (FB)’s Graph Search Means For Investors

Mark ZuckerbergFor the past year, internet companies have been making central changes in the way they do things. All these changes are happening against the backdrop of an increased need for a personalized web – a living web, if you may. Facebook Inc (NASDAQ:FB) is now the latest player to follow through on integral changes through its new graph search.

What is graph search and what does it mean for investors?

Graph search is a new search model that will replace the old search bar. Unlike traditional search, which uses keywords, graph search will use phrases to narrow in on friends, organizations and even brands based on users’ personal interests. Graph search is consistent with the need for a personalized web that not only provides information based on interests, but that anticipates user needs.

If graph search is a success, user engagement on Facebook Inc (NASDAQ:FB) will rise incredibly. Additionally, Facebook Inc (NASDAQ:FB) will have an easier time targeting ads. Unlike chasing individuals, targeting groups with overlapping interests will be much easier and effective from an ad perspective.

What does this mean for investors? Essentially, graph search means higher levels of user engagement, which in turn translates to more ad revenue and higher capital gains for investors.

But is the reality of graph search as flowery as the prospect?

Google+ huge threat

You heard right; that ‘ghost town’ that is Google+ is a huge threat for graph search. Facebook Inc (NASDAQ:FB)’s user base is, without question, far bigger than Google+. However, there is a catch. Google+ is entirely ad free for a reason. And further still, there is a greater reason why Google+ is nested under the idea of an all-inclusive Google account or an account that nests all of Google Inc (NASDAQ:GOOG)’s services (mail, YouTube, Google+, mobile app store and more).

Unlike Facebook, Google+ has no ads. That’s ironic coming from Google Inc (NASDAQ:GOOG), right? But there is a reason. Google wants to step up user experience so as to get the most accurate information from its users. Most Google+ users get into circles that directly satisfy their immediate interests. They also share articles and media that are consistent with their primary interests at the time.

For instance, if you were to go to the Google+ page of any investment lover, the bulk of articles and media you will come across will relate to investments, finance and economics. From this perspective, it is clearly evident that Google+ is more reliable than Facebook Inc (NASDAQ:FB) in terms of identifying users’ primary interests. On Facebook Inc (NASDAQ:FB), close to half of the pages users ‘like’ represent persuasive marketing or at best, secondary interests.

Google+ allows Google Inc (NASDAQ:GOOG) to understand its users better and at a more personal level by highlighting users’ primary interests. And because of the whole ‘Google account’ idea, Google can use Google+ to profile its users and anticipate their needs. This will be a huge game changer as it is in every way consistent with the current push for a personalized web.

Don’t write off Yahoo!

While there is no denying that Yahoo! Inc. (NASDAQ:YHOO)’s business has gone south, there is still something bubbling beneath the surface. Earlier in the year, in an interview with Bloomberg’s Erik Schatzker at the World Economic Forum in Switzerland, Yahoo! Inc. (NASDAQ:YHOO) CEO Marissa Mayer made heavy reference to what she described as ‘personalized mobile web.’ Yahoo! is working on delivering content based on interests to mobile users. This explains Yahoo! Inc. (NASDAQ:YHOO)’s recent stance on acquisitions.

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