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

Why spend all those billions on acquisitions? It’s simple. Yahoo! has the content (financial quotes, celebrity news, sports, self improvement, politics and so much more), but can’t match this content to user interests. Because of users’ exodus to Facebook Inc (NASDAQ:FB), Google and other niche social sites, Yahoo!’s user base, despite being voluminous, is not as robust as it used to be. It’s not sophisticated and Yahoo! can’t really use it to anticipate user needs and identify users’ primary interests.

The slew of acquisitions will help Yahoo! to rope in different kind of users who will engage at deeper levels with Yahoo! owned apps and services. This will allow Yahoo! to understand its users better and implement the whole personalized web concept that Mayer has been largely emphatic on.

A web based on interests is more likely to enhance user engagement and improve ad targeting. Advertisers may ultimately be able to present ads that provide a service to users rather than those that are merely based on content. This will translate into higher click-through-rates and more ad revenue for the internet player that manages to effectively follow through on personalized web.

As it is, Google still rakes in the lion’s share of ad revenue, particularly in mobile, which is the current central platform. Last year, it brought in more than $4.5 billion of the total $8.8 billion spent on mobile advertising. Facebook’s $500 million paled in comparison. However, Facebook is expected to bring in $2 billion this year in view of increased mobile monetization.

Conclusion

Facebook’s graph search is definitely a step in the right direction. If Facebook’s graph search is a success, the social giant will be in for a huge payday from ads. However, it’s still too early to tell and investors should hold back and see how things go. If graph search shows signs of future success, buy into Facebook Inc (NASDAQ:FB) before the price starts trending upward uncontrollably.

The article What Facebook’s Graph Search Means For Investors originally appeared on Fool.com and is written by Lennox Yieke.

Lennox Yieke has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Lennox is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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